The Dow Jones Industrial Average – which was originally designed to reflect the day-to-day health of the U.S. economy, not necessarily the stock market – bounced above and below the breakeven line multiple times on Tuesday before rallying in the afternoon to a positive close. It was not so for the S&P 500 Index and the Nasdaq Composite.
Incoming data, including inflation expectations as well as hiring indicators, show enough acceleration and deceleration that some market participants are starting to raise the specter of "stagflation" and new variants such as "slogflation."
Investors confront new and refreshed policy challenges on what seems like a daily basis, though fundamentals and future outlook may be playing as prominent a role in recent price action as politics.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The S&P 500 and particularly the Nasdaq – burdened by heavier tech weightings and corresponding ties to broader growth trends – enjoyed short-term intraday bounces but still ended lower ahead of Nvidia Day.
At the closing bell, the Dow was up 0.4% to 43,621. The S&P 500 was off 0.5% to 5,955, and the Nasdaq shed 1.4% to 19,026.
"Stagflation" or "slogflation"
"US Consumer Confidence Dropped Sharply in February" read the ominous headline from The Conference Board at 10 am Eastern Time on Tuesday morning, with even more worrying data on inflation expectations inside the report.
The Conference Board said consumer confidence decreased by 7.0 points to 98.3 in February from an upwardly revised 105.3 in January, well below a consensus forecast of 102.5. Views on the present situation declined by 3.4 points to 136.5, and the expectations component slid 9.3 points to 72.9.
And average one-year-ahead inflation expectations increased to 6.0%, up 0.8 percentage points and consistent with the uptick reflected in February data from the University of Michigan consumer sentiment survey.
As Ritholtz Wealth Management CEO Josh Brown notes in a conversation with RWM Chief Market Strategist Callie Cox, "We're starting to see a situation where the economic data is slowing faster than inflation," which is also commonly referred to as "stagflation." And, according to Brown, "People are now saying 'slogflation'."
Cox is concerned, "but it's like a 'nervous' concerned. It's not like a 'doom-cycle' concerned." Inflation, as Cox explains, is just below or around 3%, "which is not the 9% we saw in 2022 if you're worried about inflation crisis No. 2." But it remains above the Federal Reserve's 2% target – which is also a level that represented "normal for us for a decade" in the 2010s.
"The threat around inflation, it feels so much greater because we just came out of an inflation crisis and because we have a lot of policy talk about tariffs and tax cuts that could ultimately raise inflation," says Cox. That "recency bias" could be what's showing up in survey data. "There is a worry about inflation," Cox notes, "and it can be self-fulfilling."
We'll look forward to hearing what Federal Reserve Chair Jerome Powell has to say about inflation expectations following the next Fed meeting, which is scheduled for March 18-19.
"This is what makes this moment so interesting to me. Everybody's worried about inflation, but the weaknesses and the potential weaknesses that are bubbling up are happening in the jobs market." The Bureau of Labor Statistics will release the next jobs report for February on Friday, March 7.
The jobs market is important because consumer spending represents approximately 70% of the U.S. economy. "If people are making money, they're spending money," Cox notes. "When people start losing their incomes, you start to have problems. Right now the jobs market is OK, but there are definitely cracks."
The 10-year U.S. Treasury yield declined to a 2025 low of 4.283% intraday on Tuesday – "growth" is one of the things the 10-year yield aggregates – down from as high as 4.896% on January 13.
Is the AI trade over?
"Tomorrow is a massive day for the global markets," Wedbush analyst Daniel Ives writes, "as the Street awaits Nvidia earnings to gauge the demand trajectory of the AI Revolution." Investors, traders and speculators on and off Wall Street are wondering "if another '$2 billion beat and $2 billion raise' is in the cards for the Godfather of AI Jensen and Nvidia."
Nvidia (NVDA) was down 2.8% on Tuesday, making it the worst-performing stock in the Dow a day after it suffered a 3%-plus decline.
Other names associated with the AI trade – including chipmaker Super Micro Computer (SMCI, -11.8%) and data center power provider Vistra (VST, -3.4%) – slid sharply as well, as the Nasdaq's year-to-date decline extended to 1.4%.
"The market is heavily skewed negative right now around tech sentiment with any whisper of worries/concern from DeepSeek to MSFT CapEx causing a brutal ripple impact across the tech ecosystem," Ives observes.
As Mizuho analyst Jordan Klein writes, "The tech tape and the former AI winner bucket sure feels at a major breaking point with retail, quants, passives and now maybe active managers starting to unwind positions and de-risk/de-gross into NVDA tomorrow night."
Tesla gets wrecked too
Tesla (TSLA) is often touted as an AI stock, but the EV maker's 8.4% crash on Tuesday was about something more basic: vehicle sales in Europe.
Tesla shed more than $100 billion in market capitalization after the European Automobile Manufacturers' Association said it sold 9,945 cars in Europe in January, a 45% year-over-decline. Total battery electric vehicle sales in Europe were up 37%.
Wall Street expects Tesla to report total first-quarter deliveries of 420,000 to 430,000 EVs, down from 470,000 at the beginning of the year based on data compiled by FactSet.
Related content
- Nvidia Earnings: Live Updates and Commentary
- Trump to Tariffs: How Retirees Can Manage Market Turmoil
- Earnings Calendar and Analysis for This Week
-
I'm a Financial Planner: How You Can Get Started With RMDsThe IRS will come knocking for its share of your tax-deferred retirement savings when you hit 73, but planning ahead for RMDs will ensure you're ready.
-
Expert Tips on How to Replace Your Paycheck in RetirementBills don't stop once you retire — and you can't expect your Social Security checks to cover them all. Don't risk running out of money. Instead, make a plan.
-
I'm a Financial Planner: This Is How You Can Get Started With RMDs
The IRS will come knocking for its share of your tax-deferred retirement savings when you hit 73, but planning ahead for RMDs will ensure you're ready.
-
How Will You Replace Your Paycheck in Retirement? A Financial Adviser's Tips on Income Planning
Bills don't stop once you retire — and you can't expect your Social Security checks to cover them all. Don't risk running out of money. Instead, make a plan.
-
From Pets to Paintings: The Little Things That Can Cause Big Estate TroubleSentimental items might have little monetary value, but their disposition can cause hurt feelings. Talking about who wants what and labeling items can help.
-
The Clock Is Ticking: Take Advantage of These Retirement Tax Benefits While They LastRecent tax changes, including an extra $6,000 deduction for those 65 and older, present a golden opportunity for retirees to reduce their tax bills.
-
I'm a Financial Adviser: This Is Why Unmarried Same-Sex Couples Need an Estate PlanWhen illness or death occurs within an unmarried same-sex partnership, family members can step in and push the surviving partner out. An estate plan is vital.
-
Stocks Bounce But End With Big Weekly Losses: Stock Market TodayThe stock market rout continued on Friday, but a late-day burst of buying power brought the main indexes off their session lows.
-
Costco Gold Bars Keep Selling Out. Are They a Smart Investment?How Costco's bullion program works, how to get the best deal and whether it makes sense for investors.
-
Use This Stock Market Recipe for a Well-Diversified PortfolioFor years, large U.S. stocks were all you needed for a diversified portfolio. A broader mix is better now.
