Market Monitor February 28th

A volatile trading day in New York highlights the uncertainty among investors. The Dow Jones closed 1.4% higher on Friday, while the Nasdaq gained 1.6%, partly due to an unexpected surge in the final half-hour. Throughout the day, Wall Street experienced strong fluctuations, with alternating declines and gains of around 1%.

The turbulent session was partly driven by harsh remarks from Donald Trump toward Ukrainian President Zelensky, warning of a possible third world war. Trump’s unpredictable behavior is adding uncertainty to the markets.

Investors found some support in the bond market, where the U.S. 10-year Treasury yield fell by 5 basis points to 4.21%. This fueled speculation that the Fed might implement multiple rate cuts this year, given weak economic data and declining inflation.

Nvidia (NVDA) managed to recover, rising nearly 4% after an earlier 8% drop despite better-than-expected quarterly earnings. Bank of America raised its price target to $200, projecting an upside potential of 66%. Despite challenges such as competition from China and export restrictions, revenue increased by 78%.

The PC market remains weak. Dell (DELL) reported better-than-expected results but disappointed with a lower profit forecast, causing its stock to drop 5%. HP Inc. (HP) took an even bigger hit, falling 8% after weak guidance and a lower-than-expected earnings outlook.

Tesla (TSLA) initially traded lower but ended the day with a nearly 4% gain. The 200-day moving average (SMA 200) acted as a buy trigger for technical traders.

Berkshire Hathaway (BRK.A) shares hit record highs on Friday. The stock has risen more than 11% in 2025, outperforming the S&P 500. Berkshire reported a 71% increase in Q4 operating profit to $14.53 billion, mainly driven by a 302% surge in insurance earnings.

Daily Market Analysis – February 28, 2025 (After Market Close)

SPY (S&P 500 ETF) Trend Analysis:

• Short-term (ST) trend: Bearish (Red)
• Long-term (LT) trend: Bullish (Green)

Key Observations:

• SPY gained +1.6% on the last trading day.
• Despite recent volatility, SPY is still up 15.86% over the past 12 months.
• Over the past 3 months, however, it is down -1.19%, showing some consolidation.
• A bounce from support levels suggests renewed buying interest.

QQQ (Nasdaq-100 ETF) Trend Analysis:

• Short-term trend: Bearish (Red)
• Long-term trend: Neutral (Orange)

Key Observations:

• QQQ also gained +1.6% in the last session.
• However, it is down -2.84% over the past month and -0.31% over 3 months, showing some weakness.
• Last friday, QQQ bounced from a major support level at $500
• A break above $520 could reignite the bullish trend.

IWM (Russell 2000 ETF) Trend Analysis:

• Short-term trend: Bearish (Red)
• Long-term trend: Neutral (Orange)

Key Observations:

• IWM closed +1.1% higher but remains one of the weakest among the three ETFs.
• Over the past 3 months, it has declined -11.25%, reflecting sustained small-cap underperformance.
• Despite a slight 4.25% gain over 12 months, short-term and medium-term trends remain somewhat bearish.
• This is the sixth consecutive day IWM has closed below the SMA200.

##Sector Performance Analysis

1 Week Performance

Worst Performing Sectors:

• Information Technology (-6%)
• Health Care (-4%)
• Energy (-4%)

Best Performing Sector:

• Real Estate
• Financials

1 Month Performance

Weakness continues in:

• Information Technology
• Energy
• Health Care

Mild strength seen in:

• Real Estate
• Utilities

3 Months Performance

Worst Performing Sectors:

• Health Care
• Materials
• Energy

Information Technology, which led the rally previously, is now among the weakest sectors.

Sector Conclusion:

• Tech and Growth sectors have significantly weakened, reflecting a shift in market sentiment.
• Defensive sectors like Consumer Staples and Real Estate are holding better, suggesting investors are moving toward safety.
• Energy has struggled, likely due to concerns about economic slowdown or commodity price fluctuations.
• Overall, market sentiment appears to be shifting from risk-on to risk-off.

Market Breadth Analysis

February 28, 2025

• Advancing Stocks: 69%
• Declining Stocks: 28.7%
• SMA(20+): 36.5%
• New Highs (NH): 1.5%
• New Lows (NL): 6.3%

Observations:

• Market breadth improved significantly on Feb 28, with 69% advancing stocks, compared to only 35.6% on Feb 24 and 25.
• Declining stocks percentage fell from 61.7% (Feb 24-25) to 28.7% (Feb 28), suggesting a short-term rebound.
• New highs remain low, indicating that few stocks are making fresh breakouts.
• New lows increased slightly, showing some lingering weakness.
• SMA(20+) has not improved significantly, suggesting market participation is still mixed.

Market Breadth Conclusion:

• The market showed significant improvement on Feb 28, with more advancing stocks.
• However, overall trend participation is still weak, as reflected in the low SMA(20+) percentage.
• This could indicate a temporary bounce rather than a full trend reversal.

Final Market Conclusion

1. SPY remains relatively strong, but QQQ is showing mixed signals, and IWM is still in a bearish trend.
2. Sector performance suggests a shift away from growth stocks toward defensive sectors, signaling a more cautious market.
3. Market breadth data improved toward the end of the week, but long-term participation remains low, raising concerns about sustainability.
4. Given these factors, the market is currently in a fragile state, with potential for further downside if key levels fail.

If SPY and QQQ break above key resistance levels, the market could regain strength. However, if selling pressure resumes, particularly in growth stocks and small caps, a deeper correction might unfold.