The Beginning of a Correction?
The first part of the holiday-shortened week saw the S&P 500 hit its second and third record highs of the year.
- The S&P 500 reached 4,200 points for the first time in 2025.
- However, sentiment shifted when Walmart’s (WMT) muted guidance raised investor concerns.
- These concerns were driven by weaker-than-expected data, the possibility of a trade war, and ongoing geopolitical uncertainties.
Walmart’s 2026 fiscal year projections caused a sharp decline in stocks on Thursday.
- The stock price of Walmart fell by 3.5%, impacting the Dow and the broader consumer-related stock universe.
- Walmart cited uncertainties about consumer behavior and global economic and geopolitical conditions as key factors affecting their outlook.
On Friday, the blue-chip index was further rattled by news of a U.S. Department of Justice investigation into UnitedHealth’s (UNH) Medicare billing practices.
- The investigation into UnitedHealth led to a 2% drop in its stock price, weighing on broader market sentiment.
Despite the declines, other major indexes remained relatively flat to moderately higher, bolstered by mega-cap stocks.
- Both Nasdaq benchmarks reached intraday all-time highs early on Friday, with the Nasdaq Composite hitting 15,000 points.
- However, concerns over slowing economic growth and elevated stock valuations led to profit-taking, causing all key indexes to fall by Friday’s close.
Market volatility surged due to the scale of this month’s options expiry.
- Approximately $2.7 trillion in U.S. stock market derivatives tied to equities and ETFs expired on Friday, intensifying market movements.
Currently, analysts remain relatively calm, with opinions ranging from “consolidation” to “the beginning of a healthy correction.”
- Given the strong two-year rally, a correction is considered inevitable.
- The shift in market leadership this year, with defensive sectors like Consumer Staples, Utilities, and Healthcare replacing cyclicals such as Technology and Communication Services, could serve as a new catalyst for continued gains.
