Stocks headed steadily lower throughout Friday's session, pressured by disappointing economic data. A round of negative earnings reactions weighed on the main benchmarks, too, with all three ending the day and the week with notable losses.
It was a busy morning on the economic calendar. Shortly after the open, S&P Global said its Flash Manufacturing Purchasing Managers Index (PMI) rose to 51.6 in February from 51.2 in January. Its Flash Services PMI, on the other hand, declined to 49.7 in February from 52.9 in January – marking the first contraction of activity in the services sector in more than two years.
"New business inflows into the services sector came close to stagnation," said S&P Global in its report. Service providers cited political uncertainty surrounding federal spending cuts and the impact of potential Trump policies on the economy and inflation as the reasons for the slowdown, the data provider added.
Elsewhere, the National Association of Realtors said existing home sales decreased 4.9% month over month in January, to a seasonally adjusted rate of 4.08 million.
"Existing home sales offered little hope for a real estate recovery as elevated financing charges and costly properties are hampering affordability for prospective buyers," says José Torres, senior economist at Interactive Brokers.
Consumer sentiment was worse than we thought
But it was the University of Michigan's Consumer Sentiment Index that Wall Street really reacted to. The revised reading showed consumer sentiment fell to 64.7 in February from 71.7 in January – a steeper decline than what was seen in the preliminary data.
It also reiterated a 15-month high in year-ahead inflation expectations (4.3%) and an uptick in the long-term inflation outlook, to 3.5% in February from January's 3.2%.
"All five index components deteriorated this month, led by a 19% plunge in buying conditions for durables, in large part due to fears that tariff-induced price increases are imminent," said Surveys of Consumers Director Joanne Hsu.
Block suffers worst day in five years after earnings
In single-stock news, Block (XYZ) shares slumped 17.7% – their worst day since 2020 – after the payments systems provider missed top- and bottom-line expectations for its fourth quarter, though CashApp revenue growth came in strong. XYZ also gave uninspiring guidance.
Still, Oppenheimer analyst Rayna Kumar maintained an Outperform (Buy) rating on the fintech stock after earnings. "Square's gross payment volume growth should accelerate through efforts like expanding U.S. sales teams, boosting international sales presence, and increasing partnerships," Kumar said.
Additionally, the company is "well-positioned for share gains, with growing monetization of its products and the still-low penetration of its total addressable market."
UnitedHealth stock sinks on DOJ drama
UnitedHealth Group (UNH) stock plunged 7.2% after a report in The Wall Street Journal indicated the Justice Department is investigating the health insurer over its Medicare billing practices.
The Justice Department has not confirmed the investigation. In a statement, UnitedHealth said, "The Wall Street Journal continues to report misinformation on the Medicare Advantage (MA) program," and that "any suggestion that our practices are fraudulent is outrageous and false."
At roughly $465 a share, UNH has the biggest influence on the price-weighted Dow Jones Industrial Average – which is why the 30-stock index plunged 1.7% to 43,428. However, selling was broad-based, with the S&P 500 losing 1.7% to 6,013 and the Nasdaq Composite surrendering 2.2% to 19,524.
