Major indexes declined during the holiday-shortened week. With markets closed Monday in observance of Presidents’ Day, stocks started the week on Tuesday generally trending up, which led to the S&P 500 Index closing at record highs on Tuesday and Wednesday. However, sharp losses in the latter half of the week erased the early gains and led to the major indexes finishing lower. The Dow Jones finished lower, down -2.5%, the S&P 500 was down -1.7% for the week, while the NASDAQ was lower by -2.5%. Many of the week’s headlines centered around geopolitics and tariff news amid President Trump’s efforts to end the Russia-Ukraine conflict as well as Trump’s announcement of his intent to impose additional tariffs on automobiles, pharmaceuticals, and lumber products.

The week’s economic data releases seemingly did little to improve confidence. On Tuesday, the National Association of Home Builders reported that its housing market index—a gauge of the U.S. housing sector that measures home builders’ confidence—was 42 in February, down from 47 in January and the lowest level in five months. The report cited uncertainty around tariffs, elevated mortgage rates, and high housing costs as factors driving the overall decline in sentiment. January housing starts—a measure of the start of construction on new, privately owned homes in the U.S.—declined nearly 10% from December to a seasonally adjusted annual rate of 1,366,000.

Meanwhile, S&P Global reported that U.S. business activity growth came close to stalling in February, as its flash Composite Purchasing Managers’ Index (PMI) reading came in at a 17-month low of 50.4 (readings above 50 indicate expansion, while readings below 50 signify contraction). Services activity entered contraction territory with its lowest PMI reading in over two years (49.7), which partially offset growth in the manufacturing sector. According to the report, uncertainty related to federal government policies and rising input cost pressures drove the overall decline.

Policy uncertainty has also weighed on consumer optimism in recent weeks. The University of Michigan reported its Index of Consumer Sentiment for February on Friday, which dropped nearly 10% month over month to 64.7. All components of the index declined during the month, “led by a 19% plunge in buying conditions for durables, in large part due to fears that tariff-induced price increases are imminent,” according to Survey of Consumers Director Joanne Hsu. Inflation expectations for the year ahead also jumped to 4.3%, up from 3.3% in January.

With inflation front of mind for consumers and policymakers alike, investors will be on the lookout for this week’s January update of the PCE Price Index (Personal Consumption Expenditures), which is the Fed’s preferred inflation gauge. The consensus economist forecast points to core PCE moderating to 2.6% year-over-year from 2.8% in December, but upside surprises in the CPI numbers have injected some caution. Additionally, Nvidia’s highly anticipated fourth quarter earnings results will also face investor scrutiny on Wednesday as investors gauge the outlook for surging investment in AI data centers. Earnings reports from major retailers like Home Depot, Lowe’s, and TJ Maxx will round out the week and give more color on consumer activity.