(Justin Vaughn, Editor, Options Trading Report)
The Nasdaq Composite led the indexes lower for the month of February, off 4% as the late Friday rally was short lived. The Dow Jones Industrial Average, the S&P 500 and the small cap value stock Russell 2000 struggled both losing to end the month. Tariff jockeying by President Trump continued to unsettle investors and traders. President Trump and Ukraine President Volodymyr Zelensky sparred in White House discussions regarding mineral rights and enacting a cease fire in the Russian/Ukraine war with no success as Trump requested Zelensky leave as talks ended abruptly. President Zelensky then traveled to Europe to continue discussions on a cease fire of the war. Reception was more positive as many European Union countries offered cooperation with military support, even suggesting ground troops if necessary. Certainly a warmer reception than the ‘White House.’ Buying of government bonds was heavy as the 10-year Treasury yield hit the lowest of the year, at 4.228%. Oil continued to struggle, closing Friday at $69.96 a barrel, off nearly 4% from a year ago.
Monday’s opening was negative as all indexes reacted to President Trump’s comment regarding last minute negotiations with Mexico and Canada on tariffs, saying: ”there was no room left” for negotiations, effectively ‘closing the door’ on future discussions. The indexes reacted, with the Nasdaq Composite dropping 2.6%, while the blue chip Dow Jones lost 650 points. The S&P 500 had its worst day in 2025, off 1.7%, all finishing February negatively. The popular Magnificent 7, chips and AI stocks were all down significantly, as investors and traders were confused and perplexed looking for any signs of positiveness. Late Monday President Trump signed an executive order increasing China’s tariffs from 10% to 20% commenting that the country “was not taking adequate steps to alleviate the illicit drug crisis.”
Secretary of Commerce Howard Lutnick gave indications that President Trump will discuss “tariff relief” later this week. He assured that tariffs in Canada and Mexico would not be as ‘severe’ as initially thought. Those comments did calm the market, however the Dow Jones Industrial Average fell 670 points Tuesday, off 1.6% while both the S&P 500 and Nasdaq dropped 1.2% and 0.4% respectively, but did not fall into “corrective territory.” America’s largest partners in trade, Canada, Mexico and China have all vowed retaliation to President Trump’s proposed tariffs, threatening world-wide consequences in trade balances. Prime Minister Trudeau of Canada is planning to enact tariffs of “$100 billion on U.S. imports”. President Claudia Sheinbaum of Mexico has also threatened retaliation by Sunday. Trump reacted, saying he will impose more tariffs. As the U.S. added an extra 10% tariff on China Tuesday, China countered saying, “more tariffs against American companies will be instituted at once.” “It’s unambiguously terrible for the market,” said Jay Hatfield, the chief executive at Infrastructure Capital Advisors. “Nobody thought he would actually do it.”
Cotton prices are trading at near 4 year lows. The U.S., a major exporter, shipped $5 billion worth of cotton last year of which China is the largest buyer. China’s recent 15% ‘retaliatory tariff’ has driven prices down another 3.5%. According to the Agriculture Department, the U.S. farmed 12.2 million acres of cotton in 2024, with the coming year allocating another million acres. Currently trading at 63 cents a pound, down a third from last year, cotton, a once thriving commodity is struggling.
RUMBLINGS ON THE STREET
Edward Yardeni, Yardeni Research, Barron’s – “There has…been a rotation trade away from the Magnificent Seven and into the S&P493 in recent weeks… That rotation can be seen in the recent decline of the forward P/E of the Magnificent Seven and the ascent of the forward P/E of the S&P 493.
Dennis Wilder, senior fellow at Georgetown University’s Initiative for U.S.China Dialogue of Global Issues. Barron’s – “Trump’s fundamental philosophy is: “Let’s make a deal,” Mr. Wilder said. “For Trump, the struggle has never been ideological. It’s economical. He is a businessman, not a strategic military thinker.”
Callie Cox, chief market strategist at Ritholtz Wealth Management, WSJ – “Investors are finally realizing that we have a tenuous economic situation–that the foundation is sound, but there are cracks to consider, when the ground is shifting underneath your feet, the economy becomes more vulnerable.”
Ukraine President Zelensky, WSJ – “I don’t want something that 10 generations of Ukrainians will have to pay back.” (Kyiv battles for a ‘mineral rights deal’ with Trump)