Stock Market Today: Growth Concerns Drag on Stocks

stock indexes were down on soft retail guidance

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A big-box bellwether reported strong fourth-quarter earnings but offered weak full-year guidance on Thursday, a follow-up to a soft January retail sales report that could further undermine faith in the U.S. consumer as an engine of global economic growth. Meanwhile, President Donald J. Trump is carving a new, new world order complete with budget cuts at the Pentagon and a corresponding impact on defense stocks.

And then there was St. Louis Fed President Alberto Musalem in a speech at the Economic Club of New York raising a specter any presidential administration is loath to contemplate: stagflation.

"An alternative and plausible scenario in which inflation ceases to converge, or rises, at the same time the labor market weakens must also be considered," said Musalem, a voting member of the Federal Open Market Committee. Musalem said his base-case scenario is continuing slow improvement in inflation and a healthy labor market.

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Former St. Louis Fed President Jim Bullard told MarketWatch the alternative scenario Musalem describes would put the Fed in a bind vis-à-vis its dual mandate of maintaining both price and labor-market stability. "I think they probably lower rates, because they would argue that a slower economy would naturally bring the inflation rate down a little," Bullard observed.

At the closing bell, the blue-chip Dow Jones Industrial Average was down 1% to 44,176. The broad-based S&P 500 Index, coming off an all-time closing high on Wednesday, shed 0.4% to 6,117. The tech-heavy Nasdaq Composite was off 0.5% to 19,962.

Walmart sees sales slowing

Walmart (WMT) stock fell 6.5% and was the worst-performing Dow Jones stock after the retailer beat top- and bottom-line expectations for its fourth quarter but issued a soft outlook for fiscal year 2026.

Following last week's report of softer-than-expected retail sales data for January, Walmart's forecast invites more questions about the health of the U.S. consumer.

The fact that WMT boosted its dividend by 13% – the biggest payout bump in more than a decade – suggests management maintains some confidence in its future prospects. It also means Walmart is one of the best dividend stocks to buy for dependable growth.

As Jay Woods of Freedom Capital Works notes, WMT stock was trading at a price-to-earnings ratio of 37.3 times vs a five-year high of 37.9. And following a stellar performance in 2024 – a total return of 74% vs 25% for the S&P 500 – the retail stock is up more than 15% this year, more than tripling the index's gain. For WMT to move higher from here, according to Woods, would have required "one heck of a beat."

Bernstein analyst Ivan Holman noted that though investors were prepared for management's "conservative guidance, this is a more muted outlook than investor feedback into earnings had suggested."

“We don’t want to get ahead of ourselves," said Chief Financial Officer John David Rainey during Walmart's conference call. "There is certainly some unpredictability in any environment that we have, but we feel really good about our ability to navigate that.” Rainey also noted that consumers are "very consistent" and "resilient."

Trump's new, new world order

Palantir Technologies (PLTR) stock fell 5.2% on Thursday after a 7.9% decline on Wednesday as investors priced in fresh reports on how the Trump administration plans to reposition the U.S. on the global stage. The AI stock is still up nearly 360% over the trailing 12 months.

Price action for defense stocks that haven't enjoyed a similar AI bounce was more muted, with Lockheed Martin (LMT, +0.8%), Northrop Grumman (NOC, +1.2%) and General Dynamics (GD, +0.8%) posting solid gains after a spokesman for President Trump clarified that the commander in chief has asked for $50 billion in cuts to the fiscal 2026 budget to help fund border security and drones.

Palantir – a data analytics company with more than a billion dollars worth of contracts with the U.S. Army and the Department of Defense – also disclosed that CEO Alex Karp plans to sell nearly 10 million PLTR shares.

"President Trump has dramatically shifted the direction of U.S. foreign policy in four short weeks," writes Alexandra Ward of The Wall Street Journal, "making the U.S. a less reliable ally and retreating from global commitments in ways that stand to fundamentally reshape America's relationship with the world."

At the same time, Dan Lamothe, Alex Horton and Hannah Natanson of The Washington Post report that Defense Secretary Pete Hegseth "has ordered senior leaders at the Pentagon and throughout the U.S. military to develop plans for cutting 8 percent from the defense budget in each of the next five years."

Nevertheless, Wedbush analyst Daniel Ives says the "sell-off represents another opportunity with PLTR generating traction across both federal and commercial for its entire portfolio." Ives reiterated his Outperform rating (equivalent to a Buy) and his $120 price target for PLTR, which represents 13% upside from Thursday's closing price.

Alibaba gets an AI boost

Alibaba Group Holding (BABA) stock rose 8.1% after the Chinese technology giant beat top- and bottom-line expectations for its fourth quarter.

"This quarter's results demonstrated substantial progress in our 'user first, AI-driven' strategies and the re-accelerated growth of our core businesses," said CEO Eddie Wu.

"The AI era presents a clear and massive demand for infrastructure," Wu added, noting that Alibaba "will aggressively invest" in the opportunity.

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David Dittman is the former managing editor and chief investment strategist of Utility Forecaster, which was named one of "10 investment newsletters to read besides Buffett's" in 2015. A graduate of the University of California, San Diego, and the Villanova University School of Law, and a former stockbroker, David has been working in financial media for more than 20 years.

With contributions from