Weekly Wrap

The stock market continues to contend with similar concerns to recent weeks. Namely, uncertainty pertaining to economic growth, corporate earnings, and tariffs. 

Despite the headwinds, the S&P 500 (+0.5%) and Nasdaq Composite (+0.2%) broke a four-week losing streak thanks to some rebound action from a short-term oversold condition. 

It wasn't just a mega cap push, either, the equal-weighted S&P 500 closed 0.7% higher than last Friday. 

Nonetheless, there were plenty of factors to fuel the market's persistent worries. The headline event this week was the Federal Open Market Committee (FOMC) meeting. The committee held rates steady, leaving the federal funds target range unchanged at 4.25-4.50% in a unanimous vote.

Fed Governor Waller dissented—not on the rate decision itself, but on the pace of balance sheet reduction. His preference to maintain the current level of securities runoff was overruled as the committee opted to slow the monthly runoff of Treasury securities from $25 billion to $5 billion starting April 1, while keeping mortgage-backed securities runoff unchanged at $35 billion.

The committee’s directive also acknowledged rising economic uncertainty while maintaining that the Fed remains attentive to both sides of its dual mandate.

The latest Summary of Economic Projections (SEP) complicates the narrative. The Fed lowered its 2025 GDP growth forecast from 2.1% to 1.7% while simultaneously raising its PCE inflation projection from 2.5% to 2.7% (core PCE ticked up from 2.5% to 2.8%). Despite this, the median estimate for the fed funds rate held steady at 3.9%, implying an expectation for two rate cuts this year.

Weaker growth estimates paired with a steady inflation outlook and rate cut projections indicates the central bank is more concerned with stubborn inflation than slowing growth.

During his press conference, Fed Chairman Powell again said that there is no rush to adjust policy. He warned that it is "going to be very difficult to have a precise assessment of how much inflation is coming from tariffs."

He indicated that it's "kind of the base case" that inflationary pressures from tariffs would be transitory, adding that the last time tariffs were imposed, the increase in prices was transitory. 

On a tariff-related note, the market remains on high alert about the specter of reciprocal tariffs being announced on April 2.

Treasuries settled the week with solid gains. The 10-yr yield declined six basis points to 4.25% and the 2-yr yield declined seven basis points to 3.95%.

Monday:

Monday's trade featured a positive bias through the entire session, reflecting an ongoing buy-the-dip mentality after the S&P 500 entered correction territory last week. Losses in the mega cap space limited index performance in the early going, but market breadth reflected more buying interest under the index surface. Advancers had a 4-to-1 lead over decliners at the NYSE and a 5-to-2 lead at the Nasdaq.

Buying increased in many areas of the market in the afternoon trade, sending the major indices to session highs. This followed a Bloomberg report indicating that the newly confirmed U.S. Trade Representative Greer aims for a more orderly rollout of reciprocal tariffs on April 2.

The afternoon rebound was also helped by recovery action in a few mega cap names.

Reviewing Monday's economic data:

• Retail sales increased 0.2% month-over-month in February (Briefing.com consensus 0.7%) following a downwardly revised 1.2% decline (from -0.9%) in January. Excluding autos, retail sales were up 0.3% month-over-month (Briefing.com consensus 0.4%) following a 0.6% decline (from -0.4%) in January.
  • The key takeaway from the report is that control group retail sales, which exclude auto, gasoline station, building materials, and food services sales, jumped 1.0% month-over-month following a downwardly revised 1.0% decline (from -0.8%) in January.
• The New York Fed's Empire Manufacturing Survey for March showed the General Business Conditions Index declining to -20.0 in March from 5.7 in February. A number below 0.0 denotes a contraction in business activity in the New York Fed region. The Prices Paid Index rose five points to 44.9, its highest level in more than two years, while the Prices Received Index jumped three points to 22.4, hitting its highest level since May 2023.
  • The key takeaway from the report is that it plays into some of the stagflation worries that have infiltrated the market.
• January Business Inventories increased 0.3%, as expected, following a 0.2% decline in December.
• The March NAHB Housing Market Index dropped to 39 (Briefing.com consensus 43) from 42 in February.

Tuesday:

The stock market closed with losses across the board. The major indices settled off session lows with declines ranging from 0.6% to 1.7%.

The downside move follows two consecutive winning sessions for the the S&P 500 (-1.1%) and Nasdaq Composite (-1.7%) and the gains haven't been fully erased. The S&P 500 and Nasdaq Composite are still 1.7% and 1.2% higher, respectively, than Thursday's close.

Mega cap stocks led the downturn. Investors were digesting a batch of headlines related to NVIDIA amid its GTC event, but shares didn't seem fazed by the news.

Geopolitical angst was also cited as a factor driving Tuesday's downside move, yet price action in commodities and Treasuries didn't reflect that.

President Trump's call with Russian President Putin also garnered a muted response from stocks and bonds. White House Press Secretary Karoline Leavitt issued a read out of the call, saying "leaders agreed that the movement to peace will begin with an energy and infrastructure ceasefire, as well as technical negotiations on implementation of a maritime ceasefire in the Black Sea, full ceasefire and permanent peace."

Reviewing Tuesday's economic data:

• February Housing Starts 1.501 mln (Briefing.com consensus 1.385 mln); Prior was revised to 1.350 mln from 1.366 mln, February Building Permits 1.456 mln (Briefing.com consensus 1.450 mln); Prior was revised to 1.473 mln from 1.483 mln
  • The key takeaway from the report is that starts activity was bolstered by the return of better weather, which was reflected in the 18.3% increase in housing starts in the South region (they were down 23.0% in January).
• February Export Prices 0.1%; Prior 1.3%
• February Export Prices ex-ag. 0.1%; Prior 1.5%
• February Import Prices 0.4%; Prior was revised to 0.4% from 0.3%
• February Import Prices ex-oil 0.3%; Prior 0.1%
• February Industrial Production 0.7% (Briefing.com consensus 0.2%); Prior was revised to 0.3% from 0.5%, February Capacity Utilization 78.2% (Briefing.com consensus 77.7%); Prior was revised to 77.7% from 77.8%
  • The key takeaway from the report is that there was a solid increase in manufacturing output that was led by an 8.5% jump in the index for motor vehicles and parts, which likely had some tariff frontrunning involved. Motor vehicle assemblies increased 11.5% month-over-month to a seasonally adjusted annual rate of 10.35 million.

Wednesday:

The stock market rallied in the mid-week session. There was a positive bias in the early going and buying interest increased following the 2:00 ET FOMC decision and Fed Chair Powell's subsequent press conference.

The major indices closed near their session highs after the Federal Open Market Committee (FOMC) held rates steady, leaving the federal funds target range unchanged at 4.25-4.50% in a unanimous vote.

Fed Governor Waller dissented—not on the rate decision itself, but on the pace of balance sheet reduction. His preference to maintain the current level of securities runoff was overruled as the committee opted to slow the monthly runoff of Treasury securities from $25 billion to $5 billion starting April 1, while keeping mortgage-backed securities runoff unchanged at $35 billion.

The committee’s directive also acknowledged rising economic uncertainty while maintaining that the Fed remains attentive to both sides of its dual mandate.

The latest Summary of Economic Projections (SEP) complicates the narrative. The Fed lowered its 2025 GDP growth forecast from 2.1% to 1.7% while simultaneously raising its PCE inflation projection from 2.5% to 2.7% (core PCE ticked up from 2.5% to 2.8%). Despite this, the median estimate for the fed funds rate held steady at 3.9%, implying an expectation for two rate cuts this year.

Weaker growth estimates paired with a steady inflation outlook and rate cut projections indicates the central bank is more concerned with stubborn inflation than slowing growth.

Reviewing Wednesday's economic data:

• Weekly MBA Mortgage Applications -6.2%; Prior 11.2%
• Weekly EIA Crude Oil Inventories showed a build of 1.75 million barrels following last week's build of 1.45 million barrels

Thursday:

The rally that followed yesterday's FOMC news did not persist today. There was an attempt at follow through, but that attempt ultimately petered out along with the mega-cap stocks as investors remained pre-occupied with questions -- and no clear answers -- about the economic outlook.

There was some good economic news today, however. Existing home sales showed some surprising strength in February as buyers responded to an increase in inventory. It was a good sign along with no real change in weekly initial jobless claims, which continue to run at levels consistent with a solid labor market.

Those reports corroborated Fed Chair Powell's view from yesterday that the "hard data," as opposed to soft survey data, is still pretty solid in terms of what it is conveying about economic activity. That point notwithstanding, the specter of reciprocal tariffs being announced on April 2, and a bewildering forecast from the Fed that calls for lower growth and higher inflation in 2025 than previously expected, seemingly curtailed the market's interest in following through on yesterday's advance.

Today, overall, didn't feature much conviction on either side of the tape.

Reviewing Thursday's economic data:

• Initial jobless claims for the week ending March 15 increased by 2,000 to 223,000 (Briefing.com consensus 220,000). Continuing jobless claims for the week ending March 8 increased by 33,000 to 1.892 million.
  • The key takeaway from the report is that this period covers the week in which the survey for the employment report is conducted, so the low level of initial jobless claims will lead economists to project another relatively solid increase in nonfarm payrolls.
• The Q4 Current Account balance showed a narrowing in the deficit to $303.9 billion (Briefing.com consensus -$334.0 billion) from an upwardly revised $310.3 billion (from -$310.9 billion).
• The March Philadelphia Fed Index dipped to 12.5 (Briefing.com consensus 10.0) from 18.1 in February. The dividing line between expansion and contraction is 0.0, so this report indicates that business activity in the Philadelphia fed region expanded in March, but at a slower pace than the prior month.
• Existing home sales increased 4.2% month-over-month in February to a seasonally adjusted annual rate of 4.26 million (Briefing.com consensus 3.95 million) from an upwardly revised 4.09 million (from 4.08 million) in January. Sales were down 1.2% from the same period a year ago.
  • The key takeaway from the report is that existing home sales actually increased, as the consensus estimate called for a 3.2% month-over-month decline. The surprising strength suggests some unleashing of pent-up demand with more inventory on the market and prospective buyers adjusting to the higher level of mortgage rates.
• February Leading Indicators declined 0.3% (Briefing.com consensus -0.2%) following an upwardly revised 0.2% decline (from -0.3%) in January.

Friday:

There was a negative bias driving the equity market on this quarterly options expiration day. The major indices didn't reflect that at the close, however. The Dow Jones Industrial Average (+0.1%), S&P 500 (+0.1%) and Nasdaq Composite (+0.5%) closed at their best levels of the session, propelled by a late afternoon surge in the mega caps.

Apple (AAPL 218.27, +4.17, +2.0%) and Microsoft (MSFT 391.26, +4.42, +1.1%), which make up 13% of the S&P 500 in terms of market cap, were among the top performers.

Still, many stocks registered declines following disappointing earnings and/or guidance from the likes of FedEx (FDX 230.33, -15.88, -6.5%), NIKE (NKE 67.94, -3.92, -5.5%), Lennar (LEN 115.22, -4.85, -4.0%), and Micron (MU 94.72, -8.28, -8.0%).

The equal-weighted S&P 500 closed 0.5% lower and eight of the 11 S&P 500 sectors closed in the red with the real estate (-1.0%) and materials (-1.0%) sectors registering the largest declines.

There was no top-tier US economic data on Friday.