Weekly Wrap

This week, U.S. equity markets faced significant volatility, culminating in notable losses across major indices. The S&P 500, which closed above its 200-day moving average early in the week, declined by 1.5%, the Dow Jones Industrial Average by 1%, and the Nasdaq Composite by 2.6%.

A convergence of rising inflation, declining consumer confidence, and trade policy uncertainties amplified market volatility.

The Consumer Confidence Index showed a fourth consecutive decline, and the Expectations Index fell to its lowest level (65.2) in 12 years, with worries about future employment prospects and inflation pacing that downturn. Inflation data this week corroborated the worries after February's core Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation read, rose by 0.4%, bringing the annual rate to 2.8%.

Also, the final March University of Michigan Index of Consumer Sentiment was marked down to 57.0 from the preliminary reading of 57.9. There was a large month-over-month drop in the Expectations Index, with consumers across all demographics and political affiliations expressing concerns about personal finances, business conditions, unemployment, and inflation.

Ongoing concerns about US trade policy also played a big role this week. President Trump announced a 25% tariff on all imported passenger vehicles starting April 3. He also said reciprocal tariffs will go on for all countries, but that the U.S. will be very lenient. 

Tech stocks led the retreat, but many names participated in this week's slide. The equal-weighted S&P 500 fell 1.2% while NVIDIA (NVDA), Microsoft (MSFT), and Amazon.com (AMZN) dropped 6.8%, 3.2%, and 1.8%, respectively. 

Four S&P 500 sectors registered gains while the remaining seven sectors logged declines ranging from 0.2% (financials) to 3.7% (technology). The risk-off bias this week led the consumer staples sector to log a 1.7% gain.

Monday: 

The stock market rallied on optimism that the Trump administration may adopt a more targeted approach to impending tariffs, which are set to come into effect on April 2.

The S&P 500 climbed 1.8%, closing at a two-week high above its 200-day moving average (5,752).

Technology stocks led the rally, especially names that sold off to start 2025.

Positive economic indicators further bolstered sentiment.

In the bond market, U.S. Treasury yields climbed in a manifestation of increased risk appetite among investors.

Reviewing Monday's economic data:

• March S&P Global US Manufacturing PMI - Prelim 49.8; Prior 52.7
• March S&P Global US Services PMI - Prelim 54.3; Prior 51.0

Tuesday:

The major equity indices closed higher for a third consecutive session. This price action pushed the S&P 500 further above its 200-day moving average (5,754). The moves were modest, however, and mostly driven by gains in the mega cap space.

There was an overall negative bias under the index surface as participants continue to weigh worries about US trade policy and economic growth. The latter was piqued by this morning's economic releases.

The Consumer Confidence Index showed a fourth consecutive decline, and the Expectations Index fell to its lowest level (65.2) in 12 years, with worries about future employment prospects and inflation pacing that downturn. Separately, new home sales increased a modest 1.8% month-over-month in February, yet higher-priced homes made up a smaller percentage of sales than the prior month.

In housing market-related news, KB Home's (KBH) disappointing earnings and guidance contributed to the downside bias.

Reviewing Tuesday's economic data:

• January FHFA Housing Price Index 0.2%; Prior was revised to 0.5% from 0.4%
• January S&P Case-Shiller Home Price Index 4.7% (Briefing.com consensus 4.6%); Prior 4.5%
• March Consumer Confidence 92.9 (Briefing.com consensus 94.2); Prior was revised to 100.1 from 98.3
  • The key takeaway from the report is that the drop in confidence was guided primarily by the decline in consumers' outlook, which was driven by worries about inflation and future employment prospects, the latter of which hit a 12-year low. This can be a combination for a pullback in discretionary spending.
• February New Home Sales 676K (Briefing.com consensus 680K); Prior was revised to 664K from 675K
  • The key takeaway from the report is that new home sales in February were aided by the drop in mortgage rates, yet affordability constraints remained a headwind as sales of higher-priced homes accounted for a smaller percentage of new home sales in February than the prior month.

Wednesday: 

The equity market closed with losses in the major indices. 

Wednesday's price action led the S&P 500 back below its 200-day moving average (5,756) and led the Dow Jones Industrial Average, which turned positive on the year in Tuesday's advance, back into the red for 2025.

There were some indications of buying interest in the early going, but losses in the mega cap space kept a cap on index performance. Selling increased in the space, and the broader equity market, following news that President Trump is expected to announce tariffs on auto imports.

Reviewing Wednesday's economic data:

• Weekly MBA Mortgage Applications Index -2.0%; Prior -6.2%
• February Durable Orders 0.9% (Briefing.com consensus -1.2%); Prior was revised to 3.3% from 3.1%, February Durable Goods - ex transportation 0.7% (Briefing.com consensus 0.1%); Prior was revised to 0.1% from 0.0%
  • The key takeaway from the report is that durable goods orders were stronger than expected; however, that understanding was clouded by the added realization that there was a downturn in business spending, evidenced by the 0.3% decline in nondefense capital goods orders, excluding aircraft.

Thursday: 

The stock market had a mixed showing.

Mixed messages on the tariff front and in economic data contributed to the choppy action. President Trump's Wednesday evening announcement that a 25% tariff will be imposed on all car and light truck imports into the United States sent carmakers sharply lower, yet he also added that reciprocal tariffs will be "lenient."

Mixed action in the mega cap space also contributed to the up and down action at the index level.

Reviewing Thursday's economic data:

• Q4 GDP - Third Estimate 2.4% (Briefing.com consensus 2.3%); Prior 2.3%, Q4 GDP Deflator - Third Estimate 2.3% (Briefing.com consensus 2.4%); Prior 2.4%
  • The key takeaway from the report is that it shows a nice expansion in activity during the fourth quarter that was underpinned by consumer spending; however, the report's impact on the market is muted by its dated nature (we're just days away from being done with the first quarter).
• Weekly Initial Claims 224K (Briefing.com consensus 225K); Prior was revised to 225K from 223K, Weekly Continuing Claims 1.856 mln; Prior was revised to 1.881 mln from 1.892 mln
  • The key takeaway from the report is that initial jobless claims -- a leading indicator -- continue to idle at levels consistent with an otherwise solid labor market.
• February Adv. Intl. Trade in Goods -$147.9 bln; Prior was revised to -$155.6 bln from -$153.3 bln
• February Adv. Retail Inventories 0.1%; Prior was revised to 0.1% from -0.1%
• February Adv. Wholesale Inventories 0.3%; Prior was revised to 0.8% from 0.7%
• February Pending Home Sales 2.0% (Briefing.com consensus 2.9%); Prior -4.6%
  • The key takeaway from the report is that the goods deficit, while outsized, narrowed on account of exports being $7.0 billion more than January exports and imports being $0.6 billion less than January imports.

Friday:

The major US equity indices experienced significant declines, driven by escalating inflation concerns and deteriorating consumer sentiment. The Dow Jones Industrial Average dropped 1.7%, the S&P 500 fell 2.0%, and the Nasdaq Composite registered a 2.7% loss.

The core Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation measure, rose 0.4% in February, equating to a 2.8% annual increase versus 2.7% in January. Also, the final University of Michigan's Consumer Sentiment survey dropped to 57.0 in March, reflecting worsening expectations for personal finances, business conditions, unemployment, and inflation.

Some negative corporate news also contributed to the selling interest in equities.

Reviewing Friday's economic data:

• February Personal Income 0.8% (Briefing.com consensus 0.4%); Prior was revised to 0.7% from 0.9%, February Personal Spending 0.4% (Briefing.com consensus 0.6%); Prior was revised to -0.3% from -0.2%, February PCE Prices 0.3% (Briefing.com consensus 0.3%); Prior 0.3%, February PCE Prices - Core 0.4% (Briefing.com consensus 0.4%); Prior 0.3%
  • The key takeaway from the report is that it was good on the income side, just okay on the spending side (real PCE up just 0.1%), and bad on the inflation side with the uptick in the core-PCE Price Index. That mixed complexion, which is apt to stir some stagflation angst as well, will keep the Fed in a wait-and-watch mode, especially with near-term price adjustments likely as the tariffs take hold.
• March Univ. of Michigan Consumer Sentiment - Final 57.0 (Briefing.com consensus 57.9); Prior 57.9
  • The key takeaway from the report is that the Expectations Index has dropped more than 30% since November 2024. The decline in March featured a clear consensus across all demographic and political affiliations, citing worsening expectations for personal finances, business conditions, unemployment, and inflation.