Weekend Update #220
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The stock market faced a tumultuous week as tariffs took effect on Tuesday, with more set for next month, prompting retaliatory measures from Canada, China, and Mexico and escalating the trade war. On Thursday, President Donald Trump announced a temporary deferral of his 25% tariffs on Canada and Mexico for all goods and services under the USMCA, providing a brief reprieve until April 2, when new tariffs are expected. By Friday, he signaled potential reciprocal tariffs on Canadian lumber and dairy products, reigniting long-standing trade tensions and adding to market confusion. The S&P 500 notched its worst week since September as policy uncertainty and a wave of disappointing economic data reveal potential cracks in the economy, and the market has lost all of its gains since the November elections while the Volatility Index (VIX) has surged to its highest level of 2025.
Amid growing economic uncertainty, geopolitical tensions have escalated as the U.S. paused all federal aid to Ukraine, halting over $1 billion in military assistance following a contentious meeting between Presidents Trump and Zelenskyy, signaling a shift in U.S. policy. This has also disrupted a planned U.S.-Ukraine minerals deal that would have shared Ukraine’s natural resource revenues. This decision also disrupted a planned U.S.-Ukraine minerals deal that would have shared Ukraine’s natural resource revenues. Both nations have expressed interest in reengaging on the deal and peace negotiations, while Russia has shown willingness to discuss a temporary truce if it leads to a broader peace settlement. In response, Trump is considering imposing banking sanctions and tariffs on Russia to push for a ceasefire, suggesting a potential shift toward diplomatic talks.
Economic data revealed that U.S. employers announced plans to cut 172,017 jobs in February, marking the highest number since July 2020 and a 103% increase from the previous year, largely driven by reductions in the government sector as the Trump administration works to shrink the federal workforce. Meanwhile, the U.S. service sector expanded more quickly, with strong demand pushing the Institute for Supply Management's services index to 53.5 and employment within the sector reaching a more than three-year high of 53.9. Despite this growth, inflationary pressures persist, with costs for materials and services rising sharply. Nonfarm payrolls increased by 151,000 in February, but the unemployment rate rose to 4.1%, signaling a softening labor market with more people permanently out of work, fewer federal jobs, and an uptick in part-time workers. Government policies, including tariff hikes and spending cuts, are expected to continue weighing on job creation and may push the unemployment rate higher. Federal Reserve Chair Jerome Powell acknowledged growing uncertainty in the U.S. economic outlook but stated that officials don’t need to rush to adjust policy.
Market Highlights:
Google is urging DOJ officials to back away from a push to break up the company, citing national security concerns, people familiar said. The Biden administration called for changes including the sale of its Chrome web browser, with hearings scheduled for next month.
Apple Inc. rolled out a new iPad Air with a faster processor, enhancing a device that helped lift holiday sales despite an iPhone slump.
Target Corp. and Best Buy Co. project little to no sales growth this year as shoppers remain constrained by inflation, a concerning sign for a big-box retailer that’s struggling to shake off a lengthy slump
Sycamore Partners is nearing an acquisition of Walgreens Boots Alliance Inc., people with knowledge of the matter said, in a deal that could end the drugstore operator’s tumultuous run as a public company.
Aramco plans to trim the world’s biggest dividend, lowering a key source of funds for Saudi Arabia’s budget while relieving stress on its own finances
Friday’s Close (Weekly Performance)
S&P 500 5,770.20 (-3.10%)
Nasdaq 18,196.22 (-3.45%)
Dow Jones 42,801.72 (-2.37%)
Thank you Blue Room Senior Analyst NICK PEART
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