Weekend Update #223
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The S&P 500 extended declines this week, ending 9.2% below the all-time high reached on February 19, 2025. President Trump’s new 25% tariffs on automobile imports in addition to weak Consumer Confidence and Consumer Sentiment reports were catalysts for the continued market selloff. Just as market participants seemed more at ease with the tariff situation to start the week, uncertainty about future policy and its impacts remains high. Markets will pay close attention to President Trump’s April 2nd “liberation day” for more insight on U.S. tariff plans, which could be another major catalyst for equity markets.
Consumers are growing increasingly concerned about a slowdown in economic growth and rising inflation as a result of tariffs, but unlike recent periods of stress such as the trade war started in 2018, COVID lockdowns, or slowing growth in 2022, Americans today also face weaker underlying fundamentals. About 2 in 3 Americans expect unemployment to rise over the coming year and, as a result, expect worse personal financial situations ahead. Consumer survey bodies report that it is likely that these fears will translate to lower spending over the next year, which has created concerns around a slowdown in economic growth.
In economic news for the week, the S&P 500 Manufacturing PMI showed activity slipping back into contraction again in March at a 49.8 reading. New home sales of 676,000 in February fell slightly below consensus estimates at 680,000. Consumer Confidence in March extended declines to the lowest level since January 2021, driven by the lowest future expectations reading since 2013 and income expectations that fell to a low since 2022. The Q4 2024 report on quarterly GDP showed 2.4% growth, surpassing expectations for 2.3%, while the quarterly GDP Price Index fell below expectations. The good news did not support markets though as leading indicators for Q1 2025 have turned negative recently. Initial Jobless Claims for the week ended March 22nd came relatively in line with consensus expectations at 224,000. PCE inflation data for February showed readings at 0.3% MoM and 2.5% YoY, also in line with expectations. Core PCE data was a negative reading, rising 0.4% MoM and 2.8% YoY, surpassing expectations. Driving the market decline on Friday was Consumer Sentiment which mirrored the Consumer Confidence survey in showing broad-based declines in future expectations with surging inflation expectations.
In company-specific news this week, General Motors (GM), Stellantis (STLA), and Ford (F) fell 6.2%, 6.1%, and 2.8%, respectively, this week following the announcement of auto tariffs. Consumer stocks were also a source of weakness as fear grows that spending on discretionary items will not be able to keep pace with previous estimates.
Friday’s Close (Weekly Performance)
S&P 500 5,580.94 (-1.53%)
Nasdaq 17,322.99 (-2.59%)
Dow Jones 41,583.90 (-0.96%)
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