Market Overview

This week witnessed a significant downturn in U.S. equity markets, primarily driven by escalating trade tensions and recession fears. President Donald Trump's announcement of "Liberation Day" tariffs on imports triggered the worst single-day selloff since early 2020. These tariffs range from 10% to 54%, depending on reciprocal duties and nonmonetary measures imposed by other nations, sparking fears of stagflation—a mix of stagnant growth and persistent inflation—as global trade disruptions loom large. China retaliated with matching tariffs of 34% on all U.S. imports.

Market Performance

• The Dow Jones Industrial Average dropped over 3,200 points this week (-7.9%), entering correction territory.
• The Nasdaq Composite plunged 10.0%, entering bear market territory.
• The S&P 500 fell 9.1% from last Friday.

Sector and Stock Impact

Tech stocks were hit hardest, with companies like Apple (AAPL, Financial), NVIDIA (NVDA), and Meta Platforms (META) experiencing double-digit percentage drops since last Friday. The S&P 500 information technology sector declined by 11.4%, while the energy sector fell by 15.0% and the financial sector by 11.4%.

Oil Prices and Treasury Yields

Slowdown fears also manifested in dropping oil prices, which fell to $62.02 per barrel (-10.6%), and declining market rates. The 10-year yield dropped 27 basis points to 3.99%, and the 2-year yield fell 24 basis points to 3.67%. The CBOE Volatility Index (VIX), known as the "fear gauge," peaked above 45.0 as investors prepared for more volatility.

Monday

The S&P 500 (+0.6%) and Dow Jones Industrial Average (+1.0%) closed at or near highs after rebounding from early session lows. The Nasdaq Composite (-0.1%) also staged a rebound but settled slightly below Friday's close. Initial declines were due to hesitation about Wednesday's reciprocal tariffs. Weekend headlines impacted investor sentiment, with reports of potential broader tariffs, including a 20% universal tariff on all imports from all countries.

• March Chicago PMI: 47.6 vs. 45.3 consensus; prior revised to 45.0 from 45.5

Tuesday

The stock market had a choppy start to April and Q2, with major equity indices trading above and below prior closing levels. The market moved lower initially, with increased selling in response to the release of the ISM Manufacturing PMI, which showed contraction in manufacturing activity.

• March S&P Global US Manufacturing PMI - Final: 50.2; Prior: 49.8
• March ISM Manufacturing Index: 49.0% (consensus 49.8%); Prior: 50.3%

The key takeaway is a mix of decelerating activity, rising prices, and weakening employment, stirring talk of stagflation. February JOLTS - Job Openings stood at 7.568 million, with February Construction Spending at 0.7% (consensus 0.4%).

Wednesday

The stock market closed with gains across the board. The Dow Jones Industrial Average (+0.6%) jumped over 200 points, while the S&P 500 and Nasdaq Composite gained 0.7% and 0.9%, respectively. Volatility continued as participants awaited President Trump's tariff announcement. Optimism grew as a 20% universal tariff seemed unlikely, and tariffs appeared to be used as a bargaining tool.

• Weekly MBA Mortgage Applications Index: -1.6%; Prior: -2.0%
• March ADP Employment Change: 155K (consensus 120K); Prior revised to 84K from 77K
• February Factory Orders: 0.6% (consensus 0.4%); Prior revised to 1.8% from 1.7%

Thursday

The stock market experienced a sharp selloff following Trump's announcement of sweeping tariffs on nearly all U.S. trading partners. The Dow Jones Industrial Average plunged over 1,500 points, the Nasdaq Composite slumped 6.0%, and the S&P 500 fell 4.8%. The administration imposed 10% tariffs on global imports, with higher rates on specific countries. This move escalated fears of an economic slowdown.

• Weekly Initial Claims: 219K (consensus 224K); Prior revised to 225K from 224K
• Weekly Continuing Claims: 1.903 million; Prior revised to 1.847 million from 1.856 million
• February Trade Balance: -$122.7 billion (consensus -$121.0 billion); Prior revised to -$130.7 billion

Friday

The major equity indices registered significant declines for the second consecutive session on above-average volume. The Nasdaq Composite (-5.8%) entered a bear market, with the S&P 500 falling 6.0% and the Dow Jones Industrial Average dropping over 2,000 points. China's 34% duty on imports heightened the trade war, and global slowdown worries intensified.

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Today's News

Amid significant market fluctuations, Google (GOOG) and Amazon (AMZN, Financial) are positioning themselves to capture a larger share of federal contracts. The creation of the Department of Government Efficiency could facilitate this transition, which might impact Microsoft's (MSFT, Financial) stronghold in government software. Additionally, Amazon Web Services, Google, and Oracle (ORCL, Financial) are expected to expand their roles in federal cloud computing solutions.

In the semiconductor sector, despite being exempt from new tariffs, companies like Marvell Technology (MRVL, Financial) and ON Semiconductor (ON, Financial) have faced substantial declines. The Philadelphia Semiconductor Index saw a significant drop, reflecting broader market concerns about economic uncertainty and global trade tensions.

SpaceX (SPACE) and United Launch Alliance, a joint venture of Boeing (BA, Financial) and Lockheed Martin (LMT, Financial), are anticipated to secure lucrative contracts from the U.S. Space Force for launching crucial satellites. This development highlights the strategic importance of space technology in national defense.

Rapidus, a Japanese semiconductor firm, is in talks with major tech companies including Apple (AAPL, Financial) and Google (GOOGL) to produce processors, indicating a shift towards diversifying supply chains amid U.S.-China tensions. The firm is engaging with multiple potential clients, suggesting a growing demand for alternative semiconductor sources.

In the retail sector, companies like Nike (NKE, Financial) and Lululemon (LULU, Financial) experienced a rebound following positive tariff discussions between U.S. and Southeast Asian leaders. This potential reduction in tariffs could benefit companies with significant manufacturing operations in Vietnam.

The petrochemical industry faces challenges as Dow (DOW, Financial) and LyondellBasell (LYB, Financial) were downgraded by J.P. Morgan due to faltering demand and rising raw material costs. This sector's performance is closely tied to global economic conditions, which are currently under strain.

Meta Platforms (META) is reportedly investing nearly $1 billion in a new data center project in Wisconsin. This move is part of a broader trend of tech companies expanding infrastructure to support growing data needs.

Federal Trade Commission Chairman Andrew Ferguson has decided to resume a lawsuit against leading pharmacy benefit managers, including UnitedHealth’s (UNH) Optum and CVS Health’s (CVS) CVS Caremark, over alleged schemes that raised insulin prices. This legal action underscores ongoing scrutiny of healthcare pricing practices.

Bill Gross, co-founder of PIMCO, advised investors against buying the dip amidst current market turmoil, likening the situation to significant economic shifts of the past. He emphasized caution as the market grapples with new tariffs and economic policies.

Microsoft (MSFT, Financial) celebrated its 50th anniversary by unveiling new AI features at a special event, highlighting the company's ongoing innovation and adaptation in the tech landscape. The event also served as a reflection on Microsoft's historical impact on the technology industry.

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