From euphoria to recession fears. The Trump trade has taken a nasty turn for markets but being overcome by pessimism would be as big a mistake as getting carried away with optimism.

President Donald Trump spurned the chance to calm the market over the weekend. Asked if he was expecting a recession, he said "I hate to predict things like that" and that he wasn't watching the stock market, in an interview on Fox News.

It's a far cry from his first term when Trump pointed to stock gains as a barometer of his success. The message is clear to both investors and opponents in the trade war such as Canada's incoming Prime Minister Mark Carney -- this administration is willing to suffer some market disruption for the perceived long-term benefits.

Could that cause a recession? The Atlanta Fed GDP model estimates a 2.4% annualized contraction for the first quarter of the year and that reading dates from before the disappointing February jobs report was published Friday.

Still, it's not time to panic. The Atlanta Fed estimate is likely distorted by an influx of gold imports, which makes the trade deficit look worse. As gold isn't being imported for consumption purposes -- traders look to be loading up on the precious metal ahead of any potential import levies -- it shouldn't subtract from first-quarter gross domestic product. Analysts at Nomura said they expect 1.1% GDP growth -- not great, but not a collapse.

More importantly, labor productivity is still on an upward trend and unemployment is low. Federal Reserve Chair Jerome Powell said Friday the economy is in "a good place." With rate cuts still an option, panicking about a possible recession is an overreaction.

-- Adam Clark

*** Join Barron's senior managing editor Lauren R. Rublin and deputy editor Ben Levisohn today at noon when they talk with Paul Malloy, head of municipal investment at Vanguard, about opportunities in the muni market. Plus, we'll discuss the latest market moves, earnings reports, and stocks in the news. Sign up here.

***

President Puts Investors on Edge Amid Tariffs, Inflation

The two issues whiplashing investors don't appear to be fading. President Donald Trump's erratic tariff policy announcements and growing signs that the economy is slowing have made investors more nervous about a potential recession, and Trump wouldn't rule out the possibility.

   -- Trump said in an interview that aired on Fox that he didn't like to 
      predict things like that, in response to a question about whether he 
      expected a recession this year. But Commerce Secretary Howard Lutnick 
      told NBC that Americans should "absolutely not" expect a recession. 
 
   -- The comments come days after Trump's 25% tariffs on goods from Canada and 
      Mexico kicked in and then were delayed until April 2, when he will 
      announce a broad set of tariffs on products from countries that impose 
      levies on American products, in equal amounts. 
 
   -- Lutnick confirmed Sunday that Trump's separate 25% tariffs on steel and 
      aluminum imports will take effect this Wednesday, from raw materials to 
      finished products and including from Canada and Mexico, which together 
      supply 40% of U.S. steel imports. Michigan Democrat Sen. Elissa Slotkin 
      criticized Trump's "reckless" approach to tariffs. 
 
   -- Slotkin told NBC she'd prefer to see a scalpel used when applying levies, 
      "not a sledgehammer." Trump, asked by Fox if there will be more clarity 
      for businesses on tariff policy, said "We may go up with tariffs. It 
      depends. We may go up. I don't think we'll go down." 

What's Next: More data this week could provide further clarity on the state of the economy. The February consumer price index on Wednesday is expected to rise 2.9% from the same time a year ago. Core CPI excluding volatile food and energy prices is expected to rise 3.2% for the year.

-- Janet H. Cho

***

More Retail Earnings Coming Amid Weakening Economic Sentiment

Retailers including Kohl's and Dollar General report earnings this week amid a cautious tone by executives in the industry after Target and Best Buy said tariffs could raise prices. There are already signs consumer confidence is deteriorating amid still-high prices for basic staples such as eggs.

   -- Kohl's is expected to report fourth-quarter adjusted earnings of 73 cents 
      a share on sales of $5.18 billion, and a same-store sales decline of 6.8%, 
      according to FactSet. Fellow department store chain operator Macy's last 
      week cut its guidance. 
 
   -- Dollar General is projected to report adjusted earnings of $1.50 a share 
      on $10.26 billion in sales, according to FactSet. Same-store sales are 
      expected to increase 0.9%, despite increased competition from Walmart and 
      e-commerce sites. 
 
   -- While some CEOs and CFOs have talked about the possibility of rising 
      prices because of tariffs, the number of S&P 500 companies that mentioned 
      the word "recession" on earnings calls reached its lowest level in more 
      than five years, according to a FactSet analysis of earnings calls from 
      Dec. 15 through March 6. 
 
   -- A FactSet analysis also found that although 76% of S&P 500 companies 
      posted better-than-expected fourth-quarter earnings-per-share, 62% of 
      companies have issued downbeat first-quarter per-share profit forecasts, 
      MarketWatch reported. 

What's Next: The University of Michigan's preliminary Consumer Sentiment Index for March coming out on Friday is expected to decline to 63.9 reading, down from February's 65.7 reading. Consumers' expectations for inflation in the year ahead are also rising.

-- Janet H. Cho

***

Government Funding Drama Heads for Another Deadline

Government funding and a looming deadline are also creating uncertainty. Unless Congress passes a stopgap spending bill by midnight on March 14, the government could shut down, creating more chaos as Elon Musk's Department of Government Efficiency wields its cost cutting ax.

   -- House Republicans proposed to keep the government funded through Sept. 
      30, and President Donald Trump has urged GOP lawmakers to back it. It's 
      unclear whether there are enough votes in the House and Senate to get a 
      bill passed and signed by the president before the deadline. 
 
   -- A shutdown likely would mean more volatility for investors. Carson 
      Group's investment research found that the S&P 500 was flat during the 
      previous 22 shutdowns dating back to 1976. And the market went on to post 
      an average gain of 12.7% in the 12 months after a shutdown. 
 
   -- The House's 99-page bill includes a boost to defense spending and cuts to 
      nondefense spending below 2024 levels. Many Democrats are likely to 
      resist that. Speaker Mike Johnson (R., La.) has teed it up for a House 
      vote on Tuesday, betting on his narrow GOP margin to hold. 
 
   -- It's going to be another close one, though Republicans have a 218-214 
      House majority. Party leaders said they worked closely with Trump to 
      craft the bill, and Johnson has expressed confidence he has the support 
      to pass it. 

What's Next: It will need 60 votes to pass the Senate, where Republicans only hold 53 seats, so Democrats will have to help it cross the line. Michigan Democrat Sen. Elissa Slotkin told NBC News on Sunday she would want to see that the bill will ensure the money is spent in the way Congress intends.

-- Paul R. La Monica and Liz Moyer

***

Tesla CEO Musk Says the U.S. Should Leave NATO

Tesla CEO Elon Musk weighed in on yet another politically divisive issue Sunday when he suggested the U.S. should exit the North Atlantic Treaty Organization. It's bad news for the electric vehicle maker's shareholders.

   -- "We really should. Doesn't make sense for America to pay for the defense 
      of Europe," Musk wrote on X early Sunday, in response to a post about the 
      U.S. leaving NATO. 
 
   -- NATO nations are supposed to spend about 2% of their GDP on national 
      defense. They reached that threshold in 2024 but have been below it for 
      much of the past decade, according to NATO data. The U.S. spends almost 
      $1 trillion a year on defense, close to 3% of GDP. 
 
   -- Musk's activities in Washington have become a risk factor for Tesla 
      shares, which are down 35% in 2025. The EV maker's sales in Europe and 
      the U.S. were weak to start the year, creating the perception that Musk 
      is alienating his core customers: politically left-leaning car buyers 
      looking to go green. 
 
   -- "My wife is insisting that we sell the Tesla...It's the best car I've 
      ever owned," said Arjun Divecha, director and head of emerging-markets 
      equity at the investment manager GMO. "If you live in Berkeley, 
      California, you cannot afford to have a Tesla anymore. I'm not kidding 
      you." 

What's Next: Tesla investors might have no choice but to look past Musk-related issues, according to Wedbush analyst Dan Ives. He put Tesla on his firm's "best ideas" list as a "table pounder" Thursday, standing by a $550 price target that implies the stock can jump 109% from its current level.

-- Al Root and George Glover

***

CoreWeave's IPO Is Coming. Its Financials Offer Window on AI Cloud.

(MORE TO FOLLOW) Dow Jones Newswires

March 10, 2025 06:33 ET (10:33 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.