U.S. Markets Decline Amid Economic Uncertainty and Trade Tensions

The S&P 500 Index ($SPX) (SPY) is down -0.43%, the Dow Jones Industrials Index ($DOWI) (DIA) has decreased by -0.26%, and the Nasdaq 100 Index ($IUXX) (QQQ) has dropped -0.40%. March E-mini S&P futures (ESH25) are down -0.52%, while March E-mini Nasdaq futures (NQH25) are down -0.61%.

Stock indexes reversed early gains, influenced primarily by weakness in the Magnificent Seven stocks. Economic uncertainty continues to burden the markets due to trade policies from the Trump administration and a US payroll report revealing an unexpected rise in the unemployment rate. The financial community awaits Fed Chair Powell’s keynote speech today at Chicago Booth’s 2025 US Monetary Policy Forum for further insights on the economic outlook.

Initial Market Movements and Sector Performance

At the start of the trading day, stocks initially rallied, particularly in the chip sector. Broadcom saw more than a +3% increase following its better-than-expected Q1 earnings report and a strong outlook. Energy stocks are also gaining traction today, fueled by a more than +2% rise in WTI crude oil prices.

Further support for stock indexes came from a decline in bond yields following the Fed-friendly US February payroll report. This report indicated that nonfarm payrolls and average hourly earnings rose less than anticipated, while the unemployment rate unexpectedly elevated.

Key Economic Indicators

According to the February figures, US nonfarm payrolls increased by +151,000, falling short of the +160,000 expectation. Additionally, January’s nonfarm payrolls were revised downward from +143,000 to +125,000. The unemployment rate for February rose by +0.1 to 4.1%, showing a weaker labor market than the forecasted stability at 4.0%.

Year-over-year average hourly earnings also increased to 4.0%, up from a revised 3.9% in January but below expectations of 4.1%.

Market Sentiment Influenced by Fed Comments and Trade Policies

The market’s bearish sentiment is partly fueled by hawkish comments from Fed officials. Atlanta Fed President Bostic expressed a preference for keeping interest rates steady until at least late spring, citing uncertainty regarding the economy’s direction under current policies. Additionally, Fed Governor Bowman noted an increase in the neutral rate since the Covid-19 pandemic.

Concerns persist that US tariffs could spark a global trade war, which would negatively impact economic growth and corporate earnings. Recently, President Trump implemented a 25% tariff on goods from Canada and Mexico and raised tariffs on Chinese goods from 10% to 20%. Nevertheless, he has provided temporary exemptions for automakers and specific goods under the United States-Mexico-Canada Agreement (USMCA), with threats of reciprocal tariffs on foreign nations starting April 2.

Today, weaker-than-expected Chinese trade data added to global growth fears. China’s February exports increased by only +2.3% year-on-year, well below the +5.9% forecast, while imports unexpectedly fell -8.4%, marking the largest decline in almost two years.

Currently, markets assign a 4% probability for a -25 basis point rate cut at the upcoming FOMC meeting scheduled for March 18-19.

Global Market Trends

International stock markets are also facing downward pressure. The Euro Stoxx 50 fell by -1.10%, while China’s Shanghai Composite Index, after hitting a 2-1/4 month high, closed down -0.25%. Japan’s Nikkei Stock 225 experienced a significant drop, closing down -2.17% at a 5-1/2 month low.

Interest Rates Overview

June 10-year T-notes (ZNM25) are up +11 ticks, with the yield on the 10-year T-note decreasing by -1.9 basis points to 4.259%. T-note prices are supported by a Fed-friendly US February payroll report and favorable movement in European government bonds. Reduced inflation expectations have also benefited T-notes, as the 10-year breakeven inflation rate dropped to a 2-1/4 month low of 2.313%.

However, gains are restricted by hawkish remarks from Fed officials regarding the interest rate policy. In Europe, bond yields are declining, with the 10-year German bund yield down -1.0 basis points to 2.823% and the 10-year UK gilt yield down -2.1 basis points to 4.639%.

Recent data showed Eurozone Q4 GDP revised upwards to +0.2% quarter-on-quarter and +1.2% year-on-year, contrasted by a -7.0% month-on-month decline in German factory orders, which was much worse than the expected -2.5% drop.

ECB Governing Council member Muller cautioned that further interest rate cuts need careful consideration, as factors like tariffs and increasing defense spending could lead to higher prices soon. Swaps now reflect a 65% likelihood for a -25 basis point cut by the ECB during the April 17 policy meeting.

Notable U.S. Stock Movements

The poor performance of the Magnificent Seven stocks heavily influences the broader market. Meta Platforms (META), Amazon.com (AMZN), and Tesla (TSLA) have all seen declines of over -2%, while Microsoft (MSFT) is down more than -1%, and Alphabet (GOOGL) has slipped by -0.38%.

In contrast, chip stocks are experiencing a rally, notably Broadcom (AVGO), which surged +3% after exceeding Q1 revenue forecasts with $14.92 billion, forecasting Q2 revenue at $14.90 billion. Other key players such as Micron Technology (MU) and GlobalFoundries (GFS) are also up more than +3%, alongside ARM Holdings Plc (ARM) and ASML Holding NV (ASML), both increasing by over +2%.

The energy sector is benefiting from rising crude oil prices, with Schlumberger (SLB) and Halliburton (HAL) both up more than +3%. Other major players including Chevron (CVX), Hess Corp (HES), Occidental Petroleum (OXY), and Devon Energy (DVN) are each up over +2%.

Additionally, The Gap (GAP) has climbed over +14% following a Q4 sales increase of +3.00%, outperforming consensus expectations of +1.88%. Walgreens Boots Alliance (WBA) has risen more than +7% after agreeing to be acquired by Sycamore Partners.

Market Highlights: Tech Stocks Swing While HP Enterprise Takes a Hit

In today’s market update, several notable stocks experienced significant movements. Sandisk Corp (SNDK) rose over 6% after Cantor Fitzgerald initiated coverage with an overweight recommendation and set a price target of $60. Meanwhile, Zscaler (ZS) gained more than 1% following an upgrade to buy from neutral by Bank of America Global Research, which established a price target of $240.

On the downside, HP Enterprise (HPE) is leading the S&P 500 losers, dropping more than 15%. The decline follows their Q1 report indicating an adjusted gross margin of 29.4%, which falls short of the consensus estimate of 31.2%. Additionally, the company forecasted a full-year adjusted EPS between $1.70 and $1.90, beneath the consensus of $2.12.

Cooper Cos (COO) also fell over 7% as it reported Q1 net sales of $964.7 million, missing the consensus target of $982.1 million. Similarly, Costco Wholesale (COST) saw a decrease of more than 6% after releasing Q2 EPS of $4.02, which was weaker than the expected $4.11.

Furthermore, Samsara (IOT) was down more than 13% after announcing a forecast for 2026 total revenue between $1.52 billion and $1.53 billion, slightly below market expectations of $1.53 billion. Air Lease (AL) dropped over 2% after Bank of America Global Research issued a double downgrade, moving the stock from buy to underperform.

Intuitive Machines (LUNR) faced a more severe decline, dropping more than 20%, adding to Thursday’s 20% plunge after concerns were raised that its second lander may be misaligned on the moon.

Upcoming Earnings Reports

Looking ahead, several companies are set to report earnings soon, including:

• Advantage Solutions Inc (ADV)
• Aemetis Inc (AMTX)
• Aldeyra Therapeutics Inc (ALDX)
• Cartesian Therapeutics Inc (RNAC)
• GCT Semiconductor Holding Inc (GCTS)
• Gencor Industries Inc (GENC)
• Genesco Inc (GCO)
• IGM Biosciences Inc (IGMS)
• Immersion Corp (IMMR)
• Mammoth Energy Services Inc (TUSK)
• National Beverage Corp (FIZZ)
• Ovid Therapeutics Inc (OVID)
• Preformed Line Products Co (PLPC)
• Savara Inc (SVRA)
• Silvercrest Asset Management G (SAMG)
• Valhi Inc (VHI)
• Werewolf Therapeutics Inc (HOWL)
• XOMA Royalty Corp (XOMA)

On the date of publication, Rich Asplund did not hold any positions in the aforementioned securities. The information in this article is provided solely for informational purposes. For further details, please refer to the Barchart Disclosure Policy.

The opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.