S&P 500 Rises Amid Mixed Trading, Tensions Mount Over Tariffs

The S&P 500 Index ($SPX) (SPY) closed up +0.49% on Wednesday, while the Dow Jones Industrials Index ($DOWI) (DIA) decreased by -0.20%. Meanwhile, the Nasdaq 100 Index ($IUXX) (QQQ) posted a gain of +1.13%. March E-mini S&P futures (ESH25) rose +0.39%, and March E-mini Nasdaq futures (NQH25) increased by +0.96%.

On the whole, stock indexes showed a positive trend, but the Dow Jones Industrials fell to a six-month low. Market support came Wednesday as price pressures eased, highlighted by the US February Consumer Price Index (CPI), which rose less than anticipated. Additionally, strength in the so-called Magnificent Seven stocks, alongside a rally among chipmakers, bolstered gains in the broader market. However, weakness in consumer staples contributed to the Dow’s decline.

Trade Tensions and Economic Indicators

Despite some gains, trade tensions limited stock increases. The European Union announced tariffs on up to $28.3 billion of US goods, including soybeans and beef, as retaliation for US tariffs on steel and aluminum imports. Canada also responded with 25% counter-tariffs on around $20.8 billion of US-produced items, such as computers and sporting goods, in addition to US steel and aluminum.

The US February CPI recorded a monthly increase of +0.2% and an annual rise of +2.8%, falling short of forecasts of +0.3% and +2.9% respectively. Excluding food and energy, February’s CPI rose +0.2% month-over-month and +3.1% year-over-year, also less than the expected +0.3% and +3.2%. This marked the smallest annual increase in nearly four years.

Mortgage applications in the US rose +11.2% for the week ending March 7, with purchase applications increasing by +7.0% and refinancing applications up +16.2%. The average 30-year fixed mortgage rate fell six basis points to a three-month low of 6.67% from the previous week’s 6.73%.

Fears remain that US tariffs could hinder economic growth and corporate earnings. Recently, President Trump announced a 25% tariff on goods from Canada and Mexico while doubling tariffs on Chinese imports to 20%. However, he granted automakers a one-month exemption from these tariffs for goods compliant with the United States-Mexico-Canada Agreement (USMCA). Despite this, Trump reiterated plans to impose reciprocal tariffs on foreign nations on April 2.

Market Outlook and Economic Indicators

Attention this week will be on Thursday’s final-demand Producer Price Index (PPI) report, which is expected to show a decline to +3.2% year-over-year from +3.5% in January. On Friday, the University of Michigan’s March consumer sentiment index is anticipated to drop by -1.2 to 63.5. Additionally, the markets are keenly observing whether Congress can pass a spending bill to prevent a government shutdown before the March 15 deadline.

Currently, the market is assigning a 1% probability to a -25 basis point rate cut during the upcoming Federal Open Market Committee (FOMC) meeting on March 18-19.

International Market Trends

Overseas markets displayed mixed outcomes on Wednesday. The Euro Stoxx 50 climbed +0.93%, while China’s Shanghai Composite Index fell by -0.23% after hitting a two-and-a-half-month high. Japan’s Nikkei Stock 225 gained +0.07%.

Interest Rates and Bond Markets

June 10-year Treasury notes (ZNM25) ended Wednesday down -6.5 ticks, with the 10-year yield rising +3.1 basis points to 4.311%. Early trading faced pressure due to a decline in German bunds. However, T-notes gained briefly after the CPI report eased, signaling potential dovish Federal Reserve policy. Strong demand for the Treasury’s $39 billion auction of 10-year T-notes, which had a bid-to-cover ratio of 2.59 (slightly above the 10-auction average of 2.55), further supported prices.

European bond yields presented a mixed picture. The 10-year German bund yield dropped from a 16-month high of 2.940%, finishing down -1.9 basis points at 2.877%. In contrast, the 10-year UK gilt yield increased by +4.8 basis points, reaching 4.722%.

ECB President Christine Lagarde highlighted challenges in maintaining stable inflation amidst abrupt shifts in global trade and increased Eurozone defense spending. Governing Council member Centeno expressed a preference for timely interest rate cuts by the ECB, which currently stands at a 44% chance for a -25 basis point reduction in the upcoming April 17 policy meeting.

US Stock Highlights

Stocks categorized as part of the Magnificent Seven performed well, contributing positively to the market. Notably, Tesla (TSLA) surged over +7%, while Nvidia (NVDA) increased by more than +6%. Other gainers included Meta Platforms (META), which rose over +2%, and Alphabet (GOOGL) and Amazon.com (AMZN), both gaining over +1%. Microsoft (MSFT) also reported an increase of +0.74%.

Intel (INTC) saw gains of over +3% following news that Taiwan Semiconductor Manufacturing Company had approached Nvidia, Advanced Micro Devices, and Broadcom about investing in a joint venture to operate Intel’s factories. Chip stocks enjoyed a strong performance as well; Micron Technology (MU) gained more than +7%, with Advanced Micro Devices (AMD), Marvell Technology (MRVL), and Lam Research (LRCX) each rising by over +4%. Broadcom (AVGO) and KLA Corp (KLAC) also saw gains exceeding +2%, while ARM Holdings Plc (ARM) and Applied Materials (AMAT) rose more than +1%.

Groupon (GRPN) saw a dramatic rise of over +42% after it projected full-year revenue between $493 million and $500 million, exceeding analysts’ consensus of $491.3 million.

Talen Energy (TLN) climbed more than +12% on news of Morgan Stanley initiating coverage with an overweight recommendation and a price target set at $243. GE Verona (GEV) saw gains of over +5% as CEO Strazik mentioned a substantial order backlog extending into 2028.

Eaton Corp Plc (ETN) increased by more than +3% following an upgrade to overweight from sector weight with a price target of $340 from KeyBanc Capital Markets. Crocs Inc (CROX) rose by over +2% after loop capital upgraded the stock to buy with a $110 price target.

In contrast, defensive stocks such as Hershey (HSY) and Mondelez International (MDLZ) fell more than -4%, attributed to strength in broader market movements. Other notable decline included General Mills (GIS), Colgate-Palmolive (CL), Campbell’s Company (CPB), and Conagra Brands (CAG), which were down more than -3%. Additionally, J.M. Smucker (SJM), PepsiCo (PEP), Kraft Heinz (KHC), and McDonald’s (MCD) dropped by more than -2%.

The airline sector experienced declines, particularly United Airlines Holdings (UAL), which fell by -4% following TD Cowen’s reduction in its price target from $165 to $150. American Airlines Group (AAL) dropped by more than -5%, Delta Airlines (DAL) decreased by over -3%, and Southwest Airlines (LUV) was down more than -2%.

iRobot (IRBT) recorded a significant drop of over -36% after Q4 revenue of $172 million lagged behind expectations of $181 million.

Brown-Forman (BF.A) declined more than -5% after the European Union imposed counter-tariffs against US goods.

Telecommunication stocks also faced downward pressure, with Charter Communications (CHTR) down more than -2%, and Verizon Communications (VZ) along with AT&T (T) both declining by over -1%. Stellantis NV (STLA) slipped by more than -1% after a double-downgrade by Pekao Investment Banking to sell with a price target of $11.47.

Upcoming Earnings Reports

Scheduled earnings reports for March 13, 2025, include DocuSign Inc (DOCU), Dollar General Corp (DG), Ulta Beauty Inc (ULTA), and Williams-Sonoma Inc (WSM).

On the date of publication, Rich Asplund did not hold any positions (directly or indirectly) in the securities mentioned in this article. All information and data are provided solely for informational purposes. For more details, please view the Barchart Disclosure Policy here.

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