US Stock Markets Dip Amid Geopolitical Tensions and Economic Concerns

The S&P 500 Index ($SPX) (SPY) closed down -0.22% on Thursday, while the Dow Jones Industrials Index ($DOWI) (DIA) saw a decrease of -0.03%. The Nasdaq 100 Index ($IUXX) (QQQ) ended the day down by -0.30%. As for futures, March E-mini S&P futures (ESH25) dipped by -0.20%, and March E-mini Nasdaq futures (NQH25) fell by -0.25%.

Stocks faced declines as uncertainty regarding the economic outlook persisted, particularly related to US trade policies. Stagflation fears grew after the FOMC downgraded its 2025 GDP forecast while simultaneously raising its inflation expectations. Additionally, negative sentiment was fueled by European market trends, especially after ECB President Lagarde indicated that US tariffs heightened uncertainty.

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Despite some initial upward momentum, the Dow Jones Industrials reached a 1.5-week high before closing lower. Falling bond yields offered temporary relief, with the 10-year T-note yield hitting a one-week low amid speculation that the Federal Reserve may continue to lower interest rates. Positive economic indicators from the US helped alleviate some growth worries. Notably, weekly jobless claims increased by 3,000 to 223,000, showing a stronger labor market than the expected rise to 224,000. Additionally, the March Philadelphia Fed business outlook survey fell to 12.5—better than the forecast of 9.0—and February existing home sales unexpectedly rose by 4.2% month-over-month to 4.26 million.

Conversely, February leading economic indicators dropped by -0.3% month-over-month, which was worse than the anticipated -0.2%.

The ongoing geopolitical risks in the Middle East contributed negatively to stock performance. Following a series of airstrikes by Israel ending a two-month ceasefire with Hamas, Israeli Prime Minister Netanyahu has vowed to increase military actions. Concurrently, the US launched strikes against Yemen’s Houthi rebels, with Defense Secretary Hegseth promising relentless actions against them.

Fears regarding US tariffs have weighed heavily on market sentiment as well. On March 4, President Trump instituted a 25% tariff on goods from Canada and Mexico and raised tariffs on Chinese imports from 10% to 20%. He has indicated plans to enforce reciprocal tariffs and other sector-specific duties starting April 2.

Currently, markets estimate only a 21% chance of a -25 basis point rate cut following the FOMC’s May 6-7 meeting.

International markets also noted losses on Thursday. The Euro Stoxx 50 dropped by -1.02%, China’s Shanghai Composite Index fell by -0.51%, while Japan’s Nikkei 225 remained closed for the Vernal Equinox Day holiday.

Interest Rates

June 10-year T-notes (ZNM25) rose by +5.5 ticks on Thursday, with the 10-year T-note yield declining by -0.8 basis points to 4.235%. T-notes reached a one-week high amid dovish indicators from the FOMC, which cut the 2025 GDP forecast and raised unemployment projections. Additionally, the FOMC announced it would decelerate the runoff of its balance sheet starting next month, further indicating a softer policy stance. The weakness in equities also prompted safe-haven buying of T-notes.

However, T-note prices decreased from their highs after several positive economic data points suggested resilience in the economy. Weekly jobless claims were lower than expected, the March Philadelphia Fed business outlook survey fell less than forecast, and February existing home sales increased unexpectedly.

European bond yields were mixed; the 10-year German bund yield decreased by -2.3 basis points to 2.780%, while the 10-year UK gilt yield rose by +1.5 basis points to 4.646% after rebounding from a two-week low.

Meanwhile, German February PPI showed a -0.2% month-over-month decline and a year-over-year increase of +0.7%, missing expectations. ECB President Lagarde mentioned the challenge in providing firm commitments on interest rates due to ongoing trade uncertainties.

ECB Governing Council member Villeroy de Galhau expressed he is “not worried about inflation in Europe,” suggesting that there is room for the ECB to cut rates further.

In line with expectations, the Bank of England (BOE) maintained its official bank rate at 4.50%, signaling a cautious approach towards monetary policy easing.

Swaps are currently pricing in a 59% chance of a -25 basis point rate cut by the ECB during its policy meeting on April 17.

US Stock Movers

Accenture Plc (ACN) led the S&P 500 losers, closing down more than -7% after narrowing its full-year operating margin forecast to 15.6%-15.7%. Gartner (IT) decreased over -6% following a Department of Defense memo that canceled contracts worth $580 million, affecting some of Gartner’s agreements.

Chip stocks also faced pressure. Microchip Technology (MCHP) dropped over -6% after announcing a $1.35 billion public offering of depositary shares. Similarly, Broadcom (AVGO) and NXP Semiconductors NV (NXPI) closed down more than -2%, while Analog Devices (ADI) and GlobalFoundries (GFS) both fell over -1%.

Aramark (ARMK) decreased by more than -4% amid a -17% drop in peer Sodexo due to a profit warning. Rivian Automotive (RIVN) also closed down more than -4% after receiving a downgrade from Piper Sandler. Monolithic Power Systems (MPWR) fell over -3% following an increased Q1 operating expense estimate, and Raymond James Financial (RJF) dropped over -3% after reporting a slight monthly decline in assets under administration.

In contrast, ProAssurance (PRA) surged more than +48% after being acquired for around $1.3 billion or $25 per share by Doctors Co. Darden Restaurants (DRI) increased more than +5% as it forecasted a better-than-expected full-year comparable sales growth of +1.50%. Jabil (JBL) rose over +3% after reporting Q2 net revenue that exceeded expectations and provided a favorable Q3 outlook.

Carvana (CVNA) rose more than +5% after being upgraded to overweight by Piper Sandler, with a new price target of $225. Similarly, Cava Group (CAVA) increased over +4% after JPMorgan Chase upgraded it to overweight with a price target of $110.

Allstate (ALL) gained over +2% after reporting a rise of +59,000 auto policies since January. Southwest Airlines (LUV) rose more than +1% following an upgrade from UBS, which raised its price target to $36.

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On the date of publication, Rich Asplund did not hold any positions in the securities mentioned. All information in this article is for informational purposes only. For more details, you can view the Barchart Disclosure Policy here.

The views expressed in this article are those of the author and do not necessarily reflect those of Nasdaq, Inc.