As our Country braces for trade tariffs, it seems that the Bears have taken control of markets. Should this persist?
Monday
S&P 500 1.76% | NASDAQ 2.27%
The S&P Global Purchasing Managers Index (PMI) is expected to grow more than expected for March. A slip in manufacturing was heavily offset by an unexpected jump in Services, which is most of the economy’s production. The PMI reading may be temporary as we see a front running to tariffs as opposed to a sustainable change.
Tuesday
S&P 500 0.16% | NASDAQ 0.46%
Conference Board Consumer Confidence fell to its lowest level since February of 2021. To the contrary, housing data beat expectations on the day. Despite the weak consumer confidence data, markets managed to muster a gain for the third straight trading day.
Wednesday
S&P 500 1.12% | NASDAQ 2.04%
Core Durable Goods Orders for February are projected to expend more than expected. A press conference held late in the day announced tariffs on foreign autos at a 25% rate. The move was telegraphed earlier in the day and markets seized on it, leading to a route of recent gains.
Thursday
S&P 500 0.33% | NASDAQ 0.53%
Q4 GDP final revision showed an increase from 2.3% to 2.4%. Ignoring GDP data (which is rather stale anyway) markets continued to move on the tariff news from Wednesday afternoon. This is a result of the full facts not being known until after market close. Domestic auto makers were hit as a result of the cross-border nature of production with Mexico and Canada.
Friday
S&P 500 1.97% | NASDAQ 2.70%
Core Personal Consumption Expenditure (PCE), the Federal Reserve Board’s (FRB) preferred gauge of inflation firmed to 2.8% from 2.7% (February). Following the lead of Consumer Confidence, Michigan Consumer Sentiment came in at its lowest level since November 2022. Unlike Tuesday, where markets ignored the consumer, markets took more seriously as concerns mount that the consumer looks weaker. Additionally, the FRB attempts to anchor long-term inflation expectations sub 3.5%. The current reading came in at 4.1%, which poses concern to the consumer as well.
Conclusion
S&P 500 1.53% | NASDAQ 2.59%
Markets retreated for the week after what seemed like a decent start to the week. The S&P 500 hit its low point, 10.81%, on March 13th. Even with this recent break to the south, the S&P is still about 1% higher than that low. It is not uncommon that immediately following a correction we see buying ensue, followed by another leg lower. After all, the cause of this correction has yet to be resolved. Concerns over consumer confidence may be overblown at the moment as sentiment rarely correlates with actual spending. Retail sales and durable goods data tend to be a better indicator.
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