Weekly Market Update for March 7, 2025
by Jared Plotz, Director of Research
Trade uncertainty continues to roil the markets, acting as an overhang on the economy. New tariffs on key US trade partners did in fact go into effect on Tuesday, but by Thursday the administration had granted a one-month reprieve to Mexico and Canada for USMCA-compliant goods and services, including automobiles and agricultural products. Currently, around half of imports from these countries are compliant, though Mexico aims to boost compliance to 85-90% in coming weeks.
While the tariff postponement for goods that fall under USMCA (the US-Mexico-Canada agreement that replaced NAFTA in 2020) provides some immediate relief, it appears the daily jockeying is taking a toll. Business activity, and various corporate commentaries, suggests an increasingly cautious “wait and see” approach to orders and capital spending. Investor, consumer, and corporate sentiment have all softened to varying degrees. A major question is whether such jockeying is merely a negotiating tactic or more permanent trade policy. It may be a bit of both. More and more, it appears the administration is willing to inject some short-term pain on the inflation front to achieve its long-term economic goals.
We would note consumer spending remains generally healthy (in fact, Costco said quarterly sales grew 9% y/y, including in February), despite recent weakening in sentiment and pressures within some cohorts. Any slowing on the corporate side is also coming off robust levels. If the overhang can lift over the coming two quarters, and as the trade picture becomes clearer, spending and investments should accelerate. In the meantime, volatility may remain high. The S&P 500 declined -3.1% this week, while the Nasdaq slid -3.5%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.31%, rising +9 bps from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, ended down -3 bps at 4.24%.
Manufacturing activity remained in expansion territory in February (but was down from January levels), while the pace of services activity picked up sequentially. Friday’s jobs report wasn’t a big needle mover; the 151,000 jobs added in February and the 4.1% unemployment rate were better than feared. Broadcom’s stock jumped on Friday, with management highlighting upside within AI networking products and noting two new AI customers. Meanwhile, CrowdStrike’s stock fell Wednesday due to disappointing first-quarter guidance, overshadowing a beat of fourth-quarter expectations.
Next week brings a string of important economic data points. On Tuesday, the NFIB Small Business Index for February will be released, as will job openings (JOLTS) for January. CPI inflation for February will come on Wednesday, with PPI inflation on Thursday. Both rates of inflation growth are expected to tick 10 bps lower sequentially. On the corporate front, Oracle and Adobe are among the larger companies reporting quarterly results, and they should provide some color on AI developments in software.
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