
Weekly Market Recap: Markets Drop as Trade Tensions Rise & Inflation Concerns Return
Market Overview
U.S. equities ended the first week of March with notable losses as geopolitical tensions, tariff headlines, and mixed economic data weighed on sentiment. The S&P 500 dropped 3.06%, while the Nasdaq underperformed with a 3.43% decline. Small-cap stocks, as represented by the Russell 2000, faced the steepest losses, falling 4.01%. In contrast, international equities posted gains, with foreign stocks rising 3.12% and emerging markets up 2.89%, as optimism surrounding Chinese economic stimulus measures overshadowed U.S. tariff concerns.
Tariff tensions escalated after the White House doubled levies on Chinese goods, prompting retaliatory actions from Beijing, including new restrictions on U.S. exports. Stocks briefly rebounded mid-week on AI-driven enthusiasm but lost momentum after weak earnings guidance from chipmaker Marvell Technology and further trade policy uncertainty.
European markets were mixed, with German stocks rallying on increased defense spending while the broader region digested the impact of U.S. trade threats and a potential slowdown in European Central Bank (ECB) rate cuts. In Asia, Chinese markets surged after Beijing reaffirmed its 5% growth target and rolled out new economic stimulus, including increased sovereign debt issuance.
Federal Reserve Insights and Economic Roundup
The fixed-income market saw bond yields rise as the Bloomberg U.S. Aggregate Index posted losses. The 10-year Treasury yield climbed 11 basis points to 4.31%, reflecting continued concerns over economic growth. Markets have fully priced in three Federal Reserve rate cuts for 2025, driven by slowing growth rather than lower inflation expectations.
Labor market data showed resilience, with businesses adding 151,000 jobs in February, while average hourly earnings grew 4% year-over-year, outpacing inflation. However, the unemployment rate edged up to 4.1%, and the number of workers holding multiple jobs reached levels last seen during the Great Financial Crisis.
Inflation pressures resurfaced in the services sector, where purchasing managers reported higher input costs. This trend, combined with sluggish growth, raises the risk of stagflation, a key concern for policymakers navigating the economic landscape.
The commodities and currency markets saw oil prices slide amid renewed oversupply fears, while gold and silver rebounded on safe-haven demand. The U.S. dollar weakened against global peers, with the euro rallying on expectations of increased government spending and a potential ECB rate-cut pause.
The Week Ahead
A busy economic calendar includes key inflation reports and labor market data:
- Monday: New York Fed One-Year Inflation Expectations (Feb)
- Tuesday: NFIB Small Business Optimism Index (Feb), JOLTS Job Openings (Jan)
- Wednesday: CPI Inflation Data (Feb), Real Average Hourly & Weekly Earnings (Feb), Federal Budget Balance (Feb)
- Thursday: PPI Inflation Data (Feb), Initial & Continuing Jobless Claims (March), Household Net Worth (Q4)
- Friday: University of Michigan Consumer Sentiment (March)
With volatility rising and inflation data in focus, investors will closely monitor any signals from the Federal Reserve on the path of interest rates, as well as potential shifts in U.S. trade policy.