Weekly Market Recap: Markets Slip Amid Tariff Tensions and Rising Stagflation Concerns

Market Overview

Stocks tumbled this week amid renewed tariff concerns and stagflation fears driven by a rise in core inflation (PCE) and signs of softer consumer spending. The S&P 500 ended the week down 1.52%, approaching correction territory, with growth stocks and technology sectors particularly hard-hit. NVIDIA and Broadcom declined significantly amid ongoing chip-demand uncertainties. Value sectors such as utilities, real estate, and consumer staples offered some stability. International markets followed suit, declining on fading optimism over Germany’s fiscal measures and persistent geopolitical tensions. Commodities, led by precious metals, posted gains with gold approaching record highs, reflecting increased safe-haven demand. A 25% tariff on all non-U.S. made autos was unveiled ahead of the broader announcement of reciprocal tariffs on April 2nd.

Federal Reserve Insights and Economic Roundup

Economic data provided mixed signals. Inflation moved further above the Fed’s 2% long-term target with Core PCE coming in above expectations at 2.8%. Unemployment claims remained steady, reflecting resilience in the labor market despite recessionary sentiments indicated by recent consumer surveys. Corporate profits improved, as revealed by the final GDP report, though retail and wholesale inventory build-ups were muted due to impending tariffs. Treasury yields were volatile but ended mostly unchanged, with weaker-than-expected demand at recent auctions reflecting investor caution. Market-implied inflation expectations rose slightly to 3.29% for the next two years, though longer-term expectations remain anchored near 2.17%. Investors continue to anticipate roughly 2-3 rate cuts later this year, maintaining elevated interest rate volatility.

Focus this week will be on the reciprocal tariff announcement on Wednesday, PMI data on Tuesday and the Jobs Report Friday.

The Week Ahead

Monday: MNI Chicago PMI (Mar), Dallas Fed Manufacturing Activity (Mar)

Tuesday: S&P Global U.S. Manufacturing PMI (Mar final), Construction Spending (Feb), JOLTS Job Openings (Feb), ISM Manufacturing Report (Mar), Dallas Fed Services Activity (Mar), Wards Total Vehicle Sales (Mar)

Wednesday: MBA Mortgage Applications (Mar 28), ADP Employment Change (Mar), Factory Orders (Feb), Durable Goods Orders (Feb final), Capital Goods Orders and Shipments (Feb final)

Thursday: Challenger Job Cuts (Mar), Trade Balance (Feb), Initial Jobless Claims (Mar 29), Continuing Claims (Mar 22), S&P Global U.S. Services & Composite PMIs (Mar final), ISM Services Index (Mar)

Friday: Change in Nonfarm, Private, and Manufacturing Payrolls (Mar), Two-Month Net Payroll Revision (Mar), Unemployment Rate (Mar), Labor Force Participation Rate (Mar), Underemployment Rate (Mar), Average Hourly Earnings (Mar), Average Weekly Hours All Employees (Mar)