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Weekly Market Recap: Navigating the Downturn: Trade Fears, Inflation Trends, and What’s Next for the Fed Thumbnail

Weekly Market Recap: Navigating the Downturn: Trade Fears, Inflation Trends, and What’s Next for the Fed

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Market Overview

U.S. equities posted another week of losses as economic uncertainty and policy concerns weighed on sentiment. The S&P 500 declined -2.23%, while the DJIA and NASDAQ dropped -2.98% and -2.40%, respectively. Growth stocks underperformed, with the Russell 1000 Growth falling -2.53%, while value stocks held up better, with the Russell 1000 Value declining -1.87%. Small caps also faced headwinds, with the Russell 2000 losing -1.45% for the week.

Investor uncertainty was driven by escalating trade tensions, as fresh 25% U.S. tariffs on steel and aluminum products led to swift retaliatory measures from Canada and the EU. The White House and European authorities continued to exchange tariff threats, particularly targeting alcoholic beverages. Additionally, corporate earnings warnings from Delta Airlines (DAL), Dick’s Sporting Goods (DKS), Verizon (VZ), and American Eagle (AEO) added to investor anxiety, pushing the major indexes lower.

International equities also struggled. Foreign stocks declined -1.10%, weighed down by U.S. trade policy concerns and economic fragility in Germany and China. However, emerging markets showed relative resilience, falling only -0.74% as Chinese policymakers hinted at new fiscal and monetary stimulus to boost domestic consumption.

Federal Reserve Insights and Economic Roundup:

Inflation and Labor Market Trends

Inflation continued to moderate, with Core CPI at 3.10% (February 2025), down from prior months. The deceleration in inflation was driven by lower airline fares and new vehicle prices, though shelter costs continued to be a significant contributor to price increases. Egg prices surged 10.4% due to supply disruptions from bird flu, reminiscent of the 2015 price spike, suggesting continued price volatility in food markets.

The labor market remained tight, with unemployment at 4.10% (February 2025), signaling steady job growth. The quits rate—a key indicator of worker confidence—rose in construction and information sectors, reflecting ongoing labor shortages. However, government layoffs declined, though economists expect this trend to reverse in the coming months.

Despite persistent economic concerns, the slowdown remains seen as a “growth scare” rather than a full-blown recession risk. Investors are closely monitoring inflation trends, as continued cooling in price pressures could pave the way for a Federal Reserve rate cut by mid-summer.

Treasury yields held steady, with the 10-Year Treasury yield rising slightly to 4.32%. Meanwhile, corporate bond spreads widened due to economic uncertainty. Investment-grade corporate spreads and high-yield spreads increased modestly, reflecting concerns over slowing growth and rising default risks for lower-rated borrowers.

Commodities and Currency Markets

The Bloomberg Commodities Index posted slight gains. WTI crude oil edged higher amid fresh U.S. sanctions on Iranian oil and shipping, though gains were capped by concerns over surplus supply from OPEC+. Meanwhile, gold rallied toward $3,000/ounce, benefitting from safe-haven demand amid rising geopolitical and trade uncertainties.

The U.S. dollar weakened slightly, pressured by strength in the euro and Japanese yen, though ongoing trade tensions helped the greenback maintain some resilience.

The Week Ahead

Key economic reports to watch include:

  • Monday: Empire Manufacturing (Mar), Retail Sales (Feb), Business Inventories (Jan), NAHB Housing Market Index (Mar)
  • Tuesday: Housing Starts (Feb), Building Permits (Feb preliminary), Import Price Index (Feb), Industrial Production (Feb), Capacity Utilization (Feb)
  • Wednesday: MBA Mortgage Applications (Mar 14), FOMC Rate Decision & Median Rate Forecast
  • Thursday: Initial Jobless Claims (Mar 15), Philadelphia Fed Business Outlook (Mar), Leading Index (Feb), Existing Home Sales (Feb)
  • Friday: No major economic releases scheduled

Markets will be closely watching the FOMC rate decision for any indications of a shift in monetary policy, as well as retail sales and housing data for signs of continued economic resilience.