Weekly Market Commentary March 31st to April 4th 2025
Payroll week is usually the most watched data for the month but was completely overshadowed by worldwide tariffs announced on Wednesday.
The February ISM Manufacturing report was the first noteworthy economic data release for the week. It missed estimates to the downside at 49.0, contracting and breaking a streak of two consecutive months of expansion. New orders, production and the orders backlog were attributable to the weakness.
The ADP report was an early look at private payrolls with March increasing above the estimate (120k) to 155k. Earnings rose by 4.6% year-over-year for those staying in their positions and 6.5% for job changers.
The biggest news of the week was provided on Wednesday when the White House released the reciprocal tariffs with a base rate of 10% on 185 countries. Overall, the depth and breadth were greater than anticipated. These changes increased the uncertainty of global economic growth and drove markets lower overnight.
The ISM Services report was released on Thursday and overshadowed with market volatility expanding at a rate of 50.8. It was the ninth consecutive monthly expansion but at a much slower rate than estimated. New orders, deliveries and employment were areas that declined.
Wrapping up the week was payroll data from the Bureau of Labor Statistics, and it was higher than forecasted. Non-farm payrolls increased to 228k in March (140k est.), while the prior two months were revised down by 48k. The unemployment rate increased by 0.1% to 4.2%, as the participation rate increased. Despite this positive report this had little impact on equity markets.
The S&P 500 opened the week at 5,580 and increased slightly prior to the tariff announcement on Wednesday evening. The risk- off move was sharp with the VIX volatility index reaching its highest level since 2020. Energy, IT and Consumer Discretionary stocks were hit the hardest. Friday brought more volatility after China announced a retaliatory tariff of 34%. Overall, the S&P 500 declined 9.1% for the week closing at 5,074 and down 17% from the all-time high in February.
The yield on the 10-Year U.S. Treasury was considerably lower on the week by 0.24% to 4.00%. The 2-10 segment of the yield curve steepened to 0.44%. Futures markets have priced in four Fed Funds cuts in 2025 after the tariff announcement.
Key consumer economic releases next week include the producer (PPI) and consumer (CPI) price indices, Federal Reserve minutes and there will be several Fed Governors speaking.
