(Bloomberg) — In the latest market moves, stocks took a tumble after the U.S. moved forward with auto tariffs, stoking fears of an expanding trade conflict, despite upbeat economic growth data from the world’s leading economy.
On the verge of closing one of the most challenging quarters for the S&P 500 since 2023, the index slipped once more. Automotive heavyweights including Toyota, Mercedes-Benz, and General Motors faced declines. AppLovin Corp. also suffered after Muddy Waters released a negative report. Among tech giants, Apple saw gains, whereas Nvidia experienced losses, and Lululemon Athletica provided a bleak outlook in the late hours. Meanwhile, the bond market signaled inflation concerns, with short-term Treasuries faring better than their longer counterparts.
President Donald Trump’s announcement of a 25% tariff on imported vehicles, alongside a stern warning to the EU and Canada against forming alliances against the U.S., cast a shadow over economic reports that showed accelerated growth in the last quarter. There was, however, a downward revision in a key inflation metric.
According to Bret Kenwell from eToro, these figures are unlikely to instill much confidence among investors, who are concentrating more on current conditions than past performances.
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“In investors’ minds, in-line or better inflation figures paired with strong employment data are needed for any reassurance,” Kenwell mentioned.
The Federal Reserve still faces troubling inflation levels, with the upcoming personal consumption expenditures price index expected to reveal persistent pressures.
The day ended with the S&P 500 down 0.3%, the Nasdaq 100 dropping 0.6%, and the Dow Jones Industrial Average decreasing 0.4%. There was a slight increase in the 10-year Treasuries yield, up by one basis point to 4.36%, while the dollar remained volatile.
The upcoming inflation report will shed light on the economic milieu leading to Trump’s anticipated “Liberation Day in America” tariffs announcement on April 2.
The uncertainty surrounding the tariffs contributes to the Federal Reserve’s recent decision to leave interest rates unchanged.
Mark Haefele from UBS Global Wealth Management commented, “The ongoing threat of escalating tariffs is certainly a concern, though our economic predictions do not foresee a recession in the U.S.”
The looming question for markets, as posed by Chris Larkin from E*Trade at Morgan Stanley, is whether any factors can rise above the persistent tariff chatter. “In the short term, we’re likely looking at more fluctuating trades,” he noted.
Craig Johnson at Piper Sandler suggests that despite the uncertainties surrounding tariffs and inflation, there are technical indications suggesting a potential short-term low. “While recovery paths are rarely straightforward, equities seem to have found some stability from March’s lows,” he said.
A recent survey from the American Association of Individual Investors indicates a decrease in short-term pessimism among individual investors. Optimism and neutral sentiment have seen an uptick.
“As stocks got some relief from last week’s selloff and into the early part of this week, we expected a reduction in the excessively high bearish sentiment reported in the weekly AAII survey,” Bespoke Investment Group strategists observed.
Bespoke highlighted that although bearish sentiment has lessened, it’s still above 50%, higher than 96.8% of prior weekly readings since 1987.
Jean Boivin, head of the BlackRock Investment Institute, suggests that U.S. stocks are well-positioned to outperform their European counterparts soon, as Europe’s brighter prospects are largely limited to sectors like defense and banking. “It’s a narrowly focused European narrative,” Boivin remarked. “For Europe to truly outshine the U.S. over the next six to twelve months, we need more fiscal initiatives beyond defense.”
Here’s a look at some of the key market movements:
Stocks:
– S&P 500 down 0.3% as of 4 p.m. New York time
– Nasdaq 100 declined 0.6%
– Dow Jones Industrial Average fell 0.4%
– MSCI World Index slipped 0.4%
Currencies:
– Bloomberg Dollar Spot Index showed little change
– Euro rose 0.4% to $1.0795
– British pound increased 0.5% to $1.2950
– Japanese yen fell 0.3% to 151.04 per dollar
Cryptocurrencies:
– Bitcoin dropped 0.3% to $87,052.04
– Ether decreased 0.3% to $2,004.22
Bonds:
– 10-year Treasuries yield edged up one basis point to 4.36%
– Germany’s 10-year yield fell two basis points to 2.77%
– UK’s 10-year yield climbed six basis points to 4.78%
Commodities:
– West Texas Intermediate crude saw a 0.2% rise to $69.79 a barrel
– Spot gold jumped 1.3% to $3,057.49 an ounce
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