Fresh market turbulence swept across the globe shortly before U.S. President Donald Trump was set to implement new tariffs. This occurred as stock prices recovered their earlier declines towards the end of an uneasy financial quarter. Meanwhile, bond yields retreated from peak levels seen during the session. Additionally, gold reached all-time high values.
From New York to London and Tokyo, stock markets experienced dramatic fluctuations. Although the S&P 500 recovered from a 1.7 percent decline, U.S. equities marked their poorest quarterly performance since 2022. Defensive sectors spearheaded the advances on Monday. Energy firms participated in an upturn following comments from Trump indicating potential restrictions on Russian crude exports. Large-cap stocks continued to face selling pressure.
For the first time since the beginning of the coronavirus pandemic in March 2020, bond prices have increased while stock values have declined over a span of three months. Traditionally, the U.S. dollar serves as a safe haven during market downturns, but recently this hasn’t been the case. This year, the greenback experienced its poorest performance at the start compared to 2017.
The conflicting signals from the Trump administration regarding which new tariffs will be introduced on Wednesday and their announcement method have left traders unsettled as they attempt to navigate this significant risk facing the market in recent times.
Trump will announce his reciprocal tariff push on Wednesday during an event in the White House Rose Garden. His top spokesperson said the announcement would feature "country-based" tariffs, but added that the president is also "committed" to implementing sectoral duties at another time.
Tariffs are expected to remain a central topic in market discussions," stated Chris Larkin of E*Trade, which is part of Morgan Stanley. "The degree to which tariffs prove stricter or milder than anticipated may significantly influence the market’s short-term trajectory.
The S&P 500 climbed by 0.6 percent. The Nasdaq 100 remained largely unchanged. Meanwhile, the Dow Jones Industrial Average increased by 1 percent. Tesla and Nvidia were among the biggest decliners amongst large-cap stocks, whereas Apple saw gains. In its first trading day, Newsmax stock surged dramatically. Shares of vaccine companies plummeted following the departure of a key official from the U.S. Food and Drug Administration.
The yield on 10-year Treasuries declined three basis points to 4.22 per cent. The Bloomberg Dollar Spot Index rose 0.2 per cent. Gold topped US$3,100 for the first time.
Trump’s trade policies reignited concerns that the economy might slow down, yet most economists continue to believe that the U.S. won’t plunge into a full-blown recession within the coming year. However, they acknowledge that the likelihood of an economic downturn has risen. A separate concern for both analysts and financial observers is the potential for a simultaneous deceleration in growth coupled with rising inflation—a troubling situation referred to as stagflation.
John Williams, president of the Federal Reserve Bank of New York, spoke with Yahoo Finance about potential inflation risks for this year, stating that although there is a possibility of increased inflation, he believes it will likely stay fairly steady overall.
Amid all the concern about the economic impacts of tariffs, Goldman Sachs' David Kostin cut his S&P 500 target, and now expects the benchmark to end the year around 5,700 versus his previous estimate of 6,200.
"If the growth outlook and investor confidence deteriorate even further, valuations could decline much more than we forecast," Kostin wrote in a note. "We continue to recommend investors watch for an improvement in the growth outlook, more asymmetry in market pricing, or depressed positioning before trying to trade a market bottom."
Keith Lerner at Truist Advisory Services noted that as the economic backdrop weakens relative to consensus expectations, earnings are likely to be reset lower at a time where valuations are improved but not compelling.
"Investors should be more neutral and less on offence relative to recent years given a more mixed risk/reward backdrop," he said. "Thus, we expect the choppy market environment to persist over the next several weeks and likely months, and we are not likely to see a quick return to new highs."
A stock-market signal is flashing a warning to investors hoping for a speedy recovery from this year's sharp equity sell-off.
The relationship indicating how closely individual stocks within the S&P 500 track each other remains close to its lowest point over the past 25 years, despite an uptick this month. This information comes from data assembled by independent analyst Jim Paulsen.
Up until now, "the process has been quite systematic and perhaps even uneventful," commented Paulsen, who boasts over forty years of experience on Wall Street, having worked with firms such as Leuthold Group and Wells Capital Management. He added, "The current correlation levels suggest that we still lack the necessary conditions to propel us into the next upward phase."
Stock market traders closely monitor crucial technical charts to gauge the direction the market might take amid growing turmoil triggered by concerns about trade uncertainties and diminishing economic expansion.
The S&P 500 momentarily fell beneath the critical threshold that market watchers had their eyes on early in the trading session – 5,504.65, which was last seen as an intra-day low point back on March 13. However, the index swiftly recovered this level soon after. The key concern now is whether it will remain above this mark.
Technical analysts suggest monitoring market breadth for signs of exhausted conditions. If the percentage of stocks trading above their 20-day moving average falls below 10%, this could indicate "an effective surrender," according to Adam Turnquist, who serves as the chief technical strategist at LPL Financial.
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