Daily Market Recap – Tuesday March 4, 2025
Stocks Decline as Tariff Concerns Weigh on Sentiment
U.S. equities closed lower on Tuesday, extending losses after Monday’s steep selloff. The Dow fell 1.55%, the S&P 500 declined 1.22%, and the Nasdaq shed 0.35%, while the Russell 2000 dropped 1.08%. Cyclical sectors were hit the hardest, with banks, credit cards, airlines, retail, and industrials among the biggest losers. Meanwhile, big tech was mixed - Nvidia (NVDA) and Google (GOOGL) outperformed, while others remained under pressure. Defensive sectors like consumer staples and pharma saw relative strength, while Bitcoin rose 2.4%, reversing earlier losses.
Trade War Escalation and Tariff Uncertainty Drive Market Volatility
Concerns over an escalating global trade war continued to dominate headlines after the U.S. officially implemented 25% tariffs on Canadian and Mexican imports, prompting retaliatory measures from China, Canada, and Mexico. Commerce Secretary Howard Lutnick attempted to ease market concerns, suggesting potential tariff relief as soon as Wednesday, with the possibility of a longer-term compromise. However, President Trump’s stance remained firm, fueling investor uncertainty. The fear that tariffs could push inflation higher and weigh on economic growth contributed to the bearish sentiment.
Mixed Economic Data Raises Growth and Inflation Concerns
Economic data presented a mixed picture. The ISM Manufacturing Index remained in expansion territory at 50.3, but new orders fell back into contraction at 48.6, raising concerns about slowing demand. Prices paid surged to 62.4, fueling fears of sticky inflation, while employment weakened to 47.6, suggesting potential softening in the labor market. Meanwhile, the Atlanta Fed’s GDPNow model slashed its Q1 GDP forecast further into contraction territory at -2.8%, amplifying concerns over slowing economic momentum.
Earnings Highlights: Target’s Cautious Outlook, Okta Surges on Strong Guidance
In earnings news, Target (TGT) beat Q4 expectations but flagged ongoing consumer uncertainty, weaker discretionary spending, and potential margin pressure from tariffs, leading to a 3% decline in its stock price. Meanwhile, Okta (OKTA) was a standout, surging 24.3% after delivering strong Q4 results, upbeat FY26 guidance, and accelerating growth in its customer retention and security solutions. Best Buy (BBY) saw a 13.3% drop after issuing a cautious outlook, warning about weaker demand and uncertain consumer spending trends.
Nvidia Extends Decline Amid Concerns Over China Export Restrictions
Nvidia (NVDA) continued its post-earnings selloff, declining another 8.8% as investors digested concerns over tighter U.S. restrictions on AI chip exports to China. Analysts at Mizuho warned that potential new bans could remove $4-5 billion in revenue from Nvidia’s FY26 estimates. This fueled fears that geopolitical risks could weigh on AI-driven semiconductor demand in key international markets.
Here’s Our Take
Trade war risks remain a key market overhang, with tariffs now a growing concern for inflation and economic growth. Any near-term relief from negotiations could provide a positive catalyst.
Market volatility has increased, with the VIX spiking and momentum unwinding in key sectors like big tech and semiconductors. Investors should watch for potential dip-buying opportunities in quality names.
Earnings season is winding down, but retail stocks are signaling cautious consumer sentiment, reinforcing concerns about a possible economic slowdown.
The AI trade remains a battleground, with Nvidia facing headwinds from potential China export restrictions, even as broader AI demand remains strong.
Looking ahead, all eyes will be on Trump’s Congressional address tonight, as well as key economic data later this week, including ISM Services, ADP payrolls, and Friday’s Non-Farm Payrolls report. Markets will be watching closely for any tariff updates or Fed rate cut signals that could shift sentiment.