Market Recap – Friday, April 4, 2025
Markets Plunge as Trade Tensions Escalate
US equities took a severe hit on Friday, with the Dow falling 5.50%, the S&P 500 down 5.97%, and the Nasdaq dropping 5.82%. The Russell 2000 also saw a 4.37% decline, with the Nasdaq entering bear-market territory. The S&P logged its worst two-day stretch since March 2020, and big tech stocks were broadly weaker. TSLA-US was the worst performer, alongside declines in energy, banking, industrials, and consumer discretionary stocks. On the other hand, some defensive sectors, including managed care, food, and building products, managed to outperform.
Global Trade Concerns Weigh on Market Sentiment
The sharp losses followed escalating global trade concerns after China announced a 34% tariff on all US imports, effective April 10. This retaliatory move exacerbated fears of an ongoing trade war and heightened the likelihood of further tariff-related disruptions. President Trump has shown a mixed stance on negotiations, offering room for potential discussions with certain countries, including Vietnam, while maintaining a firm position on trade reform. The uncertainty around the next steps in US-China and US-Europe relations remains a major overhang on global market sentiment.
Economic Data and Fed Commentary
March’s nonfarm payrolls report exceeded expectations, with the economy adding 228,000 jobs, though revisions to previous months showed weaker-than-anticipated growth. The unemployment rate ticked up to 4.2%, as expected, while wage growth held steady at 0.3% month-over-month. These data points reflect a resilient labor market but also show that the economy is not immune to the broader growth headwinds presented by tariff uncertainty.
Fed Chairman Jerome Powell’s remarks echoed the current uncertainty, with Powell warning that tariffs could lead to persistent inflationary pressures, slowing growth, and complicate the Fed’s policy stance. Powell emphasized that the central bank was well-positioned to wait for further clarity before making any changes to interest rates, though the market has been pricing in a 100 basis point rate cut by year-end.
Sector Performance
In terms of sector performance, the hardest-hit sectors were energy (oil prices falling by 7.4%), financials, and industrials, while defensive sectors like food and beverage, managed care, and telecom provided relative stability. The ongoing fears surrounding tariffs have led to widespread derisking, and markets are now bracing for the potential economic fallout from prolonged trade tensions.
Corporate News and Developments
In terms of corporate updates, a few notable moves were reported. GE Healthcare (GEHC-US) saw a 16% drop after China’s Ministry of Commerce opened an anti-dumping investigation into US-made medical equipment. DuPont (DD-US) also faced a sharp 12.8% decline after Chinese regulators launched an antitrust probe into the company. On the upside, Nike (NKE-US) rose 3% after a report suggesting that Vietnam may negotiate a tariff reduction on US goods.
Here’s Our Take
The sharp sell-off in US equities today reflects the growing uncertainty around trade policy, inflation concerns, and the potential for slower growth. The significant rise in tariffs, combined with retaliation from global trade partners, is exacerbating concerns about stagflation. While there are some positive signals from the labor market, the persistent risks related to tariffs and the broader economic implications are likely to keep markets under pressure.
For investors, caution is warranted. The market remains volatile, with heightened risks to both growth and inflation expectations. While defensive sectors may provide some relative safety, broader exposure to equities, particularly in sectors highly sensitive to tariffs, such as industrials, semiconductors, and consumer goods, could face additional downside risks. Investors should remain focused on balancing risk and opportunity, keeping a close eye on how further trade developments unfold and watching for any signs of policy shifts that may offer relief.