Market Recap – Thursday, April 3, 2025
Markets Plunge Amid Continued Tariff Fallout and Economic Concerns
US equities experienced significant losses on Thursday, with the S&P 500 falling 4.84%, its worst session since 2020. The Nasdaq dropped 5.97%, and the Russell 2000 plunged 6.59%, entering bear-market territory. The market continues to digest the impact of President Trump's "Liberation Day" tariff announcement, which exceeded expectations, driving risk-off sentiment across sectors. Big tech stocks were particularly hard hit, while more defensive sectors, including health and food/beverage, fared better.
Sector Performance
The sharp decline in equities was broad-based, with tech, retail/apparel, banks, credit cards, semiconductors, airlines, and energy stocks leading the way lower. Defensive sectors like health products, managed care, food & beverage (Lamb Weston, Conagra Brands), and utilities provided some support, but the overall market sentiment remained negative. Crude oil prices fell by 6.6%, reflecting concerns about growth and escalating tariff-related uncertainties, while the dollar index dropped by 1.6%. Treasuries rallied as the yield curve steepened, with the 10-year yield briefly touching 4%.
Global Risk-Off Sentiment and Trade Tensions
The global risk-off mood is fueled by the realization that Trump's tariffs, which include a 10% baseline levy on all imports and higher tariffs on certain countries, will have significant economic implications. Retaliatory threats are rising, with China, Canada, and the EU warning of countermeasures, exacerbating the volatility. There is increasing concern about inflationary pressures and the potential impact on global growth, especially as tariffs are expected to add to the cost of goods and services. The announcement has also sparked fears of stagflation, with the potential for slower growth combined with rising prices.
Economic Data and Employment Concerns
The March ISM Services index printed weaker than expected at 50.8, reflecting slower growth in new orders and employment. The employment index slipped into contraction for the first time in six months, signaling broader softness in the labor market. Initial jobless claims fell to 219K, but continuing claims rose to their highest level since November 2021, further highlighting stress in the labor market. Meanwhile, Challenger Job Cuts surged to 275K, the highest level since May 2020, with many layoffs attributed to efficiency measures in the federal government.
Corporate News
Corporate earnings updates were overshadowed by the tariff headlines, though some companies reported earnings results. Lamb Weston (LW) saw a strong performance with a 10% jump in its stock following a beat in earnings and revenue, while Conagra Brands (CAG) saw a modest rise of 2.1% despite missing on revenue. On the downside, Restoration Hardware (RH) and Best Buy (BBY) were among the hardest-hit stocks, with RH plunging 41.8% due to weaker earnings and concerns about tariff exposure and excess inventory.
Here’s Our Take
The market's sharp sell-off today underscores the deepening uncertainty surrounding the economic impact of Trump’s tariffs, with fears of inflationary pressures, a slowdown in growth, and a potential recession growing. The tariff increases have heightened risks for corporate earnings, especially in sectors with high exposure to global supply chains. Investors should remain cautious in the short term as volatility persists, with risks to earnings growth and the potential for further downside in the broader market. The continued uncertainty around trade negotiations and retaliation will likely keep the market in a risk-off mode, with defensive sectors offering some relative safety.
Given the increased volatility and macroeconomic uncertainties, investors may want to stay selective, focusing on companies with strong balance sheets and limited exposure to tariff risks. As the market navigates this heightened period of uncertainty, it’s essential to monitor developments in the trade war, inflation, and employment data closely.