Market Recap – Tuesday, April 1, 2025
US Equities Modestly Higher Amid Tariff Concerns and Economic Data
US equities closed mostly higher on Tuesday, with the S&P 500 up 0.38%, the Nasdaq gaining 0.87%, and the Russell 2000 adding 0.02%. The Dow saw a modest gain of 0.03%. While the market showed some strength, gains were limited and stocks ended off their best levels. Today’s trading followed a mixed session on Monday, which saw a strong recovery after early losses that briefly sent the S&P 500 into correction territory. Big tech stocks performed better after a down day on Monday, with Tesla (TSLA) leading the charge. Other outperformers included apparel companies like PVH Corp (PVH), insurance, department stores, IT services, and quick-service restaurants. On the downside, sectors such as airlines, cruise lines, banks, payments, and tobacco struggled. Gold closed slightly down, while Bitcoin futures surged 3.4%, and WTI crude saw a small drop of 0.4%.
Trade and Tariff Uncertainty
Trade and tariff concerns continued to dominate market sentiment ahead of President Trump’s widely anticipated reciprocal tariff announcement on Wednesday. While there have been some hopes that a lenient tariff approach would provide relief, the possibility of a 20% universal tariff looms large, fueling concerns about further economic impacts. The tariff uncertainty has been exacerbated by the March ISM Manufacturing report, which showed contraction in key areas like new orders and production, further emphasizing the anxiety surrounding tariffs. Despite this, there was some optimism around the potential for country-specific negotiations under the reciprocal tariff framework, though skepticism remains about the ability of the April 2 announcement to serve as a definitive turning point.
Economic Data and Fed Outlook
Economic data provided mixed signals. The March ISM Manufacturing Index fell into contraction territory, coming in at 49.0, slightly below consensus expectations. The drop in new orders and production reflected the ongoing uncertainties around tariffs, with many respondents citing their negative impact on profits and supply chains. Meanwhile, the February JOLTS report showed a slight decline in job openings, hitting a six-month low, suggesting some softening in labor market conditions. Richmond Fed President Barkin noted that the bond market is pricing in higher recession risks, which could weigh on sentiment as the market anticipates the upcoming employment data. March ADP private payrolls, factory orders, and more Fed commentary will be critical for shaping the near-term outlook.
Corporate News and Earnings Updates
Corporate news remained relatively quiet. Johnson & Johnson (JNJ) was under pressure following the court's rejection of its third attempt to use bankruptcy to resolve talc litigation. Boeing (BA) reportedly scaled back 737 Max production due to issues with wing systems. Progress Software (PRGS) rose 12.1% after beating earnings expectations and raising guidance for FY25. PVH Corp (PVH) surged 18.2% on a strong Q4 performance and positive outlook for the year. On the other hand, Southwest Airlines (LUV) declined 5.9% following a downgrade to underperform from Jefferies, citing weak sentiment in the airline industry amid macro uncertainty.
Notable Market Movers
Among notable gainers, PVH Corp (PVH) surged 18.2%, driven by a strong Q4 performance and a positive full-year outlook. Progress Software (PRGS) rose 12.1%, benefiting from a strong quarter and positive guidance. On the downside, Johnson & Johnson (JNJ) fell 7.6% after its court setback in talc litigation. Southwest Airlines (LUV) dropped 5.9% after a downgrade, and On Holding (ONON) saw a 2.8% decline due to the transition to a single-CEO structure.
Here’s Our Take
The market remains cautious as trade uncertainty, particularly around tariffs, continues to weigh on sentiment. The March ISM Manufacturing data underscores the negative impact of tariffs on the economy, and with further economic data and tariff developments expected this week, volatility is likely to persist. Investors should be mindful of potential downside risks related to global trade policy and its impact on corporate earnings. While there are some areas of strength, such as apparel and IT services, defensive sectors like utilities and healthcare could provide more stability in the face of ongoing macroeconomic challenges. As the market heads into the earnings season, staying diversified and focusing on sectors with resilient earnings growth may be crucial in navigating the current environment.