Market Recap – Wednesday, March 26, 2025
Trade Tensions and Tech Weakness Weigh on US Equities
US equities saw a broad decline on Wednesday, with the Dow down 0.31%, the S&P 500 dropping 1.12%, and the Nasdaq retreating 2.04%. The Russell 2000 fell 1.03%. While stocks ended off their worst levels, market performance was generally negative, with equal-weight indices outperforming cap-weighted ones by approximately 90 basis points. The "Magnificent 7" stocks, notably NVIDIA (NVDA) and Tesla (TSLA), were notable laggards, while sectors like data centers, semiconductors, software, and autos faced pressure. In contrast, energy, multi-sector industries, staples retailers, rails, and insurance stocks showed positive performance. Treasury yields rose by 1-4 basis points across the curve, and the dollar index climbed 0.4%. WTI crude closed up 0.9%, while gold and Bitcoin futures ended lower.
Trade and Tariffs Dominating Headlines
Trade tensions remained a significant theme, with President Trump’s announcement of permanent tariffs on autos not produced in the US, set to take effect on April 2, 2025. The tariff will initially be 2.5%, rising to 25% with no exceptions. Additionally, Trump outlined reciprocal tariffs, though they are expected to be more lenient than initially anticipated. The administration also extended its blacklist of Chinese tech companies. These moves stoked concerns about further disruptions in global trade, with the market speculating that the upcoming tariff announcements might not clear the air as hoped. The uncertainty around trade and tariffs continues to cloud market sentiment, especially within tech and semiconductor sectors.
Economic Data and Fed Insights
Economic data showed mixed signals. February’s durable goods orders surprised to the upside, with a 0.9% MoM increase, while core capital goods orders fell 0.3%, missing expectations. However, core capital goods shipments exceeded forecasts, rising 0.9%. The Fed’s Kashkari highlighted the uncertainty around tariffs and suggested an extended hold on rates. The Treasury auction of $70 billion in 5-year notes was slightly weaker than expected, and attention now turns to Thursday’s final Q4 GDP reading and pending home sales data, followed by PCE inflation and consumer sentiment data on Friday.
Tech Sector Under Scrutiny
The tech sector was under renewed pressure, with the Philadelphia Semiconductor Index (SOX) falling 3%. NVIDIA (NVDA) was a significant drag, following a report that China may impose stricter energy efficiency rules on advanced chips, threatening $17 billion in annual revenue for the company. Broader concerns about US-China tech tensions also weighed heavily, especially after the Commerce Department added more Chinese organizations to its Entity List. Additionally, slower data center equipment purchases and project cancellations by Microsoft (MSFT) further fueled fears of a tech slowdown.
Notable Market Movers
Among the notable gainers, Worthington Enterprises (WOR) surged 23.8% on strong fiscal Q3 results, while GameStop (GME) rose 11.7% after announcing the addition of Bitcoin to its treasury reserve. Cintas (CTAS) saw a 5.8% rise following a strong fiscal Q3, and Paychex (PAYX) increased by 4.2%. On the downside, Vertiv Holdings (VRT) fell 10.9% due to weak data center equipment demand, and NVIDIA (NVDA) dropped 6% amid concerns over stricter Chinese regulations.
Here’s Our Take
The market is grappling with a mix of concerns over trade, rising tariffs, and tech sector headwinds. The upcoming tariff announcements from President Trump could further cloud investor sentiment, especially in sectors sensitive to international trade. Additionally, the weaker-than-expected economic data, combined with ongoing uncertainty around US-China relations, points to potential volatility in the near term. While some sectors like energy, insurance, and staples have shown resilience, caution may be warranted in tech, semiconductors, and cyclical stocks. Investors may want to reassess exposure to high-risk, growth-oriented sectors and focus on more defensive stocks as geopolitical and macroeconomic risks continue to evolve.