The $S&P 500(.SPX)$ and $NASDAQ(.IXIC)$ declined by -1.52% and -2.39% last week, respectively.
Key market movers included $Tesla Motors(TSLA)$ (+6%), $Visa(V)$ (+2.1%), $Exxon Mobil(XOM)$ (+1.9%), $Costco(COST)$ (+2.2%), $NVIDIA(NVDA)$ (-6.8%), $Broadcom(AVGO)$ (-11.8%), $Microsoft(MSFT)$ (-3.2%), and $Alphabet(GOOG)$ (-6%).
This week’s important economic data releases include ISM Manufacturing PMI and JOLTS on Tuesday, ADP Non-Farm Employment on Wednesday, Unemployment Claims and ISM Services PMI on Thursday, and Non-Farm Payrolls and the Unemployment Rate on Friday.
Fed Chair Jerome Powell is scheduled to speak on Friday, offering insights into the economic outlook.
Things you should know before starting your week
1) Investors Turned Jittery Ahead of April 2 Liberation Day
Trump has vowed to "liberate" the U.S. from foreign goods this Wednesday by imposing new tariffs on imports.
Investor sentiment is weakening, with stocks sliding ahead of Wednesday due to uncertainty over the tariff rollout.
Trump's planned 25% auto tariff, set to begin on April 2, is also expected to trigger retaliatory measures.
Canadian Prime Minister Mark Carney has informed Trump that Canada will implement retaliatory tariffs in response to the April 2 announcement.
The European Union is exploring potential concessions it could offer the Trump administration in exchange for a rollback of some upcoming tariffs.
BofA’s Hartnett warned that U.S. import tariffs could rise from the current 2–3% to as high as 8% in 2025.
2) Trump Tariffs Could Face Legal and Congressional Pushback
According to WSJ, Trump is considering using the International Emergency Economic Powers Act (IEEPA) to impose sweeping new tariffs, but White House lawyers have warned this approach could face legal challenges and be overturned in court.
Democrats are preparing a Senate vote to challenge the use of IEEPA for tariffs on Canada, aiming to limit executive overreach and restore Congress’s constitutional authority over trade. With bipartisan concerns about the misuse of emergency powers, any broad tariff actions under IEEPA face significant legal and political hurdles that could ultimately lead to their reversal.
3) Hotter-Than-Expected PCE Inflation Drags US Stocks Lower
US Core PCE inflation rose to 2.8% in February, above the forecast of 2.7%.
The uptick in inflation led to a market pullback on Friday, as investors grew concerned that persistent inflation could prevent the Fed from delivering three rate cuts this year, potentially adding pressure to the economy.
Nevertheless, the CME FedWatch Tool still projects three rate cuts by the end of December.
Conclusion:
Investors now believe that any market rally will be short-lived as long as Trump continues to announce new tariffs.
These tariffs are expected to remain a major overhang for markets moving forward.
However, there is a chance that the tariffs announced on April 2 may be softer than expected, potentially leading to less inflationary pressure than initially feared.
While it may be too early to call a bottom for the S&P 500, its current valuation appears undemanding at 20.8x forward P/E—down from a peak of 26.6x in mid-February.
Investors looking to gain exposure to a market rebound can consider broad-market ETFs such as SPY $SPDR S&P 500 ETF Trust(SPY)$ , IVV $iShares Core S&P 500 ETF(IVV)$ , VOO $Vanguard S&P 500 ETF(VOO)$ , and the Nasdaq-100 ETF (QQQ $Invesco QQQ(QQQ)$ ).
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