Daily market snapshot

• Stocks turn lower amid tech weakness – U.S equity markets closed lower on Wednesday, with the S&P 500 snapping a streak of three consecutive trading days with positive returns. Equity-market weakness was primarily concentrated in growth sectors of the market following a report that NVIDIA could face more stringent regulations in China, which weighed on sentiment for the broader technology sector. Tariff concerns resurfaced today as well, with President Donald Trump expected to announce tariffs on auto imports later this afternoon.* The tech-heavy Nasdaq was lower by 2% while the Dow fared better, closing lower by roughly 0.3%.* Overseas, markets in Asia were mostly higher overnight, while European markets were mostly lower despite a U.K. inflation reading that was below expectations.* On the economic front, durable goods orders rose by 0.9% in February, above expectations for a -1% contraction.* The stronger-than-expected February reading followed a robust 3.3% monthly gain in January, likely driven by companies attempting to front-run tariffs by placing goods orders before tariffs take effect. Bond yields finished higher, with the 10-year Treasury yield climbing to 4.35%.*
   
• Inflation in focus – U.S. inflation and its implications for monetary policy will be in focus for markets this week, with personal consumption expenditures (PCE) inflation out on Friday. Expectations are for headline PCE to rise by 0.3% in February and 2.5% on an annual basis. The Fed's preferred measure of inflation, core PCE, is expected to post a 0.3% gain in February and rise by 2.7% on an annual basis.* Consumer price index (CPI) and producer price index (PPI) inflation, which were released earlier this month, were both lower than expectations, helping ease market concerns after higher-than-expected inflation readings in January. While tariffs pose an upside risk to inflation over the coming months, we believe they would represent a one-time increase in the level of prices as opposed to an ongoing source of inflation that would cause long-term inflation expectations to become unanchored. This should allow policymakers to look through an increase in prices related to tariffs, although they will closely monitor market conditions to ensure that inflation expectations remain contained. Our base-case is for the Fed to lower its policy rate to between 3.5% -4% by the end of 2025. However, we expect the Fed to remain on hold in the near term as it awaits more clarity on the impact of tariffs.
   
• Rotation in leadership is underway – After two consecutive years of mega-cap tech dominance, equity-market leadership has rotated in the first months of 2025. Energy is the top-performing sector year-to-date, higher by nearly 10% including dividends, followed by health care, which has gained 6%, and financials, which has gained 4.7%.** Meanwhile, last year's leaders have lagged behind. Consumer discretionary is lower by roughly 9%, while information technology has declined by over 7%.** While we acknowledge there are reasons for optimism in mega-cap technology companies, the rotation in leadership beyond these names in the early part of 2025 reiterates the importance of diversification. As part of our opportunistic equity sector guidance, we recommend investors consider overweighting health care and financials while underweighting the materials and consumer staples sectors. We recommend a neutral allocation to all other sectors. We expect the broadening of leadership beyond mega-cap tech stocks to be a key theme of 2025, potentially rewarding those with well-diversified portfolios. 
   

Brock Weimer, CFA
Investment Strategy

^{Source: *FactSet 
**FactSet, total return through 3/25/2025. GICS sectors of the S&P 500 Index.} 
 

• Stocks close higher: Equity markets closed higher on Tuesday, with communication and consumer discretionary stocks leading to the upside. Bond yields fell, with the 10-year Treasury yield at 4.32%. In international markets, Europe was up, led by automotive stocks on reports that not all U.S. tariffs may be levied on April 2 as trade negotiations continue*. The U.S. dollar declined against major international currencies. In commodity markets, WTI oil was little changed, as prices stabilized following the announced Russia-Ukraine ceasefire covering the Black Sea and energy infrastructure*.
   
• Home prices rise in line with expectations - The S&P CoreLogic Case-Shiller 20-City Home Price Index rose 4.7% in January from the year-earlier period, as expected, up from 4.5% in December*. The pace of home-price gains had been slowing for much of 2024, falling from the February peak of 7.5% year-over-year. However, this trend reversed in the past few months, with New York reporting the largest annual gains, followed by Chicago and Boston**. The broader national index rose 4.1% annualized, which is about in line with the shelter component of the consumer price index (CPI). Limited supply of available homes for sale have been a contributor to higher prices. Existing home sales rose to a 4.3 million annual pace in February but remained well below the yearly average of about 5.2 million over the past decade. Many homeowners have mortgages with interest rates well below current market rates, which are about 6.7% for 30-year fixed-rate mortgages*, meaning their house payments would likely rise if they were to sell. Additional Fed interest-rate cuts could help lower mortgage rates, potentially bringing more homes to market and returning supply and demand to better balance. 
   
• Consumer confidence worsens – The Conference Board's Consumer Confidence Index declined for the fourth consecutive month in March to 92.9, below forecasts pointing to 94.3. Pessimism about future business conditions and employment prospects were key detractors. Inflation expectations for the next 12 months rose to 6.2%, from 5.8% in February, driven by the recent rise in prices of household staples and the expected impact of tariffs, based on written responses***. Intentions to purchase homes and cars were down, while plans to buy other big-ticket items, such as appliances and electronics, rose. These trends could start to weigh on consumer spending, although further progress in bringing inflation down and clarity on tariffs could help improve sentiment, in our view.
   

Brian Therien, CFA
Investment Strategy

^{Source: *FactSet **S&P ***The Conference Board}
 

• Stocks close higher on tariff optimism: Equity markets closed higher Monday on reports that the Trump administration may initially pursue a narrower set of reciprocal tariffs on a group of countries that represent the majority of U.S. trade*. Reciprocal tariffs are intended to equalize U.S. tariffs with those charged by trading partners. If true, we believe this would be a positive development, as it could reduce the scope of the inflation impact of tariffs, while also potentially facilitating trade negotiations. Consumer discretionary and communication stocks posted the largest gains, reflecting a risk-on tone to the trading session. In international markets, Europe was modestly lower, as the S&P preliminary (flash) Eurozone Services Purchasing Managers Index (PMI) remained in expansion territory but missed estimates*. The U.S. dollar advanced relative to major international currencies. In commodity markets, WTI crude oil traded higher, as the latest output plan from OPEC points to tighter supply*.
   
• Services index rises more than expected; manufacturing edges lower: The S&P Flash U.S. Services PMI, which accounts for the majority of the economy, rose to 54.3 for March, above forecasts for a modest decline to 50.8**. The figure, which remains above the key 50.0 mark that reflects expansion, was driven by higher services output. Higher prices due to tariffs and labor costs were also a key contributor. Business activity also appears to have picked up following adverse weather, which slowed activity in January and February. Flash manufacturing PMI fell to 49.8, below estimates for a smaller decline to 51.9. Factories reported fewer new orders to get ahead of tariffs, which temporarily boosted output in prior months. Overall, we view these readings positively, as an acceleration of the services sector would more than offset the decline in manufacturing, as it represents a larger portion of the U.S. economy.
   
• Bond yields rise: Bond yields edged higher, with the 10-year Treasury yield at 4.34%. Bond markets are pricing in expectations for two Fed interest-rate cuts, which is in line with the Fed's updated economic projections that were released last week. While we expect the Fed to remain on the sidelines for a while longer as it awaits more clarity on the implementation and potential impact of tariffs, we believe the central bank remains on its easing path. Lower interest rates should reduce borrowing costs for individuals and businesses, which would be supportive of the economy and corporate profits. 
   

Brian Therien, CFA
Investment Strategy

^{Source: *FactSet **S&P}
 

• Stocks end mixed but break the losing streak - Major indexes slid in early morning trading after FedEx and Nike saw their stock prices drop after reporting earnings but recovered most of their losses late in the day. FedEx lowered its full-year guidance citing inflation and uncertain demand for shipments, while Nike signaled declines in profitability, in part due to US tariffs on products from China and Mexico*. On the flip side, shares of Boeing rose following news that the company won a contract to build the US’s next generation fighter jet. After entering correction territory declining 10% from the highs last week, stocks have stabilized and manage to eke out a gain this week after four consecutive weeks of losses*. The key theme of a rotation across sectors, investment styles, geographies and asset classes continues, but today it was tech’s turn to outperform after having lagged so far this year*. Elsewhere, Germany's massive fiscal spending package successfully cleared its final legislative hurdle and is a key driver behind the outperformance of European equities, although they took a breather today. 
   
• Trade policy developments remain center stage - The lack of any new tariff-related headlines this week has helped markets stabilize, but sentiment remains fragile ahead of the upcoming April 2 reciprocal tariff announcement. Details of the plan are still being worked out, but the Trump administration is planning to unveil its new trading policy centered around tariffs on imported goods based on assessments of each trading partner's policies. Trade worries are a known unknown at this point and may keep volatility elevated in the weeks and months ahead. Given the changes in market leadership that are underway, we think that portfolio diversification will be critical for investors to navigate this year's twists and turns. Historically, stocks have experienced a correction, defined as a 10% or more decline from highs, about once a year. But the current pullback doesn’t have to turn into something worse. The private sector continues to add jobs at a healthy pace, corporate profits are rising, and the Fed is not considering rate hikes any time soon. 
   
• Fed is waiting for more clarity but is still eyeing rate cuts - Given the uncertain impact of the new administration's policies the Fed is taking a wait-and-see approach after having cut rates by one percentage point. This week the Federal Open Market Committee maintained the benchmark interest rate range of 4.25%- 4.5% while slowing the pace of quantitative tightening. Policymakers continue to project two rate cuts this year for this year but adjusted their estimates for growth and inflation. GDP growth expectations were revised lower from 2.1% to 1.7% and inflation estimates were revised up from 2.5% to 2.8% (core PCE). However, the inflation projections for 2026 and 2027 were left unchanged implying that the Fed sees the effect of tariffs as transitory. Fed Chair Powell mentioned in his press conference policymakers will be monitor inflation expectations closely to see if they remain anchored. The key takeaway in our view is that the Fed is waiting for greater clarity and will likely stand pat for now based on the still solid economic data (despite the negative sentiment). However, they have a bias to cut and are likely going to view any near-term tariff-induced rise in prices as a one-time increase instead of an ongoing source of inflation. We remain comfortable with our view that the Fed policy rate will settle in the 3.5%-4% range by the end of the year.
   

Angelo Kourkafas, CFA
Investment Strategist 

^{Source: *FactSet} 
 

• Stocks close lower as post-Fed rally fades – Equity markets closed lower on Thursday, with materials and consumer staples stocks leading to the downside. In global markets, Asia was mixed, as China's central bank held its policy rate steady at 3.1% as expected. Europe was down, with banks and autos posting the largest declines, as the Bank of England left interest rates unchanged at 4.5%, also in line with forecasts. Bond yields fell, with the 10-year Treasury yield at 4.24%. The U.S. dollar advanced versus major currencies but remains about 5% below its January peak. In the commodity space, WTI oil traded higher as the U.S. issued new sanctions on crude from Iran*.
   
• Jobless claims edge higher, as expected - Initial jobless claims rose to 223,000 this past week, slightly below estimates calling for 224,000*. Jobless claims have averaged about 227,000 over the past four weeks, modestly above the weekly average of 223,000 for 2024*. While federal government layoffs will likely drive jobless claims higher in the months ahead, we believe these readings, combined with other recent data, indicate that the labor market remains healthy. With the unemployment rate still low at 4.1% and job openings exceeding unemployment, wage gains should remain above inflation, providing positive real wages to support consumer spending and the economy.
   
• Leading economic index ticks lower – The Conference Board's Leading Economic Index (LEI), which is intended to provide an early indication of significant turning points in the business cycle and where the economy is heading in the near term, fell 0.3% to 101.1 in February. Weaker consumer expectations for business conditions and lower manufacturing new orders were the largest drivers of the decline, while higher weekly hours worked for manufacturing and the recent rise in the S&P 500 were the main positive contributors. Importantly, LEI's six-month change, while still negative, remained on its upward trend and does not signal recession risk**. These readings indicate that growth is slowing amid policy uncertainty but do not point to a recession. Pro-growth policies, such as deregulation and tax cuts, should help accelerate the economy later this year, in our view.
   

Brian Therien, CFA
Investment Strategy

^{Source: *FactSet **The Conference Board}