Daily market snapshot

Angelo Kourkafas

Wednesday, 03/12/2025 p.m.

Equities rebound, led by tech – After a rough start to the week, stocks gained back some ground, helped by a cooler-than-expected inflation reading and a rally in the tech sector. The core consumer price index (CPI) increase was the slowest since April 2021, back when inflation first started surging*. The data provide some comfort that the inflation trend is still lower as markets wait for more clarity from on the administration's actions on tariffs. Consistent with today's risk-on move, growth and cyclical sectors outperformed defensives, while government bond yields rose. Next, investors will be paying close attention to the producer price index (PPI) release tomorrow that will provide a read on producer prices and also will be keeping an eye on headlines about government funding. Last night, the U.S. House approved a continuing resolution authorizing spending through the September 30 end of the fiscal year, a key step to avoiding a government shutdown after the March 14 deadline.
Markets breathe a sigh of relief on softer-than-expected inflation - The headline consumer price index (CPI) increased 0.2% in February after rising 0.5% in January. That was below expectations for a 0.3% rise and the slowest monthly pace in four months*. From a year ago, headline CPI ticked down to 2.8% (vs. 3.0% prior), and core CPI, which excludes food and energy, slowed to 3.1% (vs. 3.3% prior). Shelter costs continue to be the biggest contributor to inflation, accounting for half of the monthly advance of the overall measure, but, at 4.2%, February's shelter inflation was the smallest 12-month increase since December 2021*. Categories that experienced price declines were airfares, new car prices, and gasoline prices. More broadly, inflation for services slowed further, resuming its downward trajectory, while inflation for goods stayed largely unchanged. We think today's data pushes back against the stagflation narrative that has developed in recent weeks and may help sentiment improve. However, this report comes before any potential ramp-up in tariffs that will likely push prices for goods higher. In our view, an ongoing improvement in services inflation, which account for about 70% of the core CPI, may outweigh any one-off uptick in goods inflation, keeping overall inflation contained. Nonetheless, uncertainty is elevated, which is why we expect the Fed to keep rates on hold when it meets next week. We still see the bank resuming its rate-cutting cycle in the second half of the year, potentially bringing its policy rate down to 3.5%-4.0%.
Trade headlines keep uncertainty high - After threatening to double the metal tariffs yesterday on Canada to 50%, which was later reversed, the new administration imposed 25% tariffs on steel and aluminum imports from all countries going into effect overnight. In response, the European Union launched "swift and proportionate countermeasures" on U.S. imports up to €26 billion, while other countries have so far held off on immediate retaliation. Trade-policy uncertainty and signs of an emerging soft patch in the U.S. economy in the first quarter have taken some wind out of the market's sails, with the S&P 500 flirting with its first 10% correction since October of 2023*. However, U.S. stocks are still about 10% higher from a year ago, and other asset classes that make up a well-diversified portfolio have held up better, as investors have rotated into parts of the market that trade at lower valuations*.
A historical perspective on corrections – Corrections, like the one equity markets are experiencing this month, are uncomfortable, yet common. Since 1971 there have been 19 corrections that did not progress into a bear market, with an average decline of 14% from peak to bottom over an average of 4.3 months*. Historically, these sizable market pullbacks that took place within the confines of a bull market have been good times to add equities, with stocks rising 18% six months after and 23% a year later*. We recommend remaining opportunistic and consider adding quality investments at lower prices, while maintaining realistic expectations for returns and volatility. A focus on balance and diversification can potentially better help weather short-term dips, which, over the long term, are nearly impossible to avoid.

Angelo Kourkafas, CFA
Investment Strategy

^{Source: *FactSet}

Stocks close lower amid new tariff developments: Equity markets were down on Tuesday but closed above the session lows. President Trump raised U.S. tariffs on Canadian steel and aluminum imports by 25%, bringing the total duty to 50%, effective tomorrow. The order was issued in response to Ontario's new 25% surcharge on electricity exports to the U.S. The electricity surcharge was later temporarily suspended after U.S. Commerce Secretary Howard Lutnick agreed to renewed trade talks with Canada. Bond yields rose modestly, with the 10-year Treasury yield near 4.28%. The two-year Treasury yield briefly reached its lowest reading since October 2024, as bond markets price in expectations for two or three Federal Reserve interest-rate cuts this year. In international markets, Asia declined as Japan reported receiving no commitment to be exempted from U.S. tariffs on steel and aluminum products set to take effect on Wednesday, as well as those on autos, which could come in April. Europe also closed lower, led by travel & leisure and health care stocks to the downside. The U.S. dollar extended its decline versus major currencies. In commodity markets, WTI crude oil is traded higher*.
Small business index edges lower: The National Federation of Independent Business (NFIB) Small Business Optimism Index fell for the second consecutive month to 100.7 in February, down from 102.8 the prior month. The measure remains above its long-term average of 98, indicating modestly positive sentiment. The uncertainty component, which has been volatile, rose to 104, the second-highest reading on record. In positive sign for the labor market, 53% of small businesses indicated they are hiring or trying to hire. However, labor quality was cited as the top challenge, resulting in 38% of respondents reporting job openings they could not fill due to lack of qualified applicants**. Overall, we view these readings as still positive, which is important to the labor market, as small businesses represent about 46% of private sector employment***. Job openings for January of 7.74 million modestly exceeded forecasts of 7.7 million, reflecting the resilience of the labor market, in our view.
Investors await key inflation measures this week: The consumer price index (CPI) for February will be released on Wednesday, with forecasts calling for inflation to tick down to 2.9% annualized, from 3.0% the prior month**. Core CPI, which excludes more-volatile food and energy prices, is expected to decline to 3.2%, from 3.3% in January. Shelter inflation slowed to 4.4% annualized in January, down from 6.1% a year earlier, providing a key driver in moderating inflation. Despite the decline, shelter inflation remains elevated and should continue to cool as it catches up to other measures that show housing costs rising at a slower pace. We believe the recent trend and estimates for February reflect inflation that continues too gradually moderate.

Brian Therien, CFA
Investment Strategy

^{Source: *FactSet **National Federation of Independent Businesses ***U.S. Small Business Administration}

Nasdaq leads stocks sharply lower on economic growth concerns: Equity markets closed sharply lower on Monday, as weaker consumer sentiment, slower consumer spending, and tariff risks continue to weigh on the growth outlook. The Federal Reserve Bank of Atlanta's GDPNow estimate for first-quarter real GDP growth declined last week to -2.4%, down from 2.3% in late February. A significant driver in the drop was a surge in imports in January and February to get ahead of potential tariffs. However, we expect this trend to be temporary, potentially reversing over the coming months as inventories normalize. Slower consumer spending was another key detractor, as consumer sentiment weakened on concerns over inflation, future income and employment prospects*. While GDP growth could dip temporarily, we don't expect a recession, as pro-growth policies, such as deregulation and tax cuts, and lower interest rates should help drive a reacceleration later this year. Bonds have helped provide support for portfolios, with U.S investment-grade bonds up 2.1% year-to-date**, as U.S. stocks have pulled back from their peak. International stocks have also performed well, with developed-market international large-cap stocks up 10.6% this year, demonstrating the value of diversifying beyond U.S. stocks**.
Investors await key inflation measures this week: The consumer price index (CPI) for February will be released on Wednesday, with forecasts calling for inflation to tick down to 2.9% annualized, from 3.0% the prior month**. Core CPI, which excludes more-volatile food and energy prices, is expected to decline to 3.2%, from 3.3% in January. Shelter inflation slowed to 4.4% annualized in January, down from 6.1% a year earlier, providing a key driver in moderating inflation. Despite the decline, shelter inflation remains elevated and should continue to cool as it catches up to other measures that show housing costs rising at a slower pace. We believe the recent trend and estimates for February reflect inflation that continues to gradually moderate.
Bond yields edge lower: Bond yields were down, with the 10-year Treasury yield near 4.22%, extending their recent trend lower, as bond markets have priced in expectations for more Federal Reserve interest-rate cuts and slower economic growth. Bond markets are reflecting two or three Fed interest-rate cuts this year, backed by slowing inflation***. The Fed's preferred inflation measure, personal consumption expenditure (PCE) inflation, declined to 2.5% annualized through January. The Federal Reserve Bank of Cleveland's Inflation Nowcasting shows that PCE inflation could decline further to about 2.1% over the next few months, just above the Fed's 2% target. Moderating inflation should allow the Fed to continue removing restriction from monetary policy as it moves toward a more neutral stance. Lower rates should reduce borrowing costs for consumers and businesses, which would be supportive of the economy.

Brian Therien, CFA
Investment Strategy

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

Stocks rise modestly after jobs data - Major equity indexes gained some ground, ending a volatile week that was dominated by trade headlines. The employment report pointed to a still healthy pace of hiring but also a moderating trend amidst policy uncertainty. Despite lagging this week, the Nasdaq outperformed today, helped by solid results from Broadcom. The company's shares rallied 8% after the semiconductor supplier provided an upbeat forecast that indicates strong demand for artificial intelligence*. Bond yields ticked higher after Fed Chair Powell said the economy is doing fine, while reiterating that the bank is in no rush to cut rates. Elsewhere, the rally in international stocks took a breather today. WTI oil prices rose 1% to $67, though they are down more than 3% for the week after OPEC's plan to hike output in April*.
Labor market remains solid but may be softening ahead - The economy added a moderate 151,000 jobs in February, slightly below expectations, and the unemployment rate ticked up to 4.1% from 4%. Health care and financial services saw the biggest gains, while federal government jobs declined by 10,000. However, total government employment still managed to add a net of 11,000 jobs after 21,000 jobs were added at the state and local level. Poor weather across parts of the country likely contributed to a 16,000 loss in leisure and hospitality*. We think that today's jobs data provide some reassurance that the economy is not rolling over and that there is no sudden weakening in the broader job market, as the private sector continues to hire at a healthy pace. However, we expect some softening in the months ahead, as the bulk of the recent federal government layoffs will likely show up in next month's report. Policy uncertainty and stubborn inflation suggest the Fed will stay on pause when it meets in a couple of weeks. However, we still expect policymakers to deliver one or two rate cuts in the second half of the year as inflation trends improve and economic growth moderates.
Diversification is key in 2025 - While the S&P 500 posted its worst weekly decline this year, both international developed- and emerging-market equities recorded solid gains*. A key theme this year is the rotation in market leadership across geographies, as well as investment styles and sectors. As U.S. mega-cap tech stocks have turned from leaders to laggards, international indexes have benefited from tentative signs of improvement in the European outlook and enthusiasm about artificial intelligence (AI) in China. We aren’t convinced the recent rally in international stocks is the start of a new multiyear trend. However, the likely soft patch in the U.S. economy this quarter, together with improving international momentum, suggests that the U.S. exceptionalism narrative may take a backseat for a while. Amid a leadership rotation, as well as policy and trade uncertainties, portfolio diversification will be critical, in our view, for investors to navigate this year’s twists and turns. Next week the focus for markets will be on February's consumer price index (CPI), which is expected to tick down from 3% to 2.9% from a year ago*.

Angelo Kourkafas, CFA
Investment Strategy

^{Source: *FactSet}

Stocks waver on tech weakness: U.S. equity markets closed lower on Thursday, with growth segments of the market leading to the downside. Shares of semiconductor manufacturer Marvell fell by nearly 20% after the company reported better-than-expected earnings; however, forward guidance disappointed, highlighting the high bar of expectations for companies exposed to artificial intelligence. The underwhelming guidance from Marvell weighed on sentiment for growth segments of the market, with the Nasdaq Composite falling by over 2.5%.* On the policy front, President Trump announced that the U.S. will grant a one-month tariff exemption on goods imported from Canada and Mexico that fall under the existing USMCA trade agreement. Overseas, markets in Asia were higher overnight following news that China tech firm Alibaba introduced a new AI model that has comparable performance to the DeepSeek model released in late January.* Markets in Europe traded modestly lower following the European Central Bank's decision to lower its policy rate by 0.25% to 2.5%.* Bond yields were mixed, with the 10-year Treasury yield little changed at 4.29%, while the 2-year Treasury yield fell to 3.96%.*
Diversification proving to be a key theme in 2025: Market volatility has been on display in 2025, highlighting the importance of maintaining a well-diversified portfolio aligned to your goals. While the S&P 500 Index is modestly lower year-to-date, international developed stocks have risen by more than 10%, including dividends, through yesterday's close, while emerging-market stocks have gained 4%.* At a sector level, the information technology and consumer discretionary sectors led the S&P 500 higher in 2023 and 2024. However, year-to-date, both sectors are lower by over 8%.* Meanwhile, defensive sectors, such as health care and consumer staples, along with cyclical sectors, such as financials, have seen strong year-to-date returns.* As we highlighted in our Annual Outlook, we believe that broadening leadership will be a key theme in 2025. Maintaining a well-diversified portfolio can potentially reduce the impact of market volatility and could allow investors to take advantage of broadening leadership. We continue to believe that the bull market remains intact; however, the pace of gains may slow, and volatility could persist, highlighting the importance of diversification.
Jobless claims tick lower: Initial jobless claims for last week were 221,000, below expectations for 236,000 and below the prior week's reading of 242,000.* In addition to the jobless claims data, the February Challenger report showed that U.S. employers announced 172,000 job cuts in February, up from 50,000 in January and the highest monthly total since 2020.* Challenger estimated that roughly 62,000 of the announced job cuts in February were job cuts by the federal government. On the flip side, company hiring plans jumped to nearly 35,000, the strongest February reading since 2022.* Given the uncertain policy environment, we believe the pace of job growth could slow over the coming months as businesses assess the uncertain backdrop and potentially delay hiring plans. However, we don’t expect labor-market conditions to collapse or foresee a sharp uptick in the unemployment rate. In our view, the labor market should remain a source of support to U.S. consumers throughout 2025, helping extend the economic expansion.

Brock Weimer, CFA
Investment Strategy

^{Source: *FactSet}
^{International developed stocks represented by the MSCI EAFE TR Index. Return in USD.}
^{Emerging-market stocks represented by the MSCI EM TR Index. Return in USD.}

Stocks surge on tariff relief for automakers: Equity markets finished higher on Wednesday following an announcement that the U.S. will exempt autos from the 25% tariffs that were implemented yesterday on imports from Canada and Mexico for one month. The tariff relief provided a boost to sentiment, with the S&P 500 finishing higher by 1.1% while the Nasdaq posted a 1.5% gain.* Overseas, stocks in Asia were higher overnight, while markets in Europe surged following news that Germany will exempt military and defense spending from its strict fiscal-spending rules, allowing the country to increase its defense spending. Additionally, Germany announced plans to launch a 500 billion euro fund to finance infrastructure spending.* The German parliament is expected to vote on these measures next week. It was a busy day on the economic calendar, with the ADP private-employment survey showing that private payrolls rose by 77,000 in February, below expectations of roughly 145,000.* Additionally, the ISM Services PMI rose to 53.5 in February, above expectations, signaling that the services sector of the U.S. economy appears to be holding up, despite a string of softer-than-expected economic data over recent weeks.* Bond yields finished the day higher, with the 10-year Treasury yield closing around 4.28%.*
Trade uncertainty is an overhang, but fundamentals remain supportive: Trade policy uncertainty has stoked bouts of volatility in equity markets this year, first in early February and again yesterday, as the U.S. imposed 25% tariffs on goods imported from Canada and Mexico (Canadian energy imports are subject to a 10% tariff). An additional 10% tariff on goods imported from China was implemented as well, adding to the 10% tariff that was imposed in February. Canada and China announced retaliatory measures, while Mexico pledged to retaliate by March 9. The future path of trade policy is a known unknown, and we expect trade-policy uncertainty to remain in the headlines, potentially stoking bouts of volatility as the year progresses. Despite the uncertainty, we believe the fundamental backdrop remains supportive. S&P 500 earnings are on pace to grow by roughly 18% in the fourth quarter, the strongest growth since the fourth quarter of 2021.* Strong earnings momentum is expected to continue into 2025, with estimates calling for roughly 12% growth.* Additionally, labor-market conditions remain broadly supportive, while household inflation-adjusted incomes are growing, which should support spending. In our view, sustained tariffs would create a moderate but manageable headwind to U.S. economic growth. We recommend investors resist the urge to react to headlines and instead maintain well-diversified portfolios aligned to their goals.
ADP private-payroll growth lower than expected: The ADP private-employment survey showed that U.S. private employers added 77,000 jobs in February, below economist expectations for 145,000 and below the prior month's reading of 186,000.* The slowdown in hiring likely reflects a combination of policy uncertainty and signs of slowing economic growth over recent weeks, potentially leading business owners to delay hiring plans. In our view, we could see the U.S. economy go through a soft patch in the first half of the year; however, we believe the fundamental backdrop remains supportive. Corporate profits are rising, and labor-market conditions remain broadly supportive despite today's softer-than-expected report, which should provide support to the economy and markets in 2025. Economist estimates are calling for real GDP growth in 2025 of 2.2%, modestly above estimates of long-term trend growth of roughly 2%.* Looking ahead, labor-market data will remain in the spotlight this week with the release of nonfarm payrolls and the unemployment rate on Friday. Expectations are for nonfarm payrolls to rise by 160,000 in February, while the unemployment rate is expected to hold steady at 4%.*

Brock Weimer, CFA
Investment Strategy

^{Source: *FactSet}

Investment Policy Committee

The Investment Policy Committee (IPC) defines and upholds Edward Jones investment philosophy, which is grounded in the principles of quality, diversification and a long-term focus.

The IPC meets regularly to talk about the markets, the economy and the current environment, propose new policies and review existing guidance — all with your financial needs at the center.

The IPC members — experts in economics, market strategy, asset allocation and financial solutions — each bring a unique perspective to developing recommendations that can help you achieve your financial goals.

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The Investment Policy Committee (IPC) defines and upholds Edward Jones investment philosophy, which is grounded in the principles of quality, diversification and a long-term focus.

The IPC meets regularly to talk about the markets, the economy and the current environment, propose new policies and review existing guidance — all with your financial needs at the center.

Learn More

Important information:

This is for informational purposes only and should not be interpreted as specific investment advice. Investors should make investment decisions based on their unique investment objectives and financial situation. While the information is believed to be accurate, it is not guaranteed and is subject to change without notice.

Investors should understand the risks involved in owning investments, including interest rate risk, credit risk and market risk. The value of investments fluctuates and investors can lose some or all of their principal.

Past performance does not guarantee future results.

Market indexes are unmanaged and cannot be invested into directly and are not meant to depict an actual investment.

Diversification does not guarantee a profit or protect against loss.

Systematic investing does not guarantee a profit or protect against loss. Investors should consider their willingness to keep investing when share prices are declining.

Dividends may be increased, decreased or eliminated at any time without notice.

Special risks are inherent in international investing, including those related to currency fluctuations and foreign political and economic events.

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