Trade Tensions Shake Up Financial Markets:
Stocks extended their decline last week amid heightened volatility. Investor concerns over economic growth and rising inflation continued, with U.S. trade policy at the center of the fluctuations.
The S&P 500 Index declined 3.10%, while the Nasdaq Composite Index dropped 3.45%. The Dow Jones Industrial Average slid 2.37%. By contrast, the MSCI EAFE Index, which tracks developed overseas stock markets, rallied 2.85%.1,2
Source: Bloomberg Finance, L.P. (Performance data normalized 1/23/25 = 0)
Tariffs Take Effect
Big price swings and tariff uncertainty loomed over the entire week. Stocks opened lower out of the gate after the White House confirmed the planned 25% tariff on Mexican and Canadian goods would go forward. Soft manufacturing and construction data also put broad downward pressure on markets. Meanwhile, European stocks continued to rally on anticipated defense spending.3
Stocks fell further as tariffs affected Canada, Mexico, and China. Each country announced retaliatory tariffs of their own, further fanning inflationary fears among investors. By Tuesday’s close, all three averages were down 3% on the week, and the S&P had given up its post-election gains.4
Markets rebounded midweek after the White House announced a one-month reprieve from tariffs for North American automakers complying with the existing United States-Mexico-Canada Agreement (USMCA). The recovery rally built momentum as the administration hinted that exemptions for other sectors could follow.5
However, as trade policy fatigue rose again, the rebound reversed—despite the White House pausing more tariffs on Canadian and Mexican imports until April 2. Comments from the Treasury secretary defending U.S. tariffs and downbeat economic reports put further pressure on share prices. The Nasdaq entered correction territory, and for the first time in five years, the S&P 500 hit its sixth consecutive day of +/-1% price swings.6
Stocks continued to fall after an underwhelming February jobs report. Later, markets rebounded after Federal Reserve Chair Jerome Powell said that the economy “continues to be in a good place” and that the Fed was holding firm on current rates. The S&P, Dow, and Nasdaq all finished Friday in the green despite being down for the week.7
Sources: U.S. Department of the Treasury, Board of Governors of the Federal Reserve System, Charles Schwab
Under the Hood
The Institute for Supply Management (ISM) published fresh manufacturing data on Monday. Although headline numbers were decent, a closer look revealed that new orders dropped in January from a years-long high into correction territory while deliveries and prices paid jumped.8
This Week: Key Economic Data
Source: Bloomberg Finance L.P.
This Week: Companies Reporting Earnings
Source: EarningsWhispers
Author
Gary Aiken
Chief Investment Officer
Concord Asset Management
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Footnotes and Sources
1The Wall Street Journal, March 7, 2025
2Investing.com, March 7, 2025
3The Wall Street Journal, March 3, 2025
4CNBC.com, March 4, 2025
5CNBC.com, March 5, 2025
6CNBC.com, March 6, 2025
7MarketWatch.com, March 7, 2025
8The Wall Street Journal, March 4, 2025
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