U.S. stocks gained late in the trading session after President Donald Trump downplayed concerns about a potential U.S. economic recession, claiming that he sees no signs of it and predicting that the country will experience a strong economic boom. His optimistic remarks came during a White House address, where he said, “I don’t see it at all. I think this country’s going to boom.” He also noted that markets will fluctuate, but emphasized the need to rebuild the country.
Key Market Moves
S&P 500: The exchange-traded fund tracking the S&P 500 (SPY) rose after the market closed.
Tariff Developments: The White House confirmed that a 25% tariff on steel and aluminum would take effect on Canada and other nations, a move that was somewhat softened by Trump’s decision to back away from his earlier threat of imposing 50% duties on metals from the largest U.S. trading partner.
Stock Performance: The S&P 500 ended the session 0.8% lower after a late rally helped recover from a 1.5% slide. Despite a rebound in megacap stocks like Tesla and Nvidia, the majority of shares in the market retreated. The Nasdaq 100 dropped by 0.3%, while the Dow Jones Industrial Average fell by 1.1%.
Investors React to Trade and Economic Uncertainty
Markets have been increasingly unsettled by a volatile mix of tariff policies, inflation concerns, and uncertainty surrounding the Federal Reserve’s interest-rate adjustments. This has led to a cautious outlook for U.S. equities from major banks, including JPMorgan Chase & Co. and RBC Capital Markets, who have tempered their bullish forecasts for 2025 due to fears that Trump’s trade policies could slow economic growth.
Neil Dutta, an economist at Renaissance Macro Research, acknowledged that while the U.S. is not yet in a recession, the uncertainty caused by trade tensions and tariff policies has been a drag on equity markets. He said, “What Trump has been doing has not been helpful for U.S. equity markets,” adding that the real impact on markets will depend on how the situation evolves.
A Mixed Outlook for U.S. Stocks
Although the market is not currently in a full-blown recession, strategists remain concerned about the risks ahead. Citigroup Inc. downgraded their view on U.S. stocks from overweight to neutral for the next three to six months, citing expected negative data from the U.S. economy and ongoing tariff uncertainty.
Michael Reid from RBC Capital Markets continues to believe that the U.S. can avoid a recession and will experience moderate growth in 2025, but he warned that recent economic data raises some concerns. He noted, “Some ‘yellow flags’ have popped up in the data that are worth monitoring closely.”
Treasury and Inflation Concerns
The Treasury market saw volatility, with the yield on 10-year Treasuries advancing by six basis points to 4.28%. Investors are also focused on the upcoming consumer price index (CPI) data, with economists forecasting a 0.3% increase in core CPI for February. This data will be crucial in shaping the Federal Reserve’s next moves as it seeks to control inflation while balancing economic growth.
Judith Raneri, senior portfolio manager of the Gabelli U.S. Treasury Money Market Fund, expressed concerns over the inflationary impact of Trump’s tariffs. However, she noted that the Federal Reserve is likely to treat these tariff-induced price increases as temporary and may proceed with interest rate cuts later this year.
Market Sentiment Ahead of CPI Data
As investors await the release of February’s CPI data, there is a sense of caution. Dennis DeBusschere, founder of 22V Research, noted that while many investors expect a mixed or negligible market reaction to the CPI report, the uncertainty surrounding inflation and the Fed’s response could lead to significant market swings. Some 41% of investors expect the market’s response to be “mixed/negligible,” while 31% expect a “risk-off” reaction and 28% foresee a “risk-on” market movement.
Conclusion
The stock market remains in a volatile state, with traders navigating the complex landscape of trade tensions, tariff policies, and inflation concerns. While President Trump’s optimistic view of the U.S. economy provided a late rally, many Wall Street strategists are warning of risks in the coming months. Investors are closely watching the economic data, particularly inflation figures, as the Federal Reserve’s decisions on interest rates will play a critical role in shaping market expectations.
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