Escalating Global Trade Tensions Weigh on Stocks

The S&P 500 Index ($SPX) (SPY) today is down -0.87%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -1.01%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.60%.  March E-mini S&P futures (ESH25) are down -1.22%, and March E-mini Nasdaq futures (NQH25) are down -0.91%. 

Stock indexes today extended Monday’s losses, with the S&P 500 and Dow Jones Industrials falling to 7-week lows and the Nasdaq 100 dropping to a 3-3/4 month low.  Worries about escalating global trade tensions are weighing on equity markets today.  US tariffs kicked in today on Canadian and Mexican goods and expanded tariffs against China. 

Canada today announced a package of counter-tariffs against US-made products in response to the US tariffs effective immediately and includes 25% tariffs on about C$30 billion ($20.6 billion) worth of goods sold by US exporters, with a second round of tariffs on C$125 billion of US exports in three weeks, including big-ticket items like cars, steel and aluminum. Canada is the largest single buyer of US goods, and vice versa.

China today announced tariffs as high as 15% on US agricultural goods effective March 10 and banned trade with some defense companies in retaliation for US tariffs.

Market attention will focus on President Trump’s address to a joint session of Congress Tuesday evening.  On Wednesday, the Feb ISM services index is expected to fall -0.1 point to 52.7.  On Friday, Feb nonfarm payrolls are expected to rise by +160,000, and the Feb unemployment rate is expected to remain unchanged at 4.0%.  Meanwhile, Feb average hourly earnings are expected to remain unchanged from Jan at +4.1% y/y.  Also, on Friday, Fed Chair Powell will give the keynote speech on the economic outlook at Chicago Booth’s 2025 US Monetary Policy Forum. 

The markets are discounting the chances at 12% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets today are mixed.  The Euro Stoxx 50 dropped to a 2-1/2 week low and is down -2.31%.  China’s Shanghai Composite Index recovered from a 3-week low and closed up +0.22%.  Japan’s Nikkei Stock 225 fell to a 5-1/2 month low and closed down -1.20%.

Interest Rates

June 10-year T-notes (ZNM25) today are up +8 ticks.  The 10-year T-note yield is down -1.7 bp to 4.138%.  June T-notes today climbed to a 4-1/2 month high, and the 10-year T-note yield fell to a 4-1/2 month low of 4.114%.  T-notes today extended Monday’s gains on carryover support from Monday’s weaker-than-expected US ISM and construction spending reports.  Also, today’s US tariffs on Canada, China and Mexico fueled concerns about slowing global growth, a supportive factor for T-notes. In addition, T-notes have also increased safe-haven demand due to weakness in equity markets. 

European bond yields today are moving lower.  The 10-year German bund yield is down -0.6 bp to 2.485%.  The 10-year UK gilt yield is down -5.0 bp to 4.504%.

The Eurozone Jan unemployment rate was unchanged at a record low of 6.2%, showing a stronger labor market than expectations of 6.3%.

Swaps are discounting the chances at 99% for a -25 bp rate cut by the ECB at the March 6 policy meeting.

US Stock Movers

The weakness in the Magnificent Seven Technology stocks is weighing on the overall market.  Meta Platforms (META) is down more than -3%, and Amazon.com (AMZN) is down more than -2%.  Also, Nvidia (NVDA) is down -0.8%, and Microsoft (MSFT) is down -0.5%.

Tesla (TSLA) is down more than -4% after reporting its China Feb vehicle deliveries sank -49% y/y to 30,688 units. 

Bank stocks are under pressure today.  Citigroup (C) and KeyCorp (KEY) are down more than -6%.  Also, Wells Fargo (WFC) and Bank of America (BAC) are down more than -5%, and Goldman Sachs (GS) and Discover Financial Services (DFS) are down more than -4%.  In addition, American Express (AXP), Fifth Third Bancorp (FITB), Northern Trust (NTRS), and JPMorgan Chase (JPM) are down more than -3%. 

Energy producers and energy service providers are moving lower, with the price of WTI crude oil down more than -1% to a 2-3/4 month low.  APA Corp (APA), Halliburton (HAL), and Schlumberger (SLB) are down more than -3%.  Also, Baker Hughes (BKR), ConocoPhillips (COP), Marathon Petroleum (MPC), and Diamondback Energy (FANG) are down more than -2%.

Best Buy (BBY) is down more than -13% to lead losers in the S&P 500 after forecasting full-year adjusted EPS of $6.20 to $6.60, with the midpoint below the consensus of $6.55. 

Illumina (ILMN) is down more than -2% after China banned the company from selling genetic sequencing products in China as part of a wave of retaliatory measures against fresh US tariffs on Chinese goods. 

Okta (OKTA) is up more than +18% after reporting Q4 revenue of $682 million, better than the consensus of $669.8 million, and forecast 2026 revenue of $2.85 billion-$2.86 billion, stronger than the consensus of $2.80 billion. 

Walgreens Boots Alliance (WBA) is up more than +6% to lead gainers in the S&P 500 after Bloomberg reported that Sycamore Partners is nearing an acquisition of the company. 

ON Holding (ONON) is up more than +4% after reporting a Q4 gross margin of 62.1%, better than the consensus of 61.7%. 

Labcorp Holdings (LH) is up more than +1% after Citigroup upgraded the stock to buy from neutral with a price target of $300. 

Earnings Reports (3/4/2025)

AutoZone Inc (AZO), Best Buy Co Inc (BBY), Crowdstrike Holdings Inc (CRWD), Ross Stores Inc (ROST), Target Corp (TGT).