Stocks Set to Open Sharply Lower as U.S. Recession Talk Lingers, Inflation Data Awaited

March S&P 500 E-Mini futures (ESH25) are down -0.90%, and March Nasdaq 100 E-Mini futures (NQH25) are down -1.04% this morning, while Treasury yields also fell, as concerns about the health of the U.S. economy weighed on sentiment. 

Tariffs on key trading partners, a rising unemployment rate, and job cuts in the federal workforce are heightening concerns about a potential slowdown in the world’s largest economy. Investors also digested U.S. President Donald Trump’s interview with Fox News, where he noted that the U.S. economy was undergoing “a period of transition” and declined to rule out the possibility that his policies would cause a recession. This week, investors will be closely monitoring the release of key U.S. inflation data.

In Friday’s trading session, Wall Street’s major equity averages ended in the green. Broadcom (AVGO) climbed over +8% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after the semiconductor and software giant posted upbeat FQ1 results and issued above-consensus FQ2 revenue guidance. Also, Walgreens Boots Alliance (WBA) gained more than +7% after private equity firm Sycamore Partners agreed to acquire the company for $10 billion. In addition, The Gap (GAP) soared over +18% after the retailer reported better-than-expected Q4 results. On the bearish side, Hewlett Packard Enterprise (HPE) slumped more than -11% and was the top percentage loser on the S&P 500 after the server and cloud company reported weaker-than-expected FQ1 adjusted EPS and offered a downbeat FQ2 forecast. 

The U.S. Labor Department’s report on Friday showed that nonfarm payrolls climbed 151K in February, slightly missing the 159K consensus estimate. Also, the U.S. February unemployment rate unexpectedly edged up to 4.1%, weaker than expectations of no change at 4.0%. In addition, U.S. average hourly earnings rose +0.3% m/m and +4.0% y/y in February, compared to expectations of +0.3% m/m and +4.1% y/y. Finally, U.S. January consumer credit rose $18.08B, stronger than expectations of $15.60B.

“We are not putting much stock in the jobs report at the moment. [Friday’s] data was mixed at best, but we still have no clarity on the economy moving forward. Markets, businesses, and consumers do not like uncertainty, and that means increased volatility,” said Byron Anderson at Laffer Tengler Investments.

Fed Chair Jerome Powell on Friday acknowledged growing uncertainty in the U.S. economic outlook but stated that policymakers “do not need to be in a hurry” to adjust policy. “Despite elevated levels of uncertainty, the U.S. economy continues to be in a good place,” Powell said. Also, Fed Governor Adriana Kugler said, “Given the recent increase in inflation expectations and the key inflation categories that have not shown progress toward our 2% target, it could be appropriate to continue holding the policy rate at its current level for some time.”

Meanwhile, U.S. rate futures have priced in a 97.0% chance of no rate change and a 3.0% chance of a 25 basis point rate cut at the conclusion of the Fed’s March meeting.

The U.S. consumer inflation report for February will be the main highlight this week. The report is expected to show that prices increased last month at a pace that suggests slow progress on inflation for Fed officials. However, the data’s impact on U.S. rate-cut expectations might be limited due to increasing worries about the effects of Trump’s policies, particularly tariffs, on the economy. Also, investors will be keeping an eye on other economic data releases, including the U.S. PPI, the Core PPI, the JOLTs Job Openings, Crude Oil Inventories, Initial Jobless Claims, and the University of Michigan’s Consumer Sentiment Index (preliminary).

Market participants will also focus on earnings reports from several notable companies, with Adobe (ADBE), Oracle (ORCL), Dick’s Sporting Goods (DKS), Dollar General (DG), Ulta Beauty (ULTA), and Docusign (DOCU) scheduled to release their quarterly results this week.

Interest-rate setters are in a media blackout period before the March 18-19 policy meeting, so they are prohibited from making public comments this week.

The U.S. economic data slate is mainly empty on Monday.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.256%, down -1.44%.

The Euro Stoxx 50 Index is down -0.37% this morning as investor sentiment was dampened by global growth worries. Bank stocks led the declines on Monday. Limiting losses, defense and chemical stocks advanced. The benchmark index was off its Monday lows after a survey showed that investor morale in the Eurozone improved significantly in March, with economic expectations reaching their highest level since July 2021. Separately, data from the Federal Statistical Office showed that Germany’s monthly industrial production rebounded more than expected in January. Meanwhile, Friedrich Merz’s conservative party and the Social Democrats wrapped up preliminary discussions on forming a coalition government on Saturday. The two parties were working swiftly to reach an agreement before next week, aiming to ease Germany’s borrowing restrictions through parliament to stimulate growth in Europe’s largest economy. In other news, JPMorgan raised its forecast for Eurozone economic growth in 2025 to 0.8% from 0.7%, citing Germany’s fiscal loosening reforms. In corporate news, Assura Plc (AGR.LN) surged over +14% after the British healthcare real estate investment trust received an indicative, non-binding proposal of 1.61 billion pounds ($2.08 billion) from KKR and Stonepeak Partners.

Germany’s Industrial Production and Eurozone’s Sentix Investor Confidence Index were released today.

The German January Industrial Production arrived at +2.0% m/m, stronger than expectations of +1.6% m/m.

Eurozone March Sentix Investor Confidence Index came in at -2.9, stronger than expectations of -9.1.

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.19%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.38%.

China’s Shanghai Composite Index closed lower today as persistent deflationary pressures fueled concerns about the nation’s economic recovery amid rising global trade tensions. Telecom and software stocks led the declines on Monday. Data from the National Bureau of Statistics released on Sunday showed that China’s consumer inflation fell more than expected, dropping below zero for the first time in 13 months in February, while producer prices declined for the 29th straight month, as seasonal demand waned and households remained wary of spending amid concerns over jobs and income. Investors will now be watching for indications that the government’s stimulus efforts are boosting domestic demand. Meanwhile, Nomura’s chief China economist Ting Lu warned that the nation’s economic growth could slow due to a payback effect from export front-loading, rising U.S.-China trade tensions, and fading momentum in the property market recovery. In other news, China announced it will impose a 100% tariff on rapeseed oil, rapeseed meal, and pea products, along with a 25% levy on pork and some seafood imports from Canada, effective March 20th, in retaliation for tariffs Ottawa introduced in October 2024. In corporate news, Soundwill Holdings spiked +40% in Hong Kong after the property firm announced a privatization and resumed trading. 

The Chinese February CPI arrived at -0.2% m/m and -0.7% y/y, weaker than expectations of -0.1% m/m and -0.4% y/y.

The Chinese February PPI came in at -2.2% y/y, weaker than expectations of -2.0% y/y.

Japan’s Nikkei 225 Stock Index ended higher today as investors scooped up battered stocks following last week’s sharp losses. Gains in automobile and technology stocks helped offset losses in heavy-industry and pharmaceutical stocks on Monday. Data released on Monday showed that Japan’s real wages declined in January after two months of modest increases, just days before the country’s major firms conclude their annual spring pay negotiations. Separately, preliminary data from the Cabinet Office showed that Japan’s leading economic indicators index, which gauges the economic outlook for a few months ahead based on data such as job offers and consumer sentiment, rose to a 3-month high in January. In addition, data showed that Japan recorded a current account deficit in January for the first time in two years. Meanwhile, the benchmark index’s gains were limited on Monday as the yen strengthened to a 5-month high on safe-haven demand. Investors stayed cautious as they navigated U.S. President Donald Trump’s shifting approach to trade tariffs and growing concerns about the health of the U.S. economy. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +0.43% to 28.28.

The Japanese January Leading Index came in at 108.0, weaker than expectations of 108.1.

The Japanese January Current Account n.s.a. stood at -0.258T yen, weaker than expectations of -0.230T yen.

The Japanese February Economy Watchers Current Index arrived at 45.6, weaker than expectations of 48.5.

Pre-Market U.S. Stock Movers

Cryptocurrency-exposed stocks slumped in pre-market trading after the price of Bitcoin dropped to the $83K level. MicroStrategy (MSTR) is down more than -6%. Also, MARA Holdings (MARA) is down about -6%, and Bit Digital (BTBT) is down over -5%.

DexCom (DXCM) slid over -3% in pre-market trading after receiving a warning letter from the FDA following inspections of its facilities in San Diego and Mesa.

Redfin Corp. (RDFN) spiked about +77% in pre-market trading after Bloomberg reported that Rocket Cos. agreed to buy the company in a deal valued at $1.75 billion. 

DoorDash (DASH) climbed more than +4% in pre-market trading after S&P Dow Jones Indices announced that the food delivery giant would join the S&P 500 Index on March 24th.

Cognizant Technology Solutions (CTSH) rose over +3% in pre-market trading after the Wall Street Journal reported that activist investor Mantle Ridge had built a more than $1 billion stake in the company.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - March 10th

Oracle (ORCL), Franco-Nevada (FNV), BioNTech (BNTX), Willis Lease (WLFC), Yalla (YALA), NET Power (NPWR), Greenlight Capital Re (GLRE), UroGen Pharma (URGN), Genie Energy (GNE), Telos (TLS), Fennec Pharma (FENC), Rand Capital Corp (RAND), DarioHealth (DRIO).