By Jack Kraft, CFA, Vice President, Investment Strategist
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U.S. equities endured another volatile week as traders weighed tariff uncertainty and weak economic data on the consumer and inflation. March is typically a month of surprises, thanks to the NCAA basketball tournament, but with all No. 1 seeds advancing to the Final Four, the biggest upsets have been on Wall Street. The S&P 500 is on pace for its worst March since 2022, as the index lost 1.5% last week. Meanwhile, the tech-heavy Nasdaq plunged 2.6%, while the Dow shed 1.0%.
Nine of the 11 S&P 500 sectors closed last week in negative territory, led by steep losses in technology and communication services. Investors leaned into more defensive sectors, with consumer staples gaining more than 1% last week. Fears of slowing growth have seen investors rotate from growth-oriented sectors to more defensive, stable areas of the market. Since the start of the year, energy, health care, utilities and consumer staples are leading the pack, all with positive gains of more than 2%. These pockets of the market with more predictable earnings visibility should continue to act as a safe haven during challenging economic times.
Adding to the pressure on growth stocks was that Microsoft decided to cancel data center leases with at least two private data center operators. This fueled investor skepticism that the news could indicate lower demand around artificial intelligence. Despite the technology giant’s commitment to spend over $80 billion this year in building out artificial intelligence infrastructure, the news raised concerns about a broader pullback on capital expenditures across the sector.
The path of least resistance remains to the downside, as investors focus on economic impacts from tariffs. Last week, the Trump administration threw a full-court press on markets by announcing duties of 25% on auto imports, with additional tariff announcements slated for April 2. This will likely lead to retaliatory tariffs from U.S. trade partners as the administration is showing no softening in its trade-policy stance. These geopolitical concerns will likely warrant continued near-term volatility as trade uncertainty weighs on both domestic and international growth. Markets seem to be in a phase of repricing the risk of lower growth and the global economy’s ability to absorb any shock from shifting U.S. trade policy.
At the start of the year, U.S. equities were trading at elevated valuations, driven by strong corporate earnings growth expectations and the prevailing investment theme of “U.S. exceptionalism.” However, as this narrative faces increased scrutiny amid higher tariffs, weaker economic growth and the possibility of greater inflation than previously assumed, the justification for this valuation premium has come under pressure. As earnings estimates have started to be revised lower, Wall Street has followed suit by cutting year-end targets for the S&P 500. In fact, Goldman Sachs was the latest bank to lower its target on the benchmark, which now stands at 5700—a sharp decline from 6500 coming into the year.
The beloved “Magnificent Seven” mega-cap stocks—Nvidia, Microsoft, Alphabet, Meta, Amazon, Apple, and Tesla—have been the bracket-busting disappointment this year with a collective first-quarter decline of more than 15%. The sharp selloff has compressed valuations, bringing the group’s premium over the broader S&P 500 to its narrowest level in six years, according to Goldman Sachs. The swift pullback is more of a function of the unwinding of an overcrowded trade after the group was responsible for the majority of the S&P 500 Index gains for the last two years.
Although this group has fallen out of favor in the short-term, I remain confident that the majority names in this cohort will continue to be a staple of the U.S. economy. U.S. policy is shifting quickly, but that doesn’t mean people will trade in their iPhone for a Blackberry, delete their Facebook and put an end to the stream of Amazon packages arriving at their doorsteps. Market drawdowns are nothing new, and owning quality, stable growers during times of uncertainty should be reassuring rather than a cause of concern.
This week, economic updates and tariff announcements will garner headlines. On the economic front, nonfarm payrolls will be watched closely with forecasts suggesting 140,000 jobs added in March. Meanwhile, Institute for Supply Management (ISM) manufacturing is anticipated to slip just below 50, signaling contraction in the sector. Other notable releases include ISM services, U.S. trade deficit data and a slew of central bank speakers. April 2, which President Trump has referred to as “Liberation Day,” will be closely watched for news on additional tariff announcements and trade policy updates. Earnings reports will be light with PHV Corp, Restoration Hardware and Conagra Brands issuing quarterly results.
Economic Calendar: March 31 – April 4
| Time (ET) |
Report |
Period | Median Forecast | Previous |
| MONDAY, MARCH 31 | ||||
| 9:45 AM | Chicago Business Barometer (PMI) | March | 43.6 | 45.5 |
| TUESDAY, APRIL 1 | ||||
| 9:00 AM | Richmond Federal Reserve (Fed) President Thomas Barkin speaks | |||
| 9:45 AM | S&P final U.S. manufacturing PMI | March | 49.8 | 49.8 |
| 10:00 AM | Construction spending | Feb. | 0.30% | -0.20% |
| 10:00 AM | ISM manufacturing | March | 49.50% | 50.30% |
| 10:00 AM | Job openings | Feb. | 7.7 million | 7.7 million |
| TBA | Auto sales | March | — | 16.0 million |
| WEDNESDAY, APRIL 2 | ||||
| 8:15 AM | ADP employment | March | 120,000 | 77,000 |
| 10:00 AM | Factory orders | Feb. | 0.60% | 1.70% |
| 4:30 PM | Fed Governor Adriana Kugler speaks | |||
| THURSDAY, APRIL 3 | ||||
| 8:30 AM | Initial jobless claims | 29-Mar | 226,000 | 224,000 |
| 8:30 AM | U.S. trade deficit | Feb. | -$123.0B | -$131.4B |
| 9:45 AM | S&P final U.S. services PMI | March | 54.1 | 54.3 |
| 10:00 AM | ISM services | March | 53.00% | 53.50% |
| 12:30 PM | Fed Vice Chairman Philip Jefferson speaks | |||
| 2:30 PM | Fed Governor Lisa Cook speaks | |||
| FRIDAY, APRIL 4 | ||||
| 8:30 AM | U.S. employment report | March | 140,000 | 151,000 |
| 8:30 AM | U.S. unemployment rate | March | 4.10% | 4.10% |
| 8:30 AM | U.S. hourly wages | March | 0.30% | 0.30% |
| 8:30 AM | Hourly wages year over year | 3.90% | 4.00% | |
| 11:25 AM | Fed Chairman Jerome Powell speaks | |||
| 12:00 PM | Fed Governor Michael Barr speaks |
Links to previously published commentaries can be found at benjaminfedwards.com/Latest Investment Insights/Market Commentary/Market