Weekly Market Performance — March 14, 2025

Markets Blog

David Matzko, LPL Research

LPL Research provides its Weekly Market Performance for the week of March 10, 2025. The selloff in U.S. stocks continued this week as markets were unable to find relief from trade and policy uncertainty that has dragged major averages lower. International stocks closed the week mixed, with tariff concerns offsetting positive local developments in both Europe and Asia. Treasury yields ended little changed, while gold surged back toward record highs and oil prices ended the week about where they started.

Index Performance

U.S. and International Equities

U.S. Equities: Policy uncertainty and economic jitters weighed on investor sentiment again this week, dragging all three major indexes lower and marking the sixth weekly decline in the last seven weeks for the S&P 500 and Nasdaq. Value stocks outperformed growth names once again as investors rotated to defensive corners of the market, while small caps extended recent losses but outperformed the large cap benchmark S&P 500.

Market participants had to balance the urge to buy the dip against ongoing trade policy uncertainty, with the latter broadly outweighing the former this week. Stocks continued to sell off across U.S. exchanges, briefly sending the S&P 500 and the Nasdaq into a technical correction (defined as a 10% drawdown). Volatile trade headlines remained on center stage with fresh 25% U.S. levies on steel and aluminum products going into effect, which were swiftly met with countermeasures from the European Union (EU) and Canada. Canadian and U.S. officials resolved their spat relatively quickly, but markets continued to experience downward pressure with European authorities and the White House volleying tariff threats on alcoholic beverages across the Atlantic. Stocks failed to hang on to Wednesday’s bounce, as sentiment received further dents from policy jitters spilling into corporate America, with markets noting demand warnings from Delta Airlines (DAL), Dick’s Sporting Goods (DKS), Verizon (VZ), and American Eagle (AEO).

On the economic data front, softer-than-expected consumer and wholesale price inflation did little to sway markets to the upside. However, buyers stepped in to end a dizzying week and trim week-to-date losses, shrugging off weaker-than-expected consumer sentiment data and hotter inflation expectations.

International Equities: European equities ended the week broadly lower. Trading remained cautious overall, weighed down by the defensive week in U.S. markets and trade threats on the region. Investors refrained from making outsized bets as the EU responded to U.S. tariffs with levies of their own on American exports including motorcycles, jeans, and spirits, followed by a threat of 200% tariffs on European wine from the White House. However, some positives were noted by markets. After Germany’s historic debt-funded defense and infrastructure spending plan faced headwinds early in the week, the package was set to pass after German conservative party leader and Chancellor-in-waiting Friedrich Merz reached a tentative agreement with the Green party. Stocks trimmed weekly losses in response but failed to erase declines.

Asian markets ended mostly lower after the region faced strong downward pressure from early-week selling in New York. Losses deepened after mixed mid-week trading as market chatter surrounded reports suggesting hedge funds unwound positions in the region to start the week. Nonetheless, investors added some risk on Friday after Beijing announced a briefing will be held on Monday to announce fiscal and monetary policy measures to boost consumption. Mainland China erased weekly losses on reassurance that authorities are determined to aid one of the economy’s weakest links, but Hong Kong remained below the flatline. Japan reversed week-to-date declines after the nation’s trade union securing wage hikes, also lifted by rate hike hopes. South Korea ended modestly higher while Taiwan dropped, and Australia fell after the U.S. imposed a 25% tariff on steel and aluminum products.

Fixed Income, Currency, and Commodity Markets

Fixed Income: The Bloomberg U.S. Aggregate Index traded flat this week with Treasury yields ending little changed after holding Tuesday’s runup. Outside of weakening demand for longer-term Treasuries in this week’s auctions, headlines around Treasuries were relatively tame. Elsewhere, corporate securities continued to draw investor attention. Spreads in U.S. corporate credit markets had remained remarkably resilient over the past few years, with spreads (the additional compensation for owning riskier debt) at or near secular tights. However, recent economic uncertainty has pushed spreads wider, particularly on lower-rated credits. At over three percent, high-yield spreads (per the Bloomberg U.S. Corporate High Yield Index) are nearly 0.80% higher than the recent Feb 18 lows. Moreover, spreads for CCC-rated companies, the companies most prone to default, are nearly 1.25% higher than recent lows. Even investment-grade corporate credit spreads are wider, with spreads on the Bloomberg Corporate Index rising over the past few weeks.

But, while credit spreads have widened recently, they’re still not wide by historical standards. High-yield spreads are only in the 22nd percentile since 2002, while investment-grade spreads are in the 24th percentile relative to history (meaning high-yield spreads have been wider 78% of the time and investment-grade spreads higher 76% of the time). Despite the spread widening of the last few weeks, current spread levels are still too tight, in our opinion, given the renewed risks of economic deterioration in the near-term. To be clear, we do not envision spreads going to recession levels (they’re not even back to the summer 2024 “growth scare” wides). Rather, we view this as a realignment of risk premia to higher macro volatility.

Commodities and Currencies: The Bloomberg Commodities Index ended the week slightly higher in relatively choppy trading. West Texas Intermediate (WTI) crude prices rose slightly as support from fresh U.S. sanctions on Iranian oil and shipping was offset by overarching macroeconomic uncertainties. Crude failed to gain traction as supply surplus concerns rose amid OPEC+ production increases, and the potential end of the war in Ukraine which would bring back more Russian energy supplies. Gold rallied to end the week, nearing $3,000/ounce, continuing to glean support from haven trades amid ongoing tariff concerns and geopolitical developments in Ukraine, plus bolstered Federal Reserve (Fed) rate cut bets. The U.S. dollar ended the week slightly weaker, continuing to face headwinds from a stronger euro and Japanese yen while finding some support from ongoing U.S. tariff threats.

Economic Weekly Roundup

CPI Softer Than Anticipated. Consumer prices rose 0.2% month to month, softer than expected and welcomed news for investors. Annual headline inflation decelerated to 2.8% from 3.0% the previous month. Rising shelter costs accounted for nearly half of the monthly increase. Airline fares and new vehicle prices were some of the major items that decreased in February. As highly publicized bird flu impacted egg supply and drove a 10.4% price increase in February. In 2015, bird flu caused a spike in egg prices that lasted for several months, so we should expect egg prices to stay elevated in the near term.

Core services inflation is unequivocally decelerating, giving the Fed room to focus on the growth mandate. In the near term, we may see some volatility in consumer prices as businesses and consumers anticipate looming tariffs.

Job Churn Still Elevated. The job market was tight in January and workers found it favorable for job switching. Hiring is strong in the health care and social assistance sectors, although the job market appears weaker in the professional and business services industry. The quits rate – a measure of workers’ interest to switch jobs – rose for the construction and information sectors as these industries have an acute shortage of workers. Layoffs of government workers declined in January, but we should expect this to reverse course in the coming months. The openings-to-unemployed ratio rose above the lows from last year but are still close to pre-pandemic levels.

The labor market is holding steady, which should provide salve for investors worried about the cost of the “detox period” as Treasury Secretary Scott Bessent highlighted in a recent interview. So far, the growth scare is not necessarily a recession scare but uncertainty about trade and tax policy are weighing on investors. If inflation eases in the coming months, we should expect the Fed to cut rates by mid-summer, creating some relief for risk assets.

The Week Ahead

The following economic data is slated for the week ahead:

• Monday: Empire Manufacturing (Mar), Retail Sales (Feb), Business Inventories (Jan), NAHB Housing Market Index (Mar)

• Tuesday: Housing Starts (Feb), Building Permits (Feb preliminary), Import Price Index (Feb), New York Fed Services Business Activity (Mar), Industrial Production (Feb), Capacity Utilization (Feb), Manufacturing (SIC) Production (Feb)

• Wednesday: MBA Mortgage Applications (Mar 14), FOMC Rate Decision & Median Rate Forecast, Net Long-Term TIC Flows and Total New TIC Flows (Jan)

• Thursday: Current Account Balance (4Q), Initial Jobless Claims (Mar 15), Continuing Claims (Mar 8) Philidelphia Fed Business Outlook (Mar), Leading Index (Feb), Existing Home Sales (Feb)

• Friday: No economic releases scheduled

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