Weekly Market Performance — March 28, 2025

Markets Blog

David Matzko, LPL Research

LPL Research provides its Weekly Market Performance for the week of March 24, 2025. Tariff and inflation concerns sent stocks tumbling toward the lows of the week on Friday. Signs of a slowdown in consumer spending coupled with an uptick in the core Personal Consumption Expenditure (PCE) price index — the Federal Reserve’s preferred inflation gauge — stoked stagflation fears. Stable unemployment claims and a jump in corporate profits unveiled in the final Gross Domestic Product (GDP) report were bright spots on the economic calendar. International stocks were mostly lower as some of the enthusiasm surrounding Germany’s fiscal package faded. Treasury yields ended nearly flat amid a volatile week of price action.

Index Performance

U.S. and International Equities

U.S. Equities: Trade policy uncertainty struck again this week as the S&P 500 ended lower. After a strong rally on a relatively tariff-free Monday, stocks fell sharply on Wednesday and Friday to end the week lower, approaching correction territory again (a 10% or greater decline from all-time highs). Auto tariffs weighed on investor sentiment on Wednesday while a slightly disappointing core inflation reading and stagflation concerns added to investor angst during Friday’s session. Value stocks held up better than their growth counterparts, led by the defensive and income-oriented consumer staples, real estate, and utilities sectors. Meanwhile, the technology sector remained under pressure, leading the way down on weakness in the chip sector and artificial intelligence-related names. NVIDIA (NVDA) shares slipped 7% for the week while Broadcom (AVGO) tumbled nearly 12% amid concerns about China’s chip demand and the pace of the AI data center buildout.

International Equities: Trade fears weighed on European markets this week as the STOXX 600 and Hang Seng indexes each fell more than 1%, while the Nikkei held up slightly better but still declined. The U.S. dollar held steady ahead of next week’s tariff announcements. Markets remained focused on trade, but also Germany’s plans to dramatically increase spending. Geopolitical tensions bubbled up with little progress towards a cease fire in Ukraine and the clear end of the cease fire between Israel and Lebanon and in Gaza.

Fixed Income, Currency, and Commodity Markets

Fixed Income: The Bloomberg U.S. Aggregate Index traded higher on the week with a late week rally on Friday that saw Treasury yields fall by 0.08% to 0.10%. The rate-sensitive two-year yield traded 12 basis points (0.12%) lower, while the 10-year yield traded nearly 8 basis points (0.08%) lower. Additionally, corporate credit spreads were higher this week but at 3.22% over Treasuries (for the Bloomberg US Corporate High Yield Index), spreads remain below historical averages. Spreads are still lower than the recent August highs and only 0.66% higher than the recent February lows. In our view, credit markets continue to tell a sanguine story.

Turning to Treasury market supply, yesterday’s 7-year Treasury auction needed concessions to entice demand – the largest pay-up and lowest end user demand since August 2024. This week’s 2-year and 5-year Treasury auctions were also weak as end-user demand has retrenched to below the previous 3-auction averages. Rich valuations, long positioning, and uncertainty ahead of tariffs next week are some reasons for lower demand.

Market-implied inflation expectations have crept higher recently with the market expecting inflation to average 3.29% over the next 2-years, which is the highest level since 2022. Longer-term inflation expectations remain relatively well-anchored with five-year inflation expectations, five-years from now (2030 to 2035) at 2.17%. Finally, markets are pricing in roughly 2.5 rate cuts this year with June and October fully “live”. With a coin flip chance of a third cut priced-in, interest rate volatility will likely remain elevated as markets converge to either 2 cuts or 3 cuts over time. We remain neutral duration relative to benchmarks.

Commodities and Currencies: Broad-based buying pressure pushed the broader commodities complex higher for a fourth straight week. A rebound in energy prices helped lift the Bloomberg Commodity Index by around 0.5%. Oversold conditions near support sparked a 1.5% relief rally in West Texas Intermediate oil (WTI). Oil pared some gains on Friday as trade war uncertainty and increased OPEC+ production in the pipeline weighed on risk appetite. Precious metals were a bright spot as safe haven demand flowed into gold. The yellow metal climbed close to 2% and closed near record highs. Silver outpaced its precious metal cousin with a gain of 2.9%. Copper added 0.5% and continued to capture headlines as buyers scrambled to secure supply ahead of expected import tariffs. The dollar ended flat on the week after a failed attempt to recapture its 200-day moving average (dma).

Economic Weekly Roundup

No Spike in Unemployment Claims. The number of individuals filing for unemployment benefits is range-bound, indicating the labor market is holding steady. The 4-week moving average has stayed between 212k and 227k since the beginning of November as businesses protected their payrolls. Just before the 2001 and 2008 recessions, unemployment insurance claims broke above past trends as businesses shed workers. Those continuing to claim benefits dipped slightly this month to 1.856 million. In separate reports Thursday morning, both wholesale and retail inventories rose less than expected in February, as businesses were less interested in stocking up before tariffs take effect.

If you believe the latest survey data, whether it’s from the Conference Board or from the University of Michigan, you would think the economy is on the cusp of a recession. But the evidence is not all gloomy. The labor market is holding up well as businesses have an appetite to add to their payrolls. And correspondingly, the number of those filing for unemployment benefits remains very low despite some announced layoffs.

The Week Ahead

The following economic data is slated for the week ahead:

• Monday: MNI Chicago PMI (Mar), Dallas Fed Manufacturing Activity (Mar)

• Tuesday: S&P Global U.S. Manufacturing PMI (Mar final), Construction Spending (Feb), JOLTS Job Openings (Feb), ISM Manufacturing Report (Mar), Dallas Fed Services Activity (Mar), Wards Total Vehicle Sales (Mar)

• Wednesday: MBA Mortgage Applications (Mar 28), ADP Employment Change (Mar), Factory Orders (Feb), Durable Goods Orders (Feb final), Captial Goods Orders and Shipments (Feb final)

• Thursday: Challenger Job Cuts (Mar), Trade Balance (Feb), Initial Jobless Claims (Mar 29), Continuing Claims (Mar 22), S&P Global U.S. Services & Composite PMIs (Mar final), ISM Services Index (Mar)

• Friday: Change in Nonfarm, Private, and Manufacturing Payrolls (Mar), Two-Month Net Payroll Revision (Mar), Unemployment Rate (Mar), Labor Force Participation Rate (Mar), Underemployment Rate (Mar), Average Hourly Earnings (Mar), Average Weekly Hours All Employees (Mar)

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