Weekly Market Commentary March 31, 2025
Market indices closed the week lower as markets grappled with weakening consumer confidence and April 2 tariffs on automotives.
• The S&P 500 declined by -1.53%
• The Dow Jones Industrial Average declined by -0.96%
• The tech-heavy Nasdaq performed worst, falling -2.59%
• The 10-Year Treasury yield closed at 4.25%
Last week’s economic reports painted a complex picture, with persistent inflation concerns taking center stage. Specifically, core personal consumption expenditures (PCE), the Federal Reserve’s (Fed) favored inflation gauge, exceeded expectations at 0.4% month-over-month (versus 0.3%), signaling stubborn price pressures above the 2% target. Crucially, unlike the fixed-weight consumer price index (CPI), PCE adjusts for consumer behavior, making it a key Fed indicator. Further reinforcing inflation concerns, the University of Michigan revised its 1- and 3-year inflation expectations upward from already elevated levels. While the 7-year Treasury yield saw a slight increase, potentially reflecting these rising expectations, the 2- and 5-year yields declined, creating a mixed yield curve signal.
Shifting focus to consumer health, sentiment weakened noticeably. The Conference Board’s Consumer Confidence report fell short of expectations for the fifth consecutive month, albeit with potential for upward revisions. The University of Michigan’s sentiment index confirmed this trend, plunging 12% in February, with the expectations component dropping a precipitous 18% (and over 30% since November 2024). Personal spending also came in below forecasts (0.4% versus 0.5%), suggesting a potential pullback in consumer demand.
Meanwhile, business activity offered conflicting signals. Services Purchasing Managers’ Index (PMI) exceeded expectations, indicating strength in a crucial economic sector. However, manufacturing PMI disappointed. Countering this, durable goods orders provided a positive surprise, with core orders significantly exceeding expectations at 0.7% (versus 0.2%), offering some optimism for manufacturing. While manufacturing is smaller than services, its cyclical nature makes it a valuable economic indicator.
Markets are grappling with these mixed signals amidst a backdrop of tariff uncertainty. Investors will closely scrutinize upcoming data to determine the economy’s true trajectory and the persistence of inflationary pressures.
Click HERE to read more.