The futures market is pointing to a negative open to today’s stock trading. Early this morning, the U.S. Bureau of Labor Statistics released important employment data for the month of March. In all, an impressive 228,000 people were added to the worker rolls, compared to the outlook for an uptick of only 140,000 new positions and the revised February increase of 117,000 (down from the 151,000 previously reported). The unemployment rate came in at 4.2%, slightly higher than expected and above the 4.1% rate in the prior month. Domestic hourly wages advanced 0.3%, in line with estimates and the February gain. On a year-to-year basis, pay was up 3.8%, short of the 4.0% improvement reported in February. Average weekly hours worked and labor participation both advanced incrementally.
These latest employment data were better than what was widely expected on Wall Street. Even so, business managers remain cautious. They have, for the most part, suspended new investments, in light of uncertainty in the global trade arena. This week, President Trump imposed harsher-than-expected tariffs on imported goods from U.S. allies, as well as foes. The Street is watching to see how other countries react to the new policy. Some are already beginning to retaliate. Fear has heightened that the tariffs could lead to a reacceleration of inflation.
Shortly, Federal Reserve Chairman Jerome Powell will talk on the economy and central bank monetary policy. Fed governors Michael Barr and Christopher Waller will, in turn, follow with their own thoughts. Economists are forecasting rising costs for goods and services in the coming months. Expectations that the Fed will cut short-term interest rates, from the current range of 4.25%-4.50%, are rising. Two or more one-quarter-point actions are anticipated before the end of 2025.
Within the investment community, talk of a possible domestic recession has become more common. That is highly possible if the developing global trade war worsens. At least one market pundit has mentioned the potential for deflation in the near term. It’s argued that corporations’ worries about tariffs and their impact on consumer goods demand could actually place pressure on what they can charge in the marketplace, hurting earnings. A fair number of political wonks appear to believe that the Trump Administration, cognizant of the impact on its legacy, will react to any sharp downturn in business activity and will turn to reducing tariffs. Congress is concerned and is weighing legislation to give it more authority over tariff policies.
Aside from company managers and consumers, investors don’t like the uncertainty created by a shifting tariff strategy. This was borne out by stock trading activity during the first four days of this week. Through Wednesday’s close, the market indexes were performing reasonably well. Recent data on manufacturing showed a contraction in March, job openings slipped in February, and factory orders declined that same month. Still, lending some support to stock valuations were sustained expansion in the services sector and more-modest initial jobless claims. More influential, however, was probably the belief that President Trump’s tariff policy would not be overly harsh. His announced decision on the subject late Wednesday, though, resulted in sharp share-price declines on Thursday.
Stocks seem on track to post low- to mid-single-digit losses for all of this week. Wall Street is divided on whether equities have hit a low point or another significant leg down is in the offing. Prudently, many investors have rebalanced their portfolios away from growth issues toward defensive income holdings. Too, a number have moved money out of stocks to high-quality bonds and cash investments, as well as gold. It appears best to be cautious, at least over the next few months. Notably, several market forecasters have reined in their 2025 expectations for the broader stock market, with the majority moving closer to adopting the idea of a flat-to-down year. That said, investors can take the opportunity of selectively purchasing beaten down issues in well-established companies with promising long-term business prospects. – David M. Reimer
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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