Business confidence declined across both manufacturing and service sectors in March, adding to investor concerns already heightened by newly announced tariffs and global growth uncertainty. As we move into April, small business confidence, inflation data, and consumer sentiment are in focus.
How Did Markets React to New Tariff Announcements?
Global equities dropped sharply last week after the Trump administration announced a 10% baseline tariff on all countries—with additional tariffs targeting key U.S. trading partners like China (34%), Japan (24%), and the European Union (20%). While markets initially hoped for a more limited proposal, the broad scope of these measures triggered a risk-off reaction.
Sectors such as energy, technology, financials, and industrials led the decline, while more defensive areas like consumer staples and utilities held up slightly better, though they still posted losses.
Fixed Income Reaction
As investors sought safety, U.S. Treasuries rallied. The short end of the curve saw the most action:
- 2-year yield fell 24 basis points to 3.67%
- 5-year yield dropped 27 basis points to 3.71%
The market is now pricing in a greater chance of multiple rate cuts before the end of 2025.
What Key Economic Data Was Released Last Week?
ISM Manufacturing Index
Manufacturing confidence fell more than expected, dropping deeper into contraction territory. New orders declined while input prices rose.
- Expected: 49.5
- Prior Month: 50.3
- Actual: 49.0
U.S. Trade Deficit
The trade deficit narrowed in February to $122.7 billion, better than the expected $123.4 billion and an improvement over January's $130.7 billion.
ISM Services Index
Service sector activity stayed in expansionary territory but weakened due to slower hiring and fewer new orders.
- Expected: 52.9
- Prior Month: 53.5
- Actual: 50.8
Jobs Report
March job growth surprised to the upside, with 209,000 jobs added. However, the unemployment rate ticked up to 4.2%.
- Expected Payroll Gain: +140K
- Prior Month: +117K
- Actual: +209K
- Unemployment Rate: Rose to 4.2% from 4.1%
What Does This Mean for Investors?
Markets remain volatile, driven by ongoing uncertainty around tariffs, inflation, and global growth. Although a few prominent tech names have struggled this year, many other sectors and international stocks have held up relatively well; some sectors and international stocks are showing relative strength, while mega-cap tech names have struggled.
Tariffs could have a broader economic impact if fully implemented—raising prices, lowering confidence, and slowing growth. But they may also serve as a negotiating tool, as seen in previous trade cycles. Until there's more clarity, businesses and consumers will likely tread cautiously.
What to Watch This Week
- Tuesday, April 8: NFIB Small Business Optimism Index — Confidence has dipped recently. Will it continue?
- Thursday, April 10: Consumer Price Index (CPI) for March — Inflation is expected to rise modestly.
- Friday, April 11: Producer Price Index (PPI) and University of Michigan Consumer Sentiment — Look for early signals on how households feel about the economy heading into Q2.
Tom Hine is a CERTIFIED FINANCIAL PLANNER® professional and owner of Capital Wealth Management. With over 30 years of experience, Tom works with individuals and families on financial planning, retirement strategies, and investment management. He has a particular passion for special needs financial planning, shaped by his personal experience helping raise his sister Amy, who was born with a severe chromosomal condition. Tom understands the emotional and financial challenges that come with caring for a loved one with disabilities and helps clients navigate complex issues like preserving government benefit eligibility, coordinating Special Needs Trusts and ABLE accounts, and long-term care planning. With offices in Glastonbury and Wilton, CT, Tom serves clients across Connecticut and throughout the U.S. Connect with Tom.
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