March S&P 500 E-Mini futures (ESH25) are down -0.12%, and March Nasdaq 100 E-Mini futures (NQH25) are up +0.04% this morning, wavering after yesterday’s selloff on Wall Street triggered by stagflation fears and tariff jitters.
Investors are weighing whether the new U.S. tariffs could trigger a full-scale trade war. U.S. President Donald Trump’s 25% tariffs on imports from Mexico and Canada took effect at midnight New York time today, alongside a doubling of duties on Chinese goods to 20%. In response, Canada announced a broad set of tariffs, while China retaliated by imposing duties of up to 15% on certain U.S. exports. Also, Trump stated on Monday that the U.S. would impose tariffs on “external” agricultural products beginning April 2nd. Investors will closely monitor his address to Congress later today for insights into potential next steps.
In yesterday’s trading session, Wall Street’s three main equity benchmarks ended in the red. Super Micro Computer (SMCI) slumped -13% and was the top percentage loser on the S&P 500 amid signs of insider selling after an SEC filing revealed that SVP George Kao sold $3.62 million worth of shares last Wednesday. Also, megacap technology stocks sank, with Nvidia (NVDA) sliding more than -8% to lead losers in the Dow and Nasdaq 100. In addition, Kroger (KR) fell nearly -3% after announcing the resignation of Chairman and Chief Executive Officer Rodney McMullen following an investigation into his personal conduct. On the bullish side, Allegro Microsystems (ALGM) jumped more than +14% after Bloomberg reported that the semiconductor devices company was drawing takeover interest from ON Semiconductor.
Economic data released on Monday showed that the U.S. ISM manufacturing index fell to 50.3 in February, weaker than expectations of 50.6. At the same time, the U.S. February ISM prices paid sub-index rose to a 2-1/2 year high of 62.4, stronger than expectations of 56.2. The data stoked fears that the world’s largest economy could be heading toward a period of stagflation. In addition, U.S. construction spending fell -0.2% m/m in January, weaker than expectations of -0.1% m/m and the biggest decline in 4 months.
“Markets have been expressing growing concerns about a potential slowdown in the U.S. The message of caution needs to be heard, and depending on Friday’s payroll, this deteriorating macro momentum could cap markets’ progression,” said Florian Ielpo at Lombard Odier Investment Managers.
St. Louis Fed President Alberto Musalem stated on Monday that while he expects price growth to ease toward the central bank’s 2% target, policymakers must keep inflation expectations in check. “In determining how monetary policy should respond to alternative scenarios, especially when they might involve difficult employment and inflation trade-offs, it will be important that medium- to longer-term inflation expectations remain well anchored,” he said.
Meanwhile, U.S. rate futures have priced in a 91.0% chance of no rate change and a 9.0% chance of a 25 basis point rate cut at the March FOMC meeting.
Market watchers are looking ahead to the U.S. monthly payroll report for February, scheduled for release on Friday, as it could serve as a crucial indicator of the direction of U.S. interest rates. Also, Fed Chair Jerome Powell is set to deliver a speech on the economic outlook at the University of Chicago Booth School of Business 2025 U.S. Monetary Policy Forum on Friday.
Today, investors will focus on earnings reports from several high-profile companies, with CrowdStrike (CRWD), AutoZone (AZO), Target (TGT), Flutter Entertainment (FLUT), Ross Stores (ROST), and Best Buy (BBY) set to report their quarterly figures.
Market participants are also anticipating a speech from New York Fed President John Williams, due later in the day.
The U.S. economic data slate is mainly empty on Tuesday.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.164%, down -0.38%.
The Euro Stoxx 50 Index is down -1.62% this morning after U.S. President Donald Trump’s tariffs on Canada, Mexico, and China went into effect, heightening concerns that Europe might face similar duties. The EU has been in Trump’s sights, with the U.S. president stating last week that 25% tariffs were coming for Europe-made “cars and all other things.” Automobile stocks, which are vulnerable to trade tariffs, slumped on Tuesday. At the same time, defense stocks extended their gains after Trump ordered a pause to all military aid to Ukraine, suggesting that European nations might have to boost their defense spending. European Commission President Ursula von der Leyen on Tuesday introduced proposals to increase defense spending in the EU, stating that they could mobilize up to 800 billion euros ($841 billion). Meanwhile, data from Eurostat released on Tuesday showed that the seasonally adjusted unemployment rate in the euro area unexpectedly remained unchanged at a record low in January. Investors are looking ahead to the European Central Bank’s monetary policy decision on Thursday, with the central bank widely expected to deliver a 25-basis-point rate cut. In corporate news, Thales (HO.FP) climbed over +6% after the defense and technology group reported better-than-expected 2024 earnings.
Eurozone’s Unemployment Rate was released today.
The Eurozone January Unemployment Rate was 6.2%, stronger than expectations of 6.3%.
Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.22%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -1.20%.
China’s Shanghai Composite Index ended slightly higher today as investors looked past a new U.S.-China trade spat and shifted their focus to the upcoming annual parliamentary sessions. Defense and semiconductor stocks led the gains on Tuesday. At the same time, energy and automobile stocks underperformed. U.S. President Donald Trump’s additional 10% tariff on Chinese goods went into effect today, bringing total U.S. tariffs on China to 20%. China quickly hit back at the U.S. on Tuesday by imposing additional 10%-15% tariffs on a variety of American agricultural and food products, set to go into effect on March 10th, and placing 25 U.S. firms under export and investment restrictions. Meanwhile, investors are looking ahead to the National People’s Congress meeting, set to begin in Beijing on Wednesday, for insights into the country’s plans to stimulate economic growth. Investor attention is on the government’s work report, which will reveal the official growth target for the world’s second-largest economy, with most analysts anticipating that the target will be maintained at 2024’s “around 5%” growth. To achieve it, policymakers are expected to raise China’s official budget deficit target to its highest in more than three decades, injecting trillions of yuan into an economy grappling with deflation, industrial overcapacity, a struggling property market, and a trade war with the U.S.
Japan’s Nikkei 225 Stock Index ended lower today as investor anxiety over a global trade war intensified after new U.S. tariffs went into effect, while a stronger yen further dampened sentiment. Analysts cautioned that markets might be underestimating tariff risks given the potential for a rapid escalation of a global trade war. Technology and brokerage stocks led the declines on Tuesday. Data from the Ministry of Finance released on Tuesday showed that Japanese corporate spending on plant and equipment unexpectedly fell in the fourth quarter, marking the first quarterly drop in almost four years amid rising uncertainties over the global economy. Separately, government data showed that Japan’s unemployment rate unexpectedly inched higher in January. The latest data could dampen expectations for additional rate hikes by the Bank of Japan. Investors are now awaiting comments from BOJ Deputy Governor Shinichi Uchida on Wednesday for insights into the timing of the central bank’s next move. Meanwhile, the yen strengthened to near its highest level since early December against the dollar after U.S. President Donald Trump stated on Monday that he had informed the leaders of Japan and China that they must stop reducing the value of their currencies, asserting that such actions are unfair to the United States. In corporate news, Ito En plunged over -12% after reporting a 20% year-over-year drop in nine-month attributable profit to 11.4 billion yen amid higher costs. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +7.59% to 27.20.
The Japanese January Unemployment Rate was 2.5%, weaker than expectations of 2.4%.
The Japanese Capital Spending stood at -0.2% y/y in the fourth quarter, weaker than expectations of +4.9% y/y.
The Japanese February Household Confidence came in at 35.0, weaker than expectations of 35.2.
Pre-Market U.S. Stock Movers
Okta (OKTA) surged over +15% in pre-market trading after the company posted upbeat Q4 results and issued above-consensus FY26 guidance.
Walgreens Boots Alliance (WBA) climbed more than +5% in pre-market trading after the Wall Street Journal reported that Sycamore Partners was nearing a deal to acquire the pharmacy chain for about $10 billion.
Vistra Corp. (VST) advanced about +1% in pre-market trading after BofA upgraded the stock to Buy from Neutral.
Gitlab (GTLB) rose over +1% in pre-market trading after the DevOps company reported better-than-expected Q4 results.
Medtronic (MDT) gained nearly +1% in pre-market trading after Citi upgraded the stock to Buy from Neutral with a price target of $107.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Tuesday - March 4th
CrowdStrike Holdings (CRWD), Sea (SE), AutoZone (AZO), Target (TGT), Flutter Entertainment (FLUT), Ross Stores (ROST), Best Buy (BBY), Credo Technology Holding (CRDO), Ingram Micro Holding (INGM), Box (BOX), AeroVironment (AVAV), Nordstrom (JWN), Hagerty (HGTY), Genius Sports (GENI), Baytex Energy Corp (BTE), Wave Life Sciences Ltd (WVE), Nayax (NYAX), Paysafe (PSFE), Cricut (CRCT), Pursuit Attractions Hospitality (PRSU), Custom Truck One Source (CTOS), Olaplex Holdings (OLPX), Evolus (EOLS), Eos Energy Enterprises (EOSE), Astronics (ATRO), Latham Group (SWIM), Orthopediatrics (KIDS), Chromadex Corp (CDXC), Stellus Capital Investment (SCM), Ooma Inc (OOMA), CPI Card (PMTS), Alpha Teknova (TKNO), Esperion (ESPR), Neuropace (NPCE), Mayville Engineering (MEC), LB Foster (FSTR), Evgo (EVGO), ChargePoint Holdings (CHPT), Cryoport Inc (CYRX), Orion Group (ORN), ATN Int (ATNI), Sophia Genetics (SOPH), Y mAbs Therapeutics (YMAB), Neuronetics (STIM), Angel Oak Mortgage (AOMR), Amylyx Pharmaceuticals (AMLX), Nevro Corp (NVRO), Crexendo (CXDO), Compugen (CGEN), InfuSystems (INFU), Modiv (MDV).
