The S&P 500 Index ($SPX) (SPY) Thursday closed down -0.22%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.03%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.30%. March E-mini S&P futures (ESH25) are down -0.20%, and March E-mini Nasdaq futures (NQH25) are down -0.25%.
Stock indexes on Thursday settled moderately lower on uncertainty over the economic outlook due to US trade policies. Stagflation concerns also undercut stocks after the FOMC cut its 2025 US GDP forecast on Wednesday and raised its 2025 inflation forecast. In addition, stocks were also pressured due to negative carryover from a slide in European stocks Thursday when ECB President Lagarde said US tariffs had raised uncertainty over the economic outlook.
Stocks pushed higher briefly on Thursday, with the Dow Jones Industrials posting a 1-1/2 week high. Falling bond yields gave stocks a boost Thursday, with the 10-year T-note yield falling to a 1-week low on speculation the Fed remains on a path to lower interest rates. Thursday’s better-than-expected US economic news eased growth concerns and supported stocks. US weekly jobless claims rose less than expected, the Mar Philadelphia Fed business outlook survey fell less than expected, and Feb existing home sales unexpectedly increased.
US weekly initial unemployment claims rose +3,000 to 223,000, showing a slightly stronger labor market than expectations of 224,000.
The US Mar Philadelphia Fed business outlook survey fell -5.6 to 12.5, stronger than expectations of 9.0.
US Feb existing home sales unexpectedly rose +4.2% m/m to 4.26 million, stronger than expectations of 3.95 million.
US Feb leading economic indicators fell -0.3% m/m, weaker than expectations of -0.2% m/m.
Heightened geopolitical risks in the Middle East are negative for stocks. Israel on Tuesday launched a series of airstrikes across Gaza, ending a two-month ceasefire with Hamas, and Israeli Prime Minister Netanyahu vowed to act “with increasing military strength” to free hostages and disarm Hamas. Also, the US launched weekend strikes on Yemen’s Houthi rebels. US Defense Secretary Hegseth said strikes would be “unrelenting” until the group stops attacking vessels in the Red Sea. The Houthi rebels said they would respond by attacking US vessels in the Red Sea.
Stocks have been under pressure over the past two weeks due to fears that US tariffs will weaken economic growth and corporate earnings. On March 4, President Trump imposed 25% tariffs on Canadian and Mexican goods and doubled the tariff on Chinese goods to 20% from 10%. On Sunday, Mr. Trump reiterated that he would impose reciprocal tariffs and additional sector-specific tariffs on foreign nations on April 2.
The markets are discounting the chances at 21% for a -25 bp rate cut after the May 6-7 FOMC meeting.
Overseas stock markets on Thursday settled lower. The Euro Stoxx 50 fell from a 2-week high and closed down -1.02%. China’s Shanghai Composite Index closed down -0.51%. Japan’s Nikkei Stock 225 did not trade today, with markets closed in Japan for the Vernal Equinox Day holiday.
Interest Rates
June 10-year T-notes (ZNM25) Thursday closed up +5.5 ticks. The 10-year T-note yield fell -0.8 bp to 4.235%. June T-notes on Thursday climbed to a 1-week high, and the 10-year T-note yield fell to a 1-week low of 4.172%. T-notes rose Thursday on carryover support from Wednesday when the FOMC cut its US 2025 GDP forecast and raised its year-end unemployment rate forecast, dovish factors for Fed policy. Also, the FOMC said it would slow the pace of runoff of its balance sheet starting next month, another dovish factor for Fed policy. In addition, weakness in stocks boosted some safe-haven demand for T-notes.
T-note prices fell back from their best levels Thursday as better-than-expected US economic reports signal strength in the economy. Weekly jobless claims rose less than expected, the Mar Philadelphia Fed business outlook survey fell less than expected, and Feb existing home sales unexpectedly increased.
European bond yields on Thursday were mixed. The 10-year German bund yield fell -2.3 bp to 2.780%. The 10-year UK gilt yield rebounded from a 2-week low of 4.559% and finished up +1.5 bp at 4.646%.
German Feb PPI fell -0.2% m/m and rose +0.7% y/y, weaker than expectations of +0.2% m/m and +1.0% y/y.
ECB President Lagarde said while the process of disinflation remains “well on track,” the ECB is unable to make firm commitments on interest rates due to elevated unpredictability over trade.
ECB Governing Council member Villeroy de Galhau said he’s “not worried about inflation in Europe,” and the ECB has room to cut interest rates further.
As expected, the Bank of England (BOE) kept its official bank rate unchanged at 4.50% and said a “gradual and careful” approach to monetary policy easing is appropriate.
Swaps are discounting the chances at 59% for a -25 bp rate cut by the ECB at the April 17 policy meeting.
US Stock Movers
Accenture Plc (ACN) closed down more than -7% to lead losers in the S&P 500 after narrowing its full-year operating margins forecast to 15.6% to 15.7% from a previous estimate of 15.6% to 15.8%.
Gartner (IT) closed down more than -6% after Secretary of Defense Hegseth signed a memo directing the termination of over $580 million in Department of Defense contracts and grants, including some Gartner contracts.
Weakness in chip stocks weighed on the broader market Thursday, as Microchip Technology (MCHP) closed down more than -6% to lead losers in the Nasdaq 100 after it launched an underwritten public offering of $1.35 billion in depositary shares. Also, Broadcom (AVGO) and NXP Semiconductors NV (NXPI) closed down more than -2%. In addition, Analog Devices (ADI) and GlobalFoundries (GFS) closed down more than -1%.
Aramark (ARMK) closed down more than -4% on negative carryover from a -17% slump in peer Sodexo after it issued a profit warning due to challenges, including weaker growth in North America in both health care and education.
Rivian Automotive (RIVN) closed down more than -4% after Piper Sandler downgraded the stock to neutral from overweight.
Monolithic Power Systems (MPWR) closed down more than -3% after raising its Q1 operating expenses estimate to $131.6 million-$135.6 million from a previous estimate of $126.9 million-$130.9 million.
Raymond James Financial (RJF) closed down more than -3% after reporting client assets under administration in February fell -0.7% m/m to $1.58 trillion.
ProAssurance (PRA) closed up more than +48% after Doctors Co. acquired the company for about $1.3 billion or $25 per share.
Darden Restaurants (DRI) closed up more than +5% to lead gainers in the S&P 500 after forecasting full-year comparable sales up +1.50%, better than the consensus of +1.29%.
Jabil (JBL) closed up more than +3% after reporting Q2 net revenue of $6.73 billion, above the consensus of $6.42 billion, and forecast Q3 net revenue of $6.70 billion-$7.30 billion, the midpoint above the consensus of $6.77 billion.
Carvana (CVNA) closed up more than +5% after Piper Sandler upgraded the stock to overweight from neutral with a price target of $225.
Cava Group (CAVA) closed up more than +4% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $110.
Allstate (ALL) closed up more than +2% after reporting February auto policies increased by +59,000 from January.
Southwest Airlines (LUV) closed up more than +1% after UBS upgraded the stock to neutral from sell with a price target of $36.
Earnings Reports (3/21/2025)
Aldeyra Therapeutics Inc (ALDX), American Realty Investors Inc (ARL), Cabaletta Bio Inc (CABA), Carnival Corp (CCL), Gencor Industries Inc (GENC), Humacyte Inc (HUMA), Nkarta Inc (NKTX), Savara Inc (SVRA), Transcontinental Realty Invest (TCI).
