Last Week
As March Madness unfolds, we embrace the bounces and rebounds on the hardwood floors around the country, as well as those on Wall Street.
The market snapped its four-week losing streak, rebounding from correction territory. The bounce off the correction was in full steam on Monday but fizzled until Wednesday afternoon as investors were fixated on the pending FOMC meeting. As expected, the central bank held interest rates steady, while its updated dot plot showed lower GDP projections, higher core PCE inflation expectations, and no change in the interest rate cuts for 2025. A positive surprise came at the post-decision press conference from Chairman Powell, who characterized any inflation caused by U.S. President Donald Trump’s tariffs as “transitory.” We are surprised that Fed officials would recycle the “T” word (transitory), given the embarrassment it caused in the summer of 2021. Trading remained choppy on Thursday and again on Friday morning before an afternoon rebound rally took the averages into the green for the week. Small caps and Mid-caps fared the best, both gaining 0.6%, the Tech sector was modestly in the red, and the S&P 500 gained 0.5%. The Oil & Gas sector jumped almost 4% as crude prices rebounded. Advancing issues outnumbered declining issues by a factor of 1.7-1, suggesting a broadening out in the market. Gold continued to glitter, rising almost one percent to another record high. The dollar and the bond market also trended higher, with the yield on the 10-year Treasury slipping 6-basis points to 4.25%.
Volatility, as measured by the VIX, subsided sharply during the week. Perhaps traders turned their attention to college basketball’s March Madness rather than Tariff Madness? On the Chicago Sports Scene, the Fighting Illini were excellent in the first round of the tournament but then fell to Kentucky in the round of 32. Baseball season is on deck.
This Week
The economic calendar includes flash PMI readings from S&P and another estimate on U.S. Q4 GDP growth. Friday’s release of February’s core personal consumption expenditures price index will certainly be in focus. Expectations are for a 2.5% year-over-year increase, matching the January figure.
Tariffs Madness remains in the background as the April 2 date for U.S. reciprocal tariffs set to go into effect approaches. The latest twist in the plot, suggesting that the tariffs would be targeted rather than across the board, provided a Monday morning lift to equity prices.
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