Week in Review: March 7, 2025

March 10, 2025

Recap & Commentary

Markets ended the week lower, with the S&P 500 suffering its largest weekly decline is six months, as markets sought to keep abreast of rapidly evolving, disparate, and at times conflicting trade policy announcements.

On Monday, President Trump confirmed that 25% tariffs on Canadian and Mexican imports, and additional 10% tariffs on Chinese imports, would take effect the next day, March 4. On Wednesday, Trump delayed tariffs on automobiles from Mexico and Canda that comply with the United States Mexico Canda Agreement (USMCA), until April 2. On Thursday, Trump suspended until April 2, tariffs on all imports from Mexico that are regulated by the USMCA. Later in the day, he made a similar announcement about Canadian imports. On Friday, Trump announced he was considering tariffs on Canadian lumber and dairy imports, potentially as high as 250%. The speed of the announcements and resulting uncertainty was reflected in the market’s decline.

Speaking at a conference on Friday, Fed Chair Jay Powell said that “Despite elevated levels of uncertainty, the U.S. economy continues to be in a good place.” With respect to future monetary policy actions, Powel said the Fed does not “need to be in a hurry” and that it remains “well positioned” while waiting for greater clarity regarding proposed changes to trade policy, whose likely economic impacts remain “high.” While his comments were welcomed by investors, the concern remains that the uncertainty itself is beginning to impact economic activity.

Economic Commentary

Friday’s employment report showed labor market conditions remain positive.  Nonfarm payrolls added 151K jobs, led the health care sector which added 52K jobs. Federal government employment declined by 10K providing some insight into the impact of recent efforts to reduce the federal workforce. Unemployment rose 0.1% to 4.1%, remaining within the 4.0-4.2% range it has found itself in since last May. The participation rate fell 0.2% to 62.4%, its lowest level since January 2023. While not necessarily significant, all else being equal, further declines could put additional upward pressure on wages.

According to industry group Institute for Supply Management (ISM) manufacturing activity slowed in February, impacted by the sharpest monthly decline in new orders since December 2018, excluding March and April 2020. In addition, input prices jumped to their highest level in nearly three years, suggesting continued upward pressure on inflation. Unlike manufacturing, service sector activity accelerated in February, aided by increases in both new orders and employment. However, like manufacturing, prices accelerated during the month. In both surveys, respondents noted the high degree of uncertainty currently stemming from trade policy.

Weekly jobless claims fell 21K, to 221K, after jumping the prior week to a three-month high. The inherently volatile series will likely receive increased scrutiny moving forward, particularly to the extent growing uncertainty revives concerns about an economic slowdown.

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Of Note

Unable to currently agree on a full-year budget, Congress will need to pass a stopgap spending bill by midnight on March 14 to prevent a government shutdown.

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Market Indices   (As of 03/07/2025)

• Consumer Inflation (CPI)
• Producer Inflation (PPI)
• Consumer Sentiment
• JOLTs Report
• Initial Jobless Claims