Stocks step back before tariff deadline

For a little more than four days last week, it looked like the US stock market could post a second week of gains since the S&P 500 (SPX) tagged correction territory on March 13. But upside momentum ebbed as familiar themes—inflation, consumer sentiment, and (mostly) tariffs—continued to dominate headlines.

The market surged last Monday amid reports that the Trump administration’s proposed tariffs wouldn’t necessarily be as stringent as previously thought. The SPX’s modest decline on Thursday after the White House announced new automobile tariffs may have given bulls confidence about the market’s resiliency, but bears gained the upper hand on Friday in the wake of more sticky inflation data and another weak consumer sentiment reading:

The headline: S&P 500 closes at lowest level since hitting correction territory.

The fine print: Much of last week’s hard economic data was fairly solid. Wednesday’s durable goods orders report showed a sizable month-over-month drop, but it was much stronger than the consensus estimate, and the previous month’s number was revised higher. Also, the final estimate of Q4 GDP was revised a tick higher (as expected) from 2.3% to 2.4%, and weekly jobless claims were lower than forecasted.

The number: 25%, the White House’s proposed tariff on all vehicles (and parts) not manufactured in the US.

The scorecard: As has been the case for much of this month, the Nasdaq 100 (NDX) tech index led the market to the downside:

Sector returns: The strongest S&P 500 sectors last week were consumer staples (+1.6%), energy (+0.7%), and real estate (+0.3%). The weakest sectors were tech (-3.8%), communication services (-3.3%), and industrials (-1.3%).

Stock movers: Concentrix (CNXC) +42% to $65.04 and Soleno Therapeutics (SLNO) +38% to $67.39, both on Thursday. GameStop (GME) -22% to $22.09 and AppLovin (APP) -20% to $261.7, also on Thursday.

Yields: The benchmark 10-year Treasury yield hit a one-month high of 4.36% last Thursday, but ended the week virtually unchanged at 4.26% because of a 0.1% drop on Friday.

Futures: Gold ended last week at a new record high, with June gold futures (GCM5) closing Friday at $3,114.30, up $92.90 for the week. May WTI crude oil (CLK5) climbed $1.08 to $69.36 last week. Biggest gainers: April VIX (VXJ5) +8.1%, May soybean oil (ZLK5) +7.5%. Biggest decliners: May orange juice (OJK5) -14.1%, May oats (ZOK5) -8%.

Tariffs and jobs data headline this week’s calendar:

●Tuesday: tariff deadline, S&P Global Manufacturing PMI, ISM Manufacturing Index, Job Openings and Labor Turnover Survey (JOLTS), construction spending, auto sales
●Wednesday: ADP Private Employment, factory orders
●Thursday: Challenger job cuts, balance of trade, S&P Global Services PMI, ISM Services Index
●Friday: Employment Report

This week’s earnings include:

●Monday: Gorilla Technology (GRRR), Progress Software (PRGS), PVH (PVH)
●Tuesday: Core & Main (CNM),McCormick (MKC), Trump Media & Technology (DJT)
●Wednesday: Cintas (CTAS), Dollar Tree (DLTR), Paychex (PAYX)
●Thursday: TD Synnex (SNX), Winnebago (WGO), Lululemon (LULU)

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.

Most economists correctly downplay the significance of “soft” data like surveys of consumer confidence and consumer sentiment, arguing that what people do, rather than what they say, is what matters—especially in the long term. There’s often a disconnect between how people feel about the economy and how they behave in it—that is, whether they’re continuing to spend, which is reflected in “hard” data like retail sales.

But in terms of the markets, the past several weeks have highlighted another reality: In the short-term, sentiment matters. Some of the stock market’s biggest down days in February followed downside surprises in consumer sentiment and confidence readings, and last week ended with a similar episode.

A five-minute chart of the SPX shows the index sold off sharply after Friday’s 9 a.m. consumer sentiment report, turning a weekly gain into a loss:

Interestingly, the consumer sentiment survey showed year-ahead inflation expectations rose to 5%, which was arguably out of sync with the higher-but-not-hot reading from the PCE Price Index released 90 minutes earlier.

Soft data may not be as relevant to the economy as hard data, but as the saying goes, the economy is not the stock market, and the stock market is not the economy. That can be especially true over short time horizons.

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