Mixed Data, Potential Targeted Tariffs Fuel Equity Rally — Evening Brief – 03.24.25
The trading day began on a positive note, with stocks climbing after reports surfaced that President Trump may soften his tariff stance. U.S. equity futures gained traction following Friday’s news, reinforced by weekend updates suggesting a shift toward more targeted tariffs, easing fears of broad economic disruption.
This optimism carried into Monday, driving a sharp rally across major indices. The Nasdaq Composite led the charge with a more than 2% gain, while the S&P 500 advanced over 1.5%. All 11 S&P sectors rose, with consumer discretionary and information technology at the forefront, though utilities lagged as the weakest performer.
Economic data provided a mixed backdrop. The Chicago Fed National Activity Index for February surprised to the upside, jumping to +0.18 from a revised -0.08 in January (initially reported as -0.03), far exceeding expectations of a -0.17 decline. This rebound was fueled by strong gains in production and income, with 51 of 85 indicators improving month-over-month, though 34 worsened and 15 of the improved indicators still contributed negatively.
Meanwhile, the S&P Global U.S. Composite PMI preliminary data for March offered a split narrative. The services PMI rebounded to 54.3 from 51.0, surpassing the anticipated 51.0 and marking 26 straight months above the 50 expansion threshold. However, the manufacturing PMI unexpectedly dropped into contraction at 49.8, down from 52.7, signaling a slowdown.
Chris Williamson, chief business economist at S&P Global Market Intelligence, noted the services uptick supported a stronger first-quarter finish, projecting annualized GDP growth of 1.9% in March and 1.5% for the quarter—a deceleration from late 2024, though less dire than the Atlanta Fed’s -2.8% first-quarter estimate.
“Business confidence in the outlook has also darkened, souring further from the buoyant mood seen at the start of the year to one of the gloomiest readings seen over the past three years, largely caused by growing worries over negative impacts from recent policy initiatives from the new administration. Most widely cited were concerns about the impact of Federal spending cuts and tariffs, said Williamson.
The bond market reacted to the services strength, brushing off manufacturing weakness. The 2-year and 10-year Treasury yields both rose nearly seven basis points to 4.333%, and 4.03%, respectively.
Looking ahead, Trump’s anticipated “Liberation Day” tariff announcement on April 2 is expected to focus on reciprocal tariffs targeting specific trade barriers from other nations, including allies, rather than the sweeping measures previously floated.
Bloomberg sources indicate this shift could still expand U.S. tariffs significantly but in a more precise manner. Deutsche Bank’s Jim Reid highlighted that this week—the last full one before the announcement—will likely be dominated by tariff headlines, sustaining market focus and volatility.