Tossing and turning on tariff uncertainty

The stock market had another difficult day on Tuesday with each of the major indices losing additional ground amid concerns about tariffs and economic growth. Then, almost on cue, there was a suggestion by Commerce Secretary Lutnick on Fox Business after the close that President Trump might reduce the tariff rates for Canada and Mexico as early as today.

The equity futures market responded in kind to that hopeful thought, getting a boost after yesterday’s close. The president, however, gave no indication in last night’s address to a joint session of Congress that a reprieve of any kind is coming for Canada and Mexico.

Mr. Lutnick added in a Bloomberg TV interview this morning that there could be an announcement on tariff relief for Canada and Mexico this afternoon, but that the relief will not be in the form of lower tariff rates. Rather, it will relate to USMCA modifications.

To which the equity futures market responded: “wah-wah-wah.”

Currently, the S&P 500 futures are flat and are trading roughly in-line with fair value, the Nasdaq 100 futures are up 31 points and are trading 0.2% above fair value, and the Dow Jones Industrial Average futures are down 21 points and are trading fractionally below fair value.

Given the scope of recent losses, these indications aren’t saying much for buy-the-dip conviction.

That is understandable with the uncertainty that has been inflamed by the Trump administration’s tariff policy, the disappointing guidance from CrowdStrike (CRWD), Foot Locker (FL), Ross Stores (ROST), Campbell Soup (CPB), and Abercrombie & Fitch (ANF), and the questions surrounding growth prospects that have been inflamed more recently by some disappointing economic data.

Add the ADP Employment Change Report for February to that list. According to ADP, private sector employment increased by just 77,000 jobs in February (Briefing.com consensus 145,000) — the smallest increase since July — with small businesses losing 12,000 jobs. Separately, year-over-year pay gains for job changers slowed from 6.8% to 6.7% while pay gains for job-stayers remained flat at 4.7%.

The key takeaway from the report is that it reflects a slowdown in hiring activity, which will be construed as a sign of U.S. growth losing some steam.

The Treasury market picked up on that thread. The 2-yr note yield, at 3.97% just before the release, is at 3.92% now, and the 10-yr note yield, at 4.26% just before the release, is at 4.21% now.

U.S. growth trends will be a focal point throughout the day with the release of the February ISM Services PMI (Briefing.com consensus 53.0%; prior 52.8%) at 10:00 a.m. ET and the Fed’s Beige Book Report at 2:00 p.m. ET.

China for its part set a GDP growth target of approximately 5.0% for 2025; meanwhile, Germany’s new leadership proposed the creation of a EUR500 billion infrastructure fund and a borrowing plan to boost defense spending that ignited Germany’s DAX Index (+3.4%) and the euro (EURS/USD +0.8% to 1.0707).

There hasn’t been much ignition, though, for the U.S. equity market, which is still pining for more encouraging price action and more encouraging economic data to temper the growth scare it is facing.

—

Originally Posted on March 5, 2025 – Tossing and turning on tariff uncertainty