Tariff Anxiety Weighs on Markets to Start the Week

Good morning! Global indices are closing out March sharply lower, as the April 2nd enactment of the Trump Tariffs inches closer. Friday’s selloff capped the worst month for stocks since 2022, with the S&P 500 now down nearly 5% on the year and the Nasdaq off closer to 10%. A mix of sticky inflation, softening consumer sentiment, and persistent uncertainty around trade policy has weighed heavily on risk appetite, particularly in tech and consumer sectors.

Still, there are a few silver linings heading into Q2. The bond market has been a relative safe haven, with the 10-year Treasury yield retreating to around 4.25%—a move that could help ease financial conditions if sustained. Meanwhile, gold surged to a fresh all-time high above $3,100 last week, reflecting heightened demand for portfolio ballast amid global uncertainty.

This week begins with a light calendar, but attention quickly turns to Wednesday's high-stakes reciprocal tariff announcement. Markets are looking for clarity on whether the new measures will be broad-based or targeted—and whether they signal escalation or simply a negotiating position. Until then, caution may continue to dominate.

Economic data released Friday showed U.S. consumers are still spending, even as inflation pressures remain persistent. Core PCE, the Fed’s preferred inflation gauge, came in slightly hotter than expected at 2.8% year-over-year. At the same time, revised consumer sentiment data from the University of Michigan showed growing concern about inflation and future economic conditions.

As we step into a new month and quarter, the focus will be on how well markets can digest these policy headwinds and whether corporate earnings, labor data, and broader economic indicators can stabilize sentiment. April is historically a strong month for equities—especially in post-election years—so some investors may view this as a potential turning point.

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Friday’s close was sharply lower as renewed concerns about inflation and weakening consumer sentiment added to ongoing anxiety ahead of the April 2 tariff announcement. The S&P 500 lost 1.5%, the Nasdaq dropped 2.2%, and the Dow slid 1.3%. With Friday’s decline, the S&P 500 is now just 1% above its March 13 low and is on track for its second consecutive monthly decline, down nearly 5% year-to-date. Technology and consumer discretionary sectors led the day’s losses, while defensive names in healthcare and utilities held up better. Overseas, European stocks ended lower and Asian markets were mixed.

The University of Michigan’s final March consumer sentiment reading was revised lower to 57.0—the lowest since 2022—with inflation expectations for both the 1- and 5-year horizons ticking higher. Combined with slightly hotter-than-expected core PCE inflation, the data pointed to ongoing price pressure and a cautious consumer.

Core PCE inflation rose 0.4% in February versus forecasts for 0.3%, pushing the annual rate to 2.8%. Headline PCE was in line at 2.5%. Personal income rose a robust 0.8% in February, but real spending advanced just 0.1%, indicating consumers are adjusting to persistent price pressures. The data came alongside fresh commentary from Fed officials, who emphasized that inflation remains above target but suggested that the Fed remains on track to cut rates later this year, pending incoming data.

Meanwhile, tariff policy continues to dominate investor focus. President Trump is expected to announce the full scope of the reciprocal tariff framework on Wednesday. Markets are hoping for clarity on whether levies will be broad-based or more targeted by sector and trading partner. Until then, sentiment remains fragile, and many investors are remaining cautious.

In other economic news, the Atlanta Fed’s GDPNow model revised Q1 growth expectations lower to -2.8%, reflecting weaker net exports. Commodities were mixed, with gold reaching a new all-time high of $3,114/oz and oil dipping slightly. Treasury yields fell sharply, with the 10-year closing at 4.25% as investors sought safety.

Asia:

Europe (as of 6:00 AM ET):

The week ahead is shaping up to be a pivotal one for traders. The headline event will be Wednesday’s reciprocal tariff announcement from the White House, which could either ease or amplify investor concerns depending on the scope and tone of the measures. Beyond that, attention will turn to Friday’s March jobs report, which will provide the next big data point on labor market strength. Manufacturing PMIs, factory orders, and ISM Services data will also round out the week, offering insight into the health of both the goods and services sectors. After a volatile March, markets are looking for a reset—and the first week of April may provide it.