Updated, March 5, 2025: This post has been adjusted to correct the name of the Institute for Supply Management.
Key Takeaways
- Stocks Fell Amid Volatility As Financials Led Broad Market Declines
- Tariffs Created Uncertainty, Impacting Consumer Confidence And Retail Earnings
- Tech Stocks Show Strength While Volatility Remains A Key Focus
Tuesday was a volatile day for stocks as a large morning selloff saw a big reversal only to see more selling come in near the end of the trading session. When it was all said and done, the S&P 500 fell 1.2% with every sector except information technology falling. Financials were hit hardest, dropping over 3.5%. The Nasdaq Composite, which managed to recover most of its losses, dropped just 0.35%. Small caps were down 1.1% and the Dow Jones Industrial Average fell 1.6%. The drop in the Dow sent it into the red for the year along with the other three major indexes.
Tuesday marked the beginning of new tariffs put in place by the Trump administration. Goods from Canada and Mexico will see 25% tariffs, with a carve-out for energy products from Canada being tariffed at 10%. Meantime, China was hit with a 10% tariff that rests on top of already existing tariffs. However, on Tuesday afternoon, Commerce Secretary Howard Lutnick suggested that a rollback could already be in the works.
The tariffs are causing a lot of uncertainty for markets and even President Donald Trump acknowledged during Tuesday night’s address to Congress that the new policies could cause some discomfort. But the uncertainty is showing up in a drop in consumer confidence, something retailers Target and Best Buy both pointed to when announcing earnings on Tuesday. Both companies acknowledged the new policies could lead to higher costs and consumer are spending less because of that uncertainty.
There are also other places where tariff concerns are showing up. On Tuesday, the Institute for Supply Management released reports on economic activity. The numbers reported were fine; however, the details were less so. Many manufacturers reported paying higher costs and were accelerating orders for goods in an attempt to get out in front of tariffs. The impact on manufacturers may not be felt by consumers immediately because of this front loading; however, if the tariffs stay in place, the buffer created by inventory buildup can only last so long.
Looking at some stocks making news this morning, shares of CrowdStrike are indicated lower by over 7%. The company offered a disappointing outlook for the year. Automakers are indicated higher in premarket. This is likely a result of tariffs which will help U.S. automakers. Financials, which I mentioned above as having the worst group performance yesterday, are indicated to open higher this morning. Lastly, chip stocks look set to open strong following a bounce that began Tuesday afternoon.
For today, I’m watching for a follow through from tech stocks that began yesterday afternoon and if they can lead the broader market higher. I’m also keeping a close eye on volatility. Given the magnitude of the swings yesterday, VIX closed well off its high of 26.35, settling at 23.51. It will be interesting to see if that pullback continues or if the recent sentiment of uncertainty continues and sends volatility higher. As always, I would stick with your investing plans and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.
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