Market Update – March 10th, 2025

Financial Markets

Stocks faced downside pressure last week as concerns over tariffs and a potential economic slowdown weighed on investor sentiment. By the close on Friday, March 7th, all major equity indices posted losses last week. The Nasdaq Composite fell -3.45%, the S&P 500 dropped -3.1%, and the Dow Jones Industrial Average declined -2.37%. Bonds also experienced a negative week, with the Barclays Aggregate Bond Index down -0.89%.

Source: Zacks

Market News

February Employment Report. February’s employment data came in weaker than expected on Friday morning last week with the unemployment rate rising to 4.1%. The U.S. added 151,000 jobs during the month, with job gains concentrated in health care, financial services, transportation and warehousing, and social assistance, while federal government employment declined. 10,000 federal jobs were estimated to have been lost in February largely due to efforts by the new Department of Government Efficiency (DOGE) and the Trump administration to trim down the federal workforce.

Wage growth remained strong, with average hourly earnings increasing 0.3% month over month and 4.0% year-over-year. Additionally, the average work week remained stable. Cracks in the labor market are continuing to form, but time will tell whether this has the potential to be the start of a downturn or a short period of choppy data.

Source: Bureau of Labor Statistics

ISM Manufacturing

The ISM Manufacturing Index posted at 50.3 in February, marking its second consecutive month in expansion territory, however a small decline from January’s index of 50.9. The minor decline was driven by weakening new orders, lower production, and softer employment, indicating some slowing economic momentum. On the other hand, these declines were partially offset by rising prices, supplier deliveries, and an improving order backlog.

Source: Institute for Supply Management

ISM Services

Following a relatively strong ISM Manufacturing report, the ISM Services Index exceeded expectations in February, rising to 53.5 and continuing the sector’s steady expansion. Growth was driven by a growing backlog of orders, improving employment conditions, higher prices, and inventory sentiment, highlighting sustained demand in the services economy. The only categories displaying softness were business activity and imports. Overall, the services sector remains a key pillar of economic strength.

Source: Institute for Supply Management

Inflation Expectations

Inflation will be a key market catalyst this week, with anecdotal evidence suggesting rising prices, particularly as consumers and businesses react to the potential short-term inflationary effects of tariffs. While only one new tariff was introduced in February—a 10% tariff on Chinese imports—its impact on inflation data remains uncertain.

Some effects may start to trickle in, but with many companies having adjusted supply chains since the election last November, any meaningful impact could take months to fully materialize. Additionally, the duration of these tariffs remains a key factor in determining any inflationary impact of the new administration’s tariff-focused trade policy.

Looking ahead to February’s CPI projections from the Federal Reserve Bank of Cleveland, headline CPI is expected to come in at 2.8%, marking a decline from January’s 3.0% annual inflation rate. Similarly, Core CPI is projected at 3.2%, slightly lower than January’s 3.3%. If these expectations hold, it could signal easing inflationary pressures. However, if inflation surprises to the upside, markets could see increased volatility in the week ahead.

Source: Federal Reserve Bank of Cleveland

Summary

Stocks declined last week as tariff concerns and fears of an economic slowdown weighed on investor sentiment. February’s employment report showed weaker-than-expected job growth, with the unemployment rate rising to 4.1%, while ISM Manufacturing remained in expansion but weakened slightly. Meanwhile, ISM Services continued to show strength, and inflation expectations for February suggest a slight decline, though tariffs could introduce uncertainty in the coming months.

We appreciate your continued trust.

Thank you,

Joseph M. Maas,
CFA, CFP®, ChFC, CLU®, MSFS, CCIM, CVA, ABAR, CM&AA

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