Equity Market Performance
Equity markets closed sharply lower on Thursday, as investors navigated policy uncertainty despite signs of easing inflation. The S&P 500 slid 1.4%, officially entering correction territory, while the Dow Jones Industrial Average dropped 1.3%, and the Nasdaq Composite tumbled nearly 2%.
The Producer Price Index (PPI) remained flat in February, missing forecasts of a 0.3% gain, signaling further moderation in inflationary pressures. Additionally, initial jobless claims came in lower than expected at 220,000, reinforcing a resilient labor market. However, these positive economic signals failed to improve sentiment, as concerns over a looming government shutdown and escalating U.S.-EU trade tensions weighed on investor confidence.
- Defensive sectors, particularly utilities, outperformed.
- Growth-oriented sectors, such as communication services and consumer discretionary, lagged.
- Bond yields declined, with the 10-year U.S. Treasury yield settling around 4.27%, reflecting a cautious market outlook.
Trade and Political Uncertainty Impact Markets
Market sentiment was further rattled by trade tensions, as the European Union responded to U.S. steel and aluminum tariffs with a 50% levy on American whiskey. In response, former President Trump threatened a 200% tariff on European wines and spirits.
Meanwhile, political uncertainty in Washington remained high as the Senate struggled to secure enough votes to pass a spending bill before Friday’s deadline, increasing the risk of a government shutdown.
Corporate Highlights
- Intel (+14.5%) surged after appointing industry veteran Lip-Bu Tan as CEO.
- Adobe (-14%) plummeted after issuing a disappointing revenue forecast.
Despite volatility, history suggests that market pullbacks are a natural part of investing, emphasizing the importance of maintaining a well-diversified portfolio.
Latest Market and Economic Update
Asian Markets
Asian stocks mostly advanced on Friday, led by a surge in Chinese shares after the People’s Bank of China pledged further monetary easing to support economic growth.
- Shanghai Composite: +1.5%
- Japan & Australia: Posted modest gains, with U.S.-EU trade tensions keeping investor sentiment cautious.
U.S. Market Outlook
U.S. equity futures edged higher overnight, suggesting a potential rebound as investors assess cooling inflation data against ongoing trade tensions and recession fears.
- Market focus remains on the Senate’s vote on the stopgap funding bill to avert a government shutdown.
- Concerns persist over President Trump’s threat of a 200% tariff on European alcoholic imports, which could further strain global trade relations.
European Markets
European equities fell on Thursday, weighed down by U.S. tariff threats.
- Stoxx 50: -0.9%
- Stoxx 600: -0.2%
- Autos sector: -1.6%, as concerns over tariffs impacted global trade sentiment.
- Pernod Ricard & Rémy Cointreau declined due to uncertainty over European alcohol tariffs.
- Novo Nordisk (+5%) rose after an upgrade from Kepler Cheuvreux.
Currency & Commodities Update
- The U.S. Dollar Index rose to 104, marking its third consecutive session of gains, as trade tensions and tariff threats weighed on the euro and other currencies.
- EUR/USD traded at 1.0843, as investors monitored Federal Reserve policy decisions and inflation and job data.
- Oil prices edged higher following new U.S. sanctions on Iran’s oil sector but remained on track for weekly losses amid oversupply concerns.
- The market also weighed ongoing Russia-Ukraine ceasefire talks and an IEA forecast predicting excess global oil supply in 2025 due to slowing demand growth.
Equities on the Move
Companies Influenced by Analyst Ratings, Earnings & Market Developments
- Ulta Beauty (+6.5%) surpassed Q4 sales and profit expectations, benefiting from strong holiday demand. However, the company projected lower-than-expected annual sales and profit due to potential price increases from trade policies. Kecia Steelman was announced as the next CEO.
- DocuSign (+11%) exceeded Q4 earnings and revenue expectations, but its revenue forecast for Q1 and the full fiscal year fell short of analyst estimates.
- Apple is set to launch a software update for AirPods later this year, enabling real-time translation of conversations as part of iOS 19. Alongside this update, the company is also developing new AirPods hardware, including a third-generation AirPods Pro and a model with built-in AI-powered cameras.
- Google has rolled out major updates to its Gemini app, including a new version of the 2.0 Flash Thinking Experimental model with enhanced features like file uploads, a 1M token context window, and expanded access to the Deep Research tool. Additionally, Gemini now offers a personalized experience, integrates with more Google apps, and introduces a new feature called Gems, allowing users to create customized AI experts.
- Tesla has warned that President Trump’s proposed tariffs on global vehicle imports could lead to retaliatory measures, disproportionately impacting U.S. exporters and raising costs for electric vehicles. The automaker, along with industry trade groups, urged a phased approach to avoid supply chain disruptions, higher consumer prices, and potential job losses in U.S. manufacturing.
- IonQ (-2%) declined after Kerrisdale Capital published a report questioning its valuation, scalability, and transparency, highlighting challenges in meeting its growth projections. The report criticized IonQ’s reliance on unproven technology and accused the company of making unrealistic claims, warning investors of overvaluation and scaling difficulties.
- NatWest Group: The British government sold 89 million shares, reducing its stake to 4.82%, making BlackRock the largest shareholder at 5.72%.
Analyst Ratings & Market Reactions
- Microsoft received a Buy upgrade from DA Davidson, with a $450 price target, citing the company’s more disciplined capital expenditure strategy and strong positioning among mega-cap tech firms. The firm believes Microsoft’s shift in AI infrastructure investment and limited consumer exposure make it a defensive play in a slowing economy, with a more attractive valuation compared to its peers.
- Netflix: Bernstein maintained an Outperform rating with a $1,200 price target, citing strong engagement and growth potential. Despite short-term challenges, they remain confident in Netflix’s ability to expand margins and maintain high pricing power due to its value proposition and under-penetrated international markets.
- Schneider Electric was double-upgraded by Goldman Sachs to a “Buy” rating from “Sell” and raised its price target to €280, citing stronger fundamentals and an overdone market reaction to concerns about datacentre demand. The analysts highlighted multiple growth drivers, including a recovery in the Low Voltage construction segment and continued expansion in Medium Voltage and datacentre-related businesses, with expectations for improved returns on invested capital in 2025.
- European Defense Stocks:
- Jefferies analysts initiated coverage on five European defense shares, with Rheinmetall as their top pick due to strong growth potential and short-cycle appeal, followed by RENK, Dassault Aviation, Leonardo, and Hensoldt.
- The firm expects Europe’s defense spending to increase significantly, benefiting companies like Rheinmetall and RENK, while cautioning against Thales’ rapid re-rating due to its longer-cycle nature.
- Cruise Lines: Barclays dismissed pricing instability concerns, viewing the selloff in cruise stocks as exaggerated. Despite macro volatility, Barclays expects only a minor impact on yields, with Royal Caribbean and Carnival identified as preferred equities due to their strong value propositions.
Upcoming Economic Data & Events
Today, the University of Michigan’s Consumer Sentiment Index and inflation expectations will be released, providing key insights into consumer confidence and price pressures.
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