Last Week on Wall Street – March 7th, 2025

S&P 500: -3.10% DOW: -2.36% NASDAQ: -2.53% 10-YR Yield: 4.16%

What Happened?

The past week on Wall Street was nothing short of a rollercoaster ride, as heightened intraday volatility saw market prices swing by as much as 2% daily. Investors navigated a landscape dominated by geopolitical uncertainty and trade policy developments, with markets reacting sharply to the latest shifts in global trade negotiations. “Tariff tantrums” played a central role in the turbulence, as policy shifts between the U.S., Canada, Mexico, and China kept traders on edge.

Market uncertainty remains high due to the constant noise embedded in daily trading. Recently, the Trump administration announced a one-month delay in the implementation of new tariffs, pushing the start date to April 2nd. However, this brief reprieve did little to boost investor confidence as skepticism persisted about its impact on future economic growth. Market pricing largely reflected this cautious sentiment, with traders remaining focused on the broader implications of ongoing trade tensions.

In the sections below, we’ll take a deeper dive on the Federal Reserve, the challenges they are facing from each district in their Beige Book, as well as recent U.S. Job’s Report and price rises on manufacturing inputs.

US economy added 151,000 jobs in February, below expectations

February U.S. jobs report came in at 151,000; less than expectations of 160,000.
Unemployment rate increased from 4.0% – 4.1%
Labor force participation was 62.4%

The key takeaway – Many investors breathed a sigh of relief on Friday as the latest U.S. jobs report came in close to expectations, alleviating fears of a sharp labor market slowdown. With the Federal Reserve’s next policy meeting just around the corner on March 18-19, analysts, investors, and market participants were closely watching this report for clues on the Fed’s next move.

A higher-than-expected unemployment rate or a slowdown in non-farm payrolls would have significantly increased the likelihood of the Federal Reserve cutting interest rates, as well as exacerbated fears that the U.S economy is weaker than expected. As the Fed’s policymakers seek to balance economic growth with inflation concerns from the Trump administration’s tariff policies, they wait to find a clearer picture on the effect of policy changes they see develop before them. While job growth remained steady, any signs of weakening employment data could reinforce expectations for rate cuts later this year.

Beyond the jobs report, investors have been grappling with heightened volatility driven by ongoing trade policy uncertainties. The so-called “tariff tantrums” have dominated headlines, as the Trump administration continues to adjust or introduce new tariff regulations that could have long-term effects on economic growth, corporate profitability, and global trade relations. The combination of labor market data and tariff developments has made for an unpredictable trading environment, with investors searching for any positive signals amid the uncertainty.

US manufacturing stable, price pressures surge ahead of tariffs storm

PMI dropped .6 percentage points to 50.3 in February.
Gauge for prices paid for inputs are at the highest levels since 2022

The key takeaway – Both the ISM Manufacturing and ISM Services Indexes released updated figures this week, and both readings signaled an expanding economy. A reading above 50.0 on these indices indicates economic growth, with the Manufacturing Index coming in at 50.3% and the Services Index at 53.5%. With the services industry continuing to be the primary driver of U.S. economic growth, its sustained expansion slowed down increasing concerns about uncertainties in the marketplace.

Despite what some might consider positive news, many analysts believe that the above-average demand for goods could be a result of manufacturers front-loading production ahead of impending tariffs, rather than a sustained increase in demand. On the services side, the sector remains the backbone of the U.S. economy, with 8 out of 10 Americans employed in service-related jobs, continuing to drive economic growth.

The ISM Manufacturing Index reflects demand within the industry by tracking new orders, production levels, employment trends, and supplier deliveries. A weak index reading can signal a slowdown in production, declining business confidence, and even concerns about stagflation.

The ISM Services Index is used to assess the performance of the service-based economy. It is derived from surveys sent to purchasing and supply management executives across various service industries. The index provides insight into trends such as business activity, new orders, employment, and price pressures, offering a broad view of the health of the services sector. As the report confirmed, the U.S. servicing industry is still higher and better off than its manufacturing counterpart. Many know the U.S is heavily reliant on the production levels emitted within the service industry, something that has been long standing for many years, and the ISM Service Index assures the marketplace that its production levels are still up to par.

Many analysts are staying vigilant regarding Trump’s tariffs and the potential pass-through effects on prices for both manufacturers and consumers. The impact on input costs, supply chains, and ultimately consumer spending habits in the near future remains a key concern. As manufacturers adjust to shifting cost structures, the extent to which these tariffs affect pricing power and demand will be closely watched.

Fed’s Beige Book Shows Slight Growth and Mounting Tariff Worries

Economic uptick rose slightly.
The word ‘tariff’ appears 49 times throughout the book.
The word ‘uncertainty’ appears 47 times.
Atlanta’s GDPNow model forecasted a decrease of 2.8% in annual growth.

The key takeaway – Recent reports indicate that the U.S. economy experienced a slight increase in activity in recent months. According to the Federal Reserve’s latest Beige Book, six of the twelve Federal Reserve Districts reported no change in economic activity, four noted modest or moderate growth, and two observed slight contractions. Notably, none of the Districts reported significant expansionary growth, with most indicating minor or flat readings.

A prominent theme in the Beige Book is the heightened concern over the Trump administration’s tariff policies. The term “tariff” appeared 49 times in the most recent publication, underscoring widespread apprehension about the potential impacts on future growth and pricing. Businesses across various sectors expressed anxiety regarding increased costs and the negative effects on investments and hiring plans. Despite these concerns, most Districts reported modest growth in prices and wages.

In tandem with the Beige Book findings, the Federal Reserve Bank of Atlanta’s GDPNow model has revised its forecast for the first quarter of 2025. The model now estimates a contraction of 2.8% in real GDP growth, a significant decrease from the previous forecast of a 2.3% increase. This sharp downturn is largely attributed to a record-high $153 billion trade deficit in January, which may be linked to firms accelerating imports ahead of anticipated tariffs. Economists have raised concerns about the rapid slowdown in economic growth, with some caution about the potential onset of a recession.