This Week on Wall Street – Week of March 3rd

Market Commentary

Markets are on edge as the U.S. prepares to implement a 25% tariff on goods from Canada and Mexico starting Tuesday, reigniting concerns about trade tensions. The latest ISM Manufacturing Survey indicated slower-than-expected expansion, reflecting business uncertainty over tariffs. Companies are already scaling back new orders and reducing workforce levels in anticipation of weaker demand. Commodity markets have reacted swiftly, with sharp price increases in steel, aluminum, and copper due to supply chain disruptions. Adding to the pressure, Trump announced a fresh 10% tariff on agricultural products targeted at Mexico and Canada, set to take effect on April 2nd.

On Wednesday, investors will be closely watching the Fed’s Beige Book, which will provide a qualitative assessment of economic conditions, including business activity, labor markets, inflation trends, and consumer spending. With inflation proving stubborn—CPI running hot for multiple months—futures markets now show a 93% probability that the Fed will hold rates steady this month. Any signs of softening economic momentum could fuel speculation about rate cuts later this year.

The highly anticipated February Jobs Report arrives later in the week and will offer fresh insights into the employment picture. Industries linked to exports and imports are expected to show signs of weakness. Additionally, the impact of ongoing deportations on labor availability and wage growth will be closely monitored.

Meanwhile, U.S. stocks continue to underperform their European counterparts, with the ECB expected to cut rates by 25bps this week, easing borrowing costs and stimulating growth. Europe has also benefited from stronger trade ties with China, as China’s economic recovery accelerates. On the geopolitical front, Friday’s tensions between the U.S. and Ukraine contributed to European markets spiking higher. In the crypto market, Bitcoin and Ethereum rallied following Trump’s announcement of a Strategic Crypto Reserve for the U.S., marking a significant shift in policy toward digital assets.

According to our Newton Model, Foreign Developed and Emerging Markets continue to outperform the U.S., though momentum has slowed in EM. Consumer Defensive stocks have taken the lead, with Industrials, Communications, and Consumer Cyclicals among the worst-performing sectors. Fixed income markets have seen Floating Rate bonds remain the strongest performer, while long-term bonds have rebounded sharply amid a flight to safety. With a mix of tariff pressures, inflation concerns, and central bank decisions, expect heightened volatility as markets react to incoming economic data and policy shifts.

Economic Releases This Week

Monday: S&P Final US Manufacturing PMI, ISM Manufacturing, Auto Sales

Tuesday: Fed Vice Chair of Supervision Michael Barr Speaks, Richmond Fed President Barkin Speaks, 25% Tariffs on Canada / Mexico Go Into Effect

Wednesday: ADP Employment, S&P Final US Services PMI, Factory Orders, ISM Services, Fed Beige Book

Thursday: Initial Jobless Claims, US Productivity (Final), US Trade Deficit, Wholesale Inventories

Friday: US Jobs Report, US Unemployment Rate, US Hourly Wages, Consumer Credit, Fed Chairman Jerome Powell Speaks

Stories to Start the Week