Weekly Market Update – April 4, 2025

Quick Takes

• The announcement of unexpectedly high tariffs led to a historic two-day decline in the S&P 500, marking only the fifth such drop since 1952, and leaving the index down -9.1% for the week. Other indices, like the Russell 2000 and Nasdaq, also entered bear market territory, reflecting widespread investor anxiety.
• As equities tumbled, bonds provided a safe haven, with yields on U.S. Treasuries dropping significantly. The 10-year Treasury yield fell below 4.0% for the first time since October, while bond indices, both domestic and international, posted solid gains.
• A strong March jobs report showing 50% more new nonfarm payrolls than expected and robust hiring in the services sector didn’t settle the markets. In a midday speech on Friday, Fed Chair Jerome Powell cautioned about the economic impact of tariffs, including potentially higher inflation and slower growth adding to investors’ concerns. 

Source: Bloomberg. Data as of April 4, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Historic stock decline overshadows solid employment report

To say it was a rough week for the stock market would be an understatement. After the market closed on Wednesday, President Donald Trump’s widely anticipated announcement of sweeping new tariffs surprised markets by coming in significantly higher, and broader, than expected. The subsequent two-day decline on Thursday and Friday was historic on many levels. The S&P 500 Index was actually positive Monday, Tuesday, and Wednesday for a total three-day gain of +1.6%. But the S&P 500 sank -4.8% on Thursday and another -6.0% on Friday to end the week down -9.1%. The two-day -10.5% decline was only the fifth time the S&P 500 has declined more than -10% over a two-day period since 1952, when the 5-day trading week began. The first of the prior three was Black Friday in October 1987, two occasions occurred in November 2008, and the most recent was March 2020 as the global economy shut down over COVID. It is an extremely small sample size, but in all those cases the market was at, or near, a bottom. In fact, over the subsequent 1-month, 6-month, and 12-month periods for each incident and for each period the returns were positive. Of course, every situation is unique and occurs with different dynamics, but the selling was extreme. The CBOE Volatility Index (VIX), a measure of expected 30-day volatility for the S&P 500, surged to 45.31, a level last seen nearly five years ago on April 21, 2020. 

In the end, the S&P 500 slipped back into correction territory, defined as more than -10% below the record high (which was February 19 for the S&P). Meanwhile, the small cap Russell 2000 Index fell -9.7% over the week and the tech-heavy Nasdaq Composite Index dropped -10.0%. The Russell and Nasdaq are now in bear market territory, defined as a -20% decline from all-time highs. The Russell is -25% below its November 25, 2024 record high and the Nasdaq is -22.7% off of its December 17, 2024 record high. 

Typically, the monthly Employment Situation Report would be the focal point of economic news and market influence in the week it was on the calendar, but Friday morning’s release did little to suppress the sour mood caused by the tariff news. As noted in the Chart of the Week below, the Bureau of Labor Statistics reported that job growth in March was a much better-than-expected 228,000 new nonfarm payrolls, compared to Wall Street consensus estimates for just 130,000 new jobs. And the details under the headline number showed that full-time workers increased nicely while part-timers fell. March was the first time since the last Trump administration that had two consecutive months of private sector payrolls increasing while government sector jobs decreased. Additionally, hiring was particularly robust in the services sector, with healthcare, retail, and transportation leading last month’s gains. The report actually did help narrow the losses in the early Friday morning futures, but markets turned south again after Federal Reserve Chair Jerome Powell appeared cautious about cutting interest rates in his address at the annual conference for the Society for Advancing Business Editing and Writing. “It is now becoming clear that the tariff increases will be significantly larger than expected,” Powell said. “The same is likely to be true of the economic effects, which will include higher inflation and slower growth.” Stocks traded lower for most of the day following his mid-day speech.

In times of stock market stress, bonds historically have provided a safe haven for diversified investors, and last week was no exception. As stocks sank on the tariff news, bond yields also plunged across maturities. The yield for the benchmark 10-year U.S. Treasury and the 2-year Treasury yield dropped -26 basis points to 3.99% and 3.65% respectively. It’s the first time the 10-year yield has been under 4.0% since October. The 30-Year Treasury yield was down -22 basis points to 4.41%. Bond prices and yields move in opposite directions and the Bloomberg U.S. Aggregate Bond Index was up +1.1% for the week and up 3.7% in 2025. Non-U.S. bonds, as measured by the Bloomberg Global Aggregate ex U.S. Bond Index also benefited from the drop in yields as well as the U.S. dollar falling -1.0% for the week, with the index rising +2.1%, its best week since August 2024.  

Periods of uncertainty, market stress, and sharp drawdowns are understandably unsettling for investors. Having a thoughtful financial plan backed by a diversified portfolio appropriate for your personal risk tolerance and long-term goals is important. The amount of uncertainty and volatility in the markets last week was in the range of levels seen in past crisis extremes. Tariff turbulence is likely to continue over the coming days and week, but it shouldn’t sink your retirement plans that are built on solid, diversified foundations. Our job is to help you focus on what you can control—your goals and the carefully crafted plan we’ve built for you. As always, if you have any concerns, please don’t hesitate to reach out to your Wealth Manager!

The Week Ahead

This week’s economic calendar is light and offers few opportunities to distract the news cycle from the ongoing tariff headlines. Consumer Credit will be released on Monday and Small Business Optimism on Tuesday. Both will be watched for any deterioration from the trade developments. The Federal Open Market Committee (FOMC) releases the minutes from its mid-March monetary-policy meeting on Wednesday afternoon, but any hope for dovish signals were probably dashed after Powell’s Friday speech. Thursday and Friday bring the bigger reports when the Bureau of Labor Statistics (BLS) releases the Consumer Price Index (CPI) and the Producer Price Index (PPI). On Friday the University of Michigan also reports its Consumer Sentiment Index. Consumer Sentiment hit a more-than-two year low in March and consensus expectations are for it to drop further with the preliminary April reading. Next week will also see several Federal Reserve speakers who will likely weigh in on the tariff situation or at least will be asked for their thoughts about it.

First-quarter earnings season also kicks into high gear next week with the large banks reporting their results. Delta Air Lines releases earnings on Wednesday, CarMax on Thursday, followed by JPMorgan Chase, Morgan Stanley, and Wells Fargo on Friday.

Chart of the Week

In the face of all the turmoil in the stock market, the March Employment Situation Report sent a positive signal about the state of the labor market, as new Non-Farm Payrolls (NFP) totaled 228,000 in March, far higher than Wall Street forecasts for 140,000 payrolls, and up from 117,000 the prior month (revised down from the originally reported 151,000). January was also revised lower, by -14,000 to 125,000. Besides the prior month downward revisions, the other downside was that the Unemployment Rate ticked up to +4.2% from +4.1% where it was expected to stay. The unemployment rate had been as low as +3.4% 24 months ago, but now matches its three-year peak reached last November. According to the Bureau of Labor Statistics (BLS) report, Health Care led the job creation again with 54,000 new jobs, while Social Assistance and Retail both added 24,000, and Transportation and Warehousing created 23,000. Federal Government positions declined by just -4,000, despite the Department of Government Efficiency (DOGE) effort to pare the federal workforce. However, the BLS noted that workers on severance or paid leave are counted as employed. A report Thursday from consultancy firm Challenger, Gray & Christmas indicated that DOGE-related layoffs have totaled more than 275,000 so far. Wages grew in line with expectations, with Average Hourly Earnings (AHE) at +0.3%, which was up from the prior month’s +0.2% rate after being revised lower from the original +0.3% reading. Year-over-year, AHE were up +3.8%, up from the +4.0% annual rate the prior month where they were expected to remain. The Fed would like to see wage growth slow to around +3% annually or less, a level it sees as consistent with low inflation. Average Weekly Hours worked was unchanged from the prior month’s 34.2 (revised up from 34.1), in line with expectations. Labor-Force Participation was up a tick to 62.5% from 62.4% where it was expected to stay. The survey of households, which is used to determine the unemployment rate, was closely in line with the establishment payroll count, as it showed a gain of 201,000 workers. Moreover, full-time workers increased by 459,000, while part-timers fell by -44,000. March was the first time since the last Trump administration of two consecutive months of private sector payrolls increasing while government sector jobs decreased. The bottom line was that job growth was much stronger than expected with private sector job gains while government sector jobs declined. That may provide some reassurance that the labor market is sound in a week when markets were rattled by the announcement of the Trump Administration’s unexpectedly aggressive tariffs and renewed concerns of recession risk.

U.S. Payrolls Rose by 228,000 in March, Far Higher than Expectations

Monthly job creation in the U.S., Jan. 2022–March 2025

Source: U.S. Bureau of Labor Statistics via FRED, CNBC.

Did You Know?

EGGS-TREME DROP – After spiking +270% from $2.30/dozen at the end of September to a record $8.50/dozen at the end of February, wholesale egg prices in the US fell -53.5% in the four weeks since, dropping down to $3.95/ dozen. (Source: USDA, MFS).

DR. COPPER  – The price of copper in New York hit a record high on March 26, eclipsing the prior high made last May as buyers build stockpiles ahead of expected tariffs on imports of the metal. Through 3/26, copper prices were up +30.2% year to date, the strongest start to a year since they gained +31.6% through 3/26 in 2009. (Source: Bloomberg)

HEY, WHERE’S MY ALLOWANCE? – 50% of U.S. parents with a child above the age of 18 provide them with some type of financial support, and they spend an average of $1,474 per month doing so. 83% of those parents who provide support for their children chip in for groceries and 46% help pay for vacations. (Source: Savings.com, MFS)

This Week in History

GMAIL B-DAY – On April 1, 2004, Google unveiled Gmail. Given the date, some email users wondered if the attempt to unseat Yahoo and Microsoft’s MSN with a new email service was an April Fools’ Day joke. The press release included some decidedly non-corporate language, noting the “millions of M&Ms” it took to launch Gmail. Today, Google Workspace, which includes Gmail, has over 3 billion users. (Source: The Wall Street Journal)

Economic Review

• The March Institute for Supply Management’s (ISM) Manufacturing PMI slipped to 49.0 from 50.3 the prior month but remained in expansion territory. That was slightly below expectations for a 49.5% reading (levels below 50 indicate contracting economic activity). The index had posted two straight positive readings, including a 27-month high of 50.9 in January. The index of New Orders, a sign of future demand, dropped to 45.2% from 48.6% while the Production barometer slid -2.5 points to 48.3%. Employment declined -2.9 points to 44.7%. The Prices Paid index, a measure of inflation, surged +7 points to 69.4%, the highest since July 2022. Meanwhile, the ISM Services PMI also fell, but stayed in expansion territory at 50.8%, down from 53.5% in February, and was well below expectations for 52.9%. Service-oriented companies, such as restaurants and retailers, employ the majority of Americans. The New Orders index fell -1.8 points to 50.4%. The Employment index sank -7.7 points to 46.2%, the lowest level in almost a year. For services inflation, the Prices Paid index fell -1.7 points up to 60.9%, its fourth straight month above 60%. The services side of the economy has held up the U.S. for the past few years and remains the engine of growth for the U.S. economy so the slowdown is a concern with the tariff activity and trade tensions.
• Unlike the competing ISM report, the final S&P Global U.S. Manufacturing Purchasing Managers Index (PMI) managed to remain in expansion territory in March, but just barely at 50.2, an improvement from the preliminary ‘flash’ estimate of 49.8 two weeks ago, but down from the prior month’s 52.7 reading (levels above 50 indicate economic expansion, while levels below 50 indicate contraction). A drop in Production for the first time since December weighed heavily on the headline index. The modest fall in output was in stark contrast to the fastest rise in production for nearly three years seen during February and partly reflected fewer instances of output being raised to front-run tariffs. Market uncertainty was also frequently reported, linked to concerns over tariff implementation and federal government policies. This served to weigh on New Order book growth, which was modest overall in March and the lowest of the year so far. Business Confidence in the outlook softened again, dropping for a second successive month to its lowest level since December. Employment was unchanged in March, following a four-month run of growth. Sluggish demand growth and elevated costs weighed on hiring activity. Overall, Input Price inflation spiked higher in March, hitting its highest level since August 2022. The latest data showed that Output Price inflation picked up for a fourth successive month to a 25-month high. Unlike the competing ISM report, the final S&P Global U.S. Manufacturing Purchasing Managers Index (PMI) managed to remain in expansion territory in March, but just barely at 50.2, an improvement from the preliminary ‘flash’ estimate of 49.8 two weeks ago, but down from the prior month’s 52.7 reading (levels above 50 indicate economic expansion, while levels below 50 indicate contraction). A drop in Production for the first time since December weighed heavily on the headline index. The modest fall in output was in stark contrast to the fastest rise in production for nearly three years seen during February and partly reflected fewer instances of output being raised to front-run tariffs. Market uncertainty was also frequently reported, linked to concerns over tariff implementation and federal government policies. This served to weigh on New Order book growth, which was modest overall in March and the lowest of the year so far. Business Confidence in the outlook softened again, dropping for a second successive month to its lowest level since December. Employment was unchanged in March, following a four-month run of growth. Sluggish demand growth and elevated costs weighed on hiring activity. Overall, Input Price inflation spiked higher in March, hitting its highest level since August 2022. The latest data showed that Output Price inflation picked up for a fourth successive month to a 25-month high. The S&P Global U.S. Services PMI improved noticeably in March after slumping to a 15-month low during February. After accounting for seasonal factors, the Services PMI index rose to 54.4 from 51.0, the highest reading of 2025 so far. By remaining above the crucial 50.0 no-change mark in March, the index has signaled continuous monthly growth since February 2023. New business overall rose solidly and to a greater degree than in February. Business Confidence in the outlook remained positive overall in March, linked to an expected improvement in economic conditions over the next year. Some firms pointed to the new administration’s economic policies as likely being supportive to growth. A modest rise in Employment was recorded during March and was the third time in the past four months that staffing levels have risen. Vendors were also reported to have raised their charges, which was linked by panelists to tariffs. The net result was a third successive monthly acceleration of Input Price inflation to its highest in a year-and-a-half. Output Price inflation, despite picking up since February, remained below trend in March. Competitive pressures and efforts to sustain demand served to limit output price inflation. As a result of combining the Manufacturing and Services PMIs, the final S&P Global U.S. Composite PMI for March came in at 53.5, up from 51.6 the prior month.
• The Job Openings Labor Turnover Survey (JOLTS) showed Job Openings fell slightly in February to 7.568 million from 7.762 million the prior month (revised up from 7.740 million). That was below expectations for 7.658 million. Job Openings peaked at 12 million in 2022, but companies have since cut back on hiring. Job openings fell the most in retail sales, finance and insurance, healthcare and social assistance. Job openings are an indication of the health of the labor market and the broader U.S. economy. The ratio of Job Openings to Unemployed Workers was 1.07, down from 1.13 the prior month and is down from a peak of 2.0 in July 2022 and at the prepandemic level the Fed wants to see it at. The Number of People Quitting Jobs was 3.195 million, down from 3.256 million the prior month. The record was 4.5 million job quitters in late 2021. The Quits Rate was 2.0%, unchanged from the prior month after being revised down from 2.1%. People tend to quit less often when the economy softens, and jobs become harder to find. The Layoffs Rate was also unchanged, at 1.1% after the prior three months was revised up from 1.0%. The Hiring Rate was unchanged at 3.4%. 
• The Commerce Department reported that Construction Spending jumped +0.7% in February, more than twice the expected +0.3% rise, and up from the prior month’s -0.5% (revised lower from -0.2%). Over the past year, construction spending is up +2.9%, off from the +3.3% annual rate the previous month. Total Private Construction was up +0.9% after a -0.2% decline the month before and total Public Construction was up +0.2% for a second month. Private Residential Spending rose +1.3% month-over-month and private Nonresidential Spending was up 0.3%. The report showed that single-family construction was up +1.0% and multifamily construction flat.
• The Commerce Department reported U.S. Factory Orders rose +0.6% to $594.9 billion in February following a +1.8% increase the prior month (revised up from +1.7%). That was above Wall Street expectations for a +0.5% gain. Shipments, up four consecutive months now, increased +0.7%, following a +0.5% gain the prior month.  Factory Orders Ex-Transportation rose +0.4%, as expected, on the heels of a +0.3% increase in December. Durable Goods Orders for long-lasting items such as televisions, appliances and transportation equipment were up +1.0% following a +3.4% gain the prior month. That was up from the preliminary estimate of +0.9% from two weeks ago. Durable Goods Orders Excluding Transportation were up +0.7% as expected from the same as the preliminary reading. New Orders for Nondefense Capital Goods Excluding Aircraft —also known as Core Capital Goods Orders, a proxy for business spending—were down -0.2% following a +1.0% increase the prior month. The Inventory-to-Shipments Ratio slipped to 1.45 from 1.46. The key takeaway from the report was that business spending slipped despite the headline beat in new orders.
• According to the U.S. Bureau of Economic Analysis, the U.S. Trade Deficit narrowed -6.1% in February to -$122.7 billion after setting a record high of -$131.4 billion the prior month. That was better than the -$123.4 billion expected. Smaller trade deficits help contribute to economic growth, while larger deficits inhibit growth. Many economists now see negative GDP growth in the first quarter due to the huge drag from the trade sector. Imports were flattish from last month, but up +23.1% from last year, at $401.1 billion, as businesses continued to get ahead of new tariffs on overseas goods proposed by the Trump administration. Exports rose +2.9% for the month, and +4.9% from last year, to $278.5 billion. The key takeaway from the report is that while there was some sequential narrowing in the trade deficit, it remained near record levels as front-running of purchases persisted ahead of the April 2 implementation of tariffs. As a result, the larger deficit will be a drag on Q1-2025 GDP forecasts from the prior month. House prices were up YoY in all of the 9 regions, with the highest rate in the Middle Atlantic (+8.2%). The Mountain division recorded the smallest YoY appreciation, at +3.7%.
• The Chicago Purchasing Managers Index (PMI), a barometer for the Chicago region’s business and manufacturing conditions (also known as the Chicago Business Barometer), improved to its best level since November 2023, rising for a third straight month to 47.6 in March from an unrevised 45.5 the prior month. That was well above Wall Street expectations for a 45.0 reading. Readings below the 50 level indicate contraction and it has been in contraction territory for 15 consecutive months now. Four of the five sub-components rose as New Orders, Production, Employment, and Order Backlogs were up while Supplier Deliveries fell. Production increased +8.8 points to the highest since December 2023, taking it into expansionary territory for the first time since June 2024, and Order Backlogs increased +0.7 points, keeping at its highest since September 2024.
• The Texas Manufacturing Outlook Survey showed Texas factory activity fell in March with the General Business Activity index down to -16.3 from an unrevised -8.3 the prior month. It was at a three-year high of +14.1 in January. That was far short of expectations for a -5.0 reading. The Production index, a key measure of state manufacturing conditions, did in fact improve to +6.0 from -9.1, New Orders improved to -0.1 from -3.5, and Shipments improved to +6.1 from +5.6. But the Company Outlook index fell to -10.7 after plunging to -5.2 from +18.7 the prior month. Employment fell to -4.6 from -0.7. Prices Paid inched up to +37.7 from +35.0 but Prices Received slipped to 6.3 from 7.8. Indicators of conditions six months from now weakened but remain fairly optimistic. The Texas Service Sector Outlook Survey declined sharply for the month, falling to -11.3 from +4.6 the prior month (unrevised).  
• Weekly MBA Mortgage Applications fell -1.6% for the week ending March 28 following a -2.0% drop the prior week. The Purchase Index rose +1.5% after a rise of +0.7% the prior week. The Refinance Index dropped -5.6% after falling -5.3% the prior week. The average 30-Year Mortgage Rate slipped to 6.70% from 6.71% the prior week.
• Weekly Initial Jobless Claims fell by -6,000 to 219,000 for the week ending March 29, better than expectations for claims of 225,000. The prior week was revised higher by 1,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) rose by +56,000 to 1,903,000 in the week ending March 22, worse than expectations for 1,870,000 claims. Last week’s reading was revised lower from 1,856,000 to 1,847,000.

Asset Class Performance

Source: Bloomberg.

Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 30% US Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4% Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.

* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.