Last week was a rough one for the market. Concerns over the economy and the impact of tariffs were the main drivers of the losses. The major indices logged significant declines with the S&P 500 losing 3.1%. Some notable technical analysis from last week included the S&P 500 briefly dipped below its 200-day moving average. The Russell 2000 and Nasdaq Composite dropped further below their respective 200-day moving averages and further into correction territory.
Just about everything in the equity market participated in downside moves this week. Ten of the 11 S&P 500 sectors were lower with the financial (-5.9%), consumer discretionary (-5.4%), and energy (-3.8%) sectors logging the biggest declines. The defensive-oriented healthcare sector (+0.2%) was the only sector to close with a gain this week.
The trade war heated up after 25% tariffs for Canada and Mexico went into effect and tariffs on China increased by 10% to 20%. The three countries subsequently announced retaliatory measures against the US. The 25% tariff for Canada and Mexico were revised, though, such that all USMCA compliant goods from Canada (~38%) and Mexico (~50%) will be exempt from tariffs until April 2.
Concerns about the economy were caused by some disappointing earnings reports from the likes of Target (TGT) and others. Target warned that price increases are likely, which may impact consumer demand and lead to lower growth in earnings and in the economy. Target’s CEO also highlighted that the consumer has been cautious already. Last week’s economic releases also played into worries about the economy. The February ISM Manufacturing PMI showed a mix of decelerating activity, rising prices, and weakening employment for the manufacturing sector. Also, the February employment report wasn’t bad, but at the same time it wasn’t just right for a market that needed to see stronger growth. Nonfarm payrolls were up 151,000 but, the unemployment rate ticked up to 4.1% from 4.0%.