Key Points

• It seems likely that the market’s late rally on Friday avoided a fifth straight down week, with the S&P 500 up 0.1% to 5,667.56, but momentum remains weak amid tariff and earnings concerns.

• Research suggests tariff uncertainty and disappointing corporate earnings, like FedEx (FDX) and Nike (NKE), drove volatility, overshadowing Fed’s steady rates and QT slowdown.

• The evidence leans toward investors diversifying into gold (+15% YTD), Treasuries, and corporate debt, as US equities face a correction (-7.6% from February peak).

• Unexpected detail: Despite the rally, AAII’s bearish sentiment hit 58.1%, a historical high, signaling caution despite mega-cap lifts like Apple (+2%).

Market Performance

The S&P 500 closed at 5,667.56, up 0.1% for the day, marking a slight weekly gain of 0.5% from last Friday’s 5,638.94, avoiding a fifth consecutive down week. The Nasdaq Composite rose 0.5% to 17,784.06, and the Dow Jones Industrial Average increased 0.1% to 41,985.35. However, the week was volatile, with the S&P 500 down 7.6% from its February 19 peak of 6,144.15, stuck in correction territory.

The Nasdaq Composite rose 0.5% to 17,784.06, and the Dow Jones Industrial Average increased 0.1% to 41,985.35, reflecting a late rally driven by mega-cap stocks but failing to reverse broader bearish trends.

Economic and Corporate Impacts

Economic data showed mixed signals: initial jobless claims at 223,000 (above 220,000 expected), Philadelphia Fed Index at 12.5 (below 10.0), and existing home sales up 4.2% to 4.26 million (beating 3.95 million). Corporate earnings disappointed, with FedEx missing guidance (-8%), Nike cutting outlook (-5.5%), Lennar underperforming (-4%), and Micron’s recovery doubts (-8%) fueling growth fears. These reports highlighted economic weakness, especially in consumer sectors.

Investor Sentiment and Strategy

Investors are shifting to diversification, with gold up 15% YTD, Treasuries climbing 3%, and corporate debt gaining, per Bloomberg’s analysis Diversification Strategies Outperform. The VIX dropped below 20, but AAII’s 58.1% bearishness—four weeks over 55%—signals caution, per Bespoke Investment Group Bearish Sentiment High. Mega-cap late surges (Apple +2%, Tesla +5.3%) masked broader weakness.

Looking Ahead

Next week, watch flash PMIs (Monday), durable goods (Wednesday), and PCE price index (Friday) for inflation clues. Tariff announcements on April 2 and Fed’s next moves will be critical, with earnings from KB Home, Chewy, and Walgreens adding color.

Market Performance and Weekly Trends

The week began with a -3% S&P plunge on March 17, driven by tariff fears and retail sales misses (+0.2% vs. +0.7% expected), per Seeking Alpha’s market recap Market Recap. Wednesday’s Fed decision—holding rates at 4.25-4.5% and slowing QT to $5B from $25B—sparked a +1.1% rally, per Monica L. Correa’s analysis Fed Rally. Thursday saw a -0.22% fade, with FedEx’s guidance cut (-8%) and tariff jitters, per Anuron Mitra Stocks End Lower. Friday’s +0.1% close, per the closing summary Closing Summary, avoided a fifth down week, but volume (4.5B NYSE, 8.9B Nasdaq) and AAII’s 58.1% bearishness, per Bespoke Investment Group Bearish Sentiment High, signaled caution.

Economic Data: Mixed Signals Amid Uncertainty

Economic releases painted a mixed picture. Initial jobless claims for March 15 were 223,000, above 220,000 expected, per the stock market update Jobless Claims. The Philadelphia Fed Index dipped to 12.5 from 18.1, below 10.0 expected, per Monica L. Correa Philly Fed. Existing home sales surged 4.2% to 4.26 million, beating 3.95 million, per Anuron Mitra Home Sales, offering a bright spot. Leading Indicators fell 0.3% (vs. -0.2%), per the same source, adding to growth worries.

Corporate Earnings: Disappointments Drive Sentiment

Earnings season hit hard, with FedEx missing ($4.51 vs. $4.63) and cutting FY25 EPS to $18-$18.60, per Amy Thielen FedEx Earnings. Nike’s -5.5% drop on weak Q4 guidance, per Kim Bhasin Nike Sales, cited tariffs. Lennar’s -4% slide on Q1 miss and Q2 cut, per the closing summary Lennar Earnings, and Micron’s -8% sell-off on recovery doubts, per the spotlight comment Micron Sell-Off, underscored consumer weakness. Nucor and U.S. Steel’s Q1 warnings added pressure, per the closing summary Materials Sector.

Market Sentiment and Investor Behavior: Diversification Surge

Investors are fleeing US equities, with BofA’s survey showing record cuts (-23% underweight), per Rita Nazareth BofA Survey. Diversification’s winning, per Lu Wang Diversification Wins—gold up 15% YTD, Treasuries +3%, and RPAR ETF +5% vs. S&P’s -3.6% YTD. Late mega-cap surges (Apple +2%, Tesla +5.3%) masked broader weakness, per the closing summary Mega-Cap Surge.

Geopolitical and Policy Developments: Tariff Tension Mounts

The Fed held rates steady, per Monica L. Correa Fed Holds, but Powell’s “transitory” tariff call faded—April 2 looms, per Rita Nazareth Tariff Loom. Trump’s mineral order and NGAD jet decision (Boeing wins, per the closing summary NGAD Winner) added noise. ECB’s Lagarde warned of 0.3% euro growth hit, per the morning briefing ECB Warning, and quad witching’s $4.5T expiry, per Anuron Mitra Options Expiry, stoked volatility.

Sector Performance: Mega-Caps Mask Weakness

Communication services (+1.0%), consumer discretionary (+0.6%), and technology (+0.5%) led, per the closing summary Sector Leaders, driven by Apple, Tesla, and Meta. Materials (-1.0%), industrials (-0.9%), and real estate (-1.0%) lagged, per the same source, with Nucor and Lennar hits. Equal-weighted S&P 500’s -0.5% vs. cap-weighted +0.1% shows mega-cap skew, per the closing summary Equal-Weighted Lag.

Weekly Takeaway: Volatility and Uncertainty Reign

The week was marked by continued market volatility, with the S&P 500 experiencing its fifth consecutive week of declines, albeit with a slight 0.5% gain. Corporate earnings were a significant driver of market sentiment, with disappointing results from major companies like FedEx, Nike, Lennar, and Micron highlighting ongoing economic challenges. Investors are increasingly turning to diversification strategies to navigate the uncertainty, with assets like gold, corporate debt, and Treasury bonds seeing renewed interest.

The Federal Reserve’s decision to hold interest rates steady provided some relief, but the central bank’s indication that it prefers to continue the current pace of balance sheet reduction suggests that monetary policy remains tight. Geopolitical tensions and trade war developments, particularly the upcoming tariff announcement on April 2, remain a significant concern, with quad witching adding to the volatility.

Looking Ahead: Key Events to Watch

• April 2 Tariff Announcement: The U.S. is set to unveil reciprocal tariffs, which could further roil markets.

• Federal Reserve’s Next Meeting: Investors will be watching for any shifts in monetary policy or guidance on balance sheet reduction.

• Corporate Earnings Season: More companies will report results in the coming weeks, providing further insight into the health of the economy.

Key Citations

• Wall Street Investors With Diversified Bets Are Winning at Last

• FedEx Lowers Guidance on Continued Economic Weakness

• US Stocks End Lower as Investors Gear Up for $4.5T Options Test

• Closing Summary – Negative Bias, Yet Positive Finish

• Bearish Sentiment High

• Fed Holds Steady, Cites ‘Elevated Uncertainty’

• Stocks Halt Fed-Fueled Rally as Trade Fear Lingers: Markets Wrap

• Micron Sell-Off After Q3 Guidance Fails to Signal a Meaningful Near-Term Recovery

• Triple-Witching Event: About $4.5T in Options Contracts Set to Expire

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