Market Monitor March 4

Market Turmoil Deepens: Stocks Slide as Trade War Escalates and Breadth Weakens

U.S. stock markets closed lower on Tuesday after a highly volatile trading session, as concerns over escalating trade tensions and economic slowdown weighed on investor sentiment. The Dow Jones fell 1.5%, the S&P 500 dropped 1.2%, and the Nasdaq slipped 0.3%.

Trade War and Economic Concerns Drive Market Decline

The newly imposed 25% import tariffs on Canada and Mexico and an increased 20% tariff on Chinese goods triggered market turmoil. Canada and China have already announced countermeasures, with Mexico expected to follow.

Investors, who had previously been skeptical about the actual implementation of these tariffs, now fear their long-term economic consequences.

Adding to concerns, fresh data showed weakness in U.S. manufacturing, and a recent economic estimate by the Atlanta Federal Reserve projected a 1.5% GDP contraction in Q1 2025. While expectations for Federal Reserve rate cuts increased, market experts warned that trade-related inflation could complicate further monetary easing.

Stock Market Reactions

• Automakers were hit hard, with Tesla (TSLA | -4.4%), General Motors (GM | -4.5%), and Ford (F | -2.9%) declining as tariffs threaten supply chains. About 15% of Tesla’s Model Y components come from Mexico, making the company particularly vulnerable. Tesla has also been under pressure due to a potential consumer boycott related to Elon Musk’s political activities.

• Retailers struggled, with Target (TGT | -3%) and Best Buy (BBY | -13.3%) both sliding due to cautious outlooks. Best Buy warned that its forecasts do not yet fully reflect the impact of tariffs, despite nearly 60% of its products being linked to China and 15-20% sourced from Mexico.

• Technology stocks had mixed results. Nvidia (NVDA | +1.7%) rebounded slightly but remains down 10% in a week due to concerns over U.S. AI chip export restrictions to China. Palantir (PLTR | +1.2%) also gained.

• On (ONON | +5.8%) stood out with strong earnings, reporting higher-than-expected revenue of 606 million Swiss francs. The Swiss sneaker brand continues to capture market share from Nike (NKE | -1.4%) and Adidas (ADS_DE | -2.4%), boosted by marketing campaigns featuring stars like Zendaya and Roger Federer.

• Walgreens Boots Alliance (WBA | +5.6%) surged on reports that private equity firm Sycamore Partners is in talks to acquire the company for $10 billion and take it private.

• Taiwan Semiconductor (TSM | +4%) gained after announcing a $100 billion investment in U.S. chip manufacturing.

Broader Market Trends

• The U.S. dollar weakened, with EUR/USD rising 1.2% to 1.0612, as markets anticipate rate cuts by the Federal Reserve.

• Meanwhile, oil prices declined following reports that OPEC+ will increase production next month.

Overall, fears of a deepening trade war and economic slowdown are weighing on global markets. While some companies, like AI stocks and On Running, defied the downturn, automakers, retailers, and industrials bore the brunt of the tariff-related selloff.

Daily Market Analysis – March 04, 2025 (After Market Close)

SPY (S&P 500 ETF - $576.86, -1.2%)

• Short-term trend: Bearish, with declines of -2.92% (1 week) and -5.09% (2 weeks).
• Long-term trend: Neutral, with -5.66% (3 months) but still +12.73% (12 months).
• Technical outlook: SPY broke below its 150-day moving average and is very close to a key support level. If further downside momentum continues, the next significant support level could be around $560-565.

QQQ (Nasdaq 100 ETF - $495.55, -0.3%)

• Short-term trend: Negative, with losses of -3.46% (1 week) and -8.12% (2 weeks).
• Long-term trend: Neutral, with +10.44% (6 months) and +12.88% (12 months).
• Technical outlook: QQQ is attempting to hold near-term support at $490, but the sharp recent pullback signals profit-taking after strong gains earlier in the year. A break below $485-490 could lead to deeper declines.

IWM (Russell 2000 ETF - $206.42, -3.1%)

• Short-term trend: Very weak, with -4.17% (1 week) and -9.15% (2 weeks).
• Long-term trend: Negative, Russell 2000 has underperformed the larger indices, down -13.61% (12 months).
• Technical outlook: IWM has fallen below key support at $215, signaling risk of further downside toward $200. A continued breakdown could indicate small-cap underperformance amid economic uncertainties.

Technical Conclusion

The overall market sentiment is bearish, with all three ETFs experiencing short-term selling pressure. SPY and QQQ remain in long-term neutral trends, but the recent downturn suggests weakness in risk assets. IWM is the weakest, reflecting small-cap struggles. A sustained rebound depends on broader market stabilization, particularly in large-cap tech and growth stocks.

Sector Analysis

• Short-term (1 week): Broad market weakness, but Real Estate and Utilities held up better.
• Mid-term (1 month): Tech and Energy were among the worst performers, Real estate and utilities are barely positive on a monthly basis.
• Long-term (3 months): All negative, Industrials performing the worst

Market Breadth Analysis

• Advancing stocks: 29.1%
• Declining stocks: 68.8%
• SMA(50+): 30.4%
• SMA(200+): 41.6%

Comparison to March 3, 2025

• Advancing stocks decreased from 76% (March 3) to 29.1% (March 4) → Significant deterioration in market participation.
• Declining stocks surged from 23.7% (March 3) to 68.8% (March 4) → Broad-based selling pressure.
• Stocks above SMA(50) dropped from 35.1% to 30.4%, showing increasing technical damage.
• Stocks above SMA(200) also fell slightly from 41.8% to 41.6%, indicating a long-term weakening trend.

Market Breadth Conclusion

Market breadth has deteriorated sharply, confirming bearish momentum. Fewer stocks are holding key moving averages, and the sharp increase in declining stocks suggests weak participation across sectors. This signals potential for continued downside risk unless breadth stabilizes.