Stock Market Update

[BRIEFING.COM] The stock market returned to its downside trend after yesterday's brief reprieve. Like recent sessions, headlines around US trade policy engrossed the equity market. 

The S&P 500 briefly dropped below its 200-day moving average (5,730), reaching 5,711 at its session low. The index managed to close just above that key technical level, while the Nasdaq Composite (-2.6%) and Russell 2000 (-1.6%) dropped further below their respective 200-day moving averages.

Today's close marks a 10.4% decline off the all-time high for the Nasdaq Composite reached December 16, which leaves the index in correction territory. The S&P 500 is 6.6% below its all-time high close after today's broad retreat.

The market attempted to recover a bit around mid-morning after Commerce Secretary Lutnick told CNBC that all USMCA compliant goods and services will be exempt from new tariffs for one month. The upside attempt was short-lived and the market was in a steady downtrend by the time President Trump signed the executive order detailing the exemptions this afternoon. 

Around 62% of Canadian goods and around 50% of Mexican goods are still subject to the tariffs and goods that are exempt will face tariffs again starting April 2. 

Fallout in mega caps and chipmakers also impacted the equity market today, reflecting ongoing unwinding of momentum trades. NVIDIA (NVDA 110.57, -6.73, -5.7%) was an influential decliner in that respect. 

Weakness in the semiconductor space was due in part to guidance from Marvell Technology (MRVL 72.28, -17.86, -19.8%) failing to meet high expectations. 

• Dow Jones Industrial Average: +0.1% YTD
• S&P 500: -2.4% YTD
• S&P Midcap 400: -4.9% YTD
• Nasdaq Composite: -6.4%
• Russell 2000: -7.3% YTD

Reviewing today's economic data:

• January Trade Balance -$131.4 bln (Briefing.com consensus -$93.5 bln); Prior was revised to -$98.1 bln from -$98.4 bln
  • The key takeaway from the report is that efforts to get in front of expected tariff actions drove the huge increase in imports, which will be a drag on Q1 GDP forecasts.
• Weekly Initial Claims 221K (Briefing.com consensus 234k); Prior 242K, Weekly Continuing Claims 1.897 mln; Prior was revised to 1.855 mln from 1.862 mln
  • The key takeaway from the report is that the reduced level of initial claims -- a leading indicator -- will temper concerns for the time being about the labor market showing more pronounced signs of weakening.
• Q4 Productivity-Rev. 1.5% (Briefing.com consensus 1.2%); Prior 1.2%, Q4 Unit Labor Costs - Rev. 2.2% (Briefing.com consensus 3.0%); Prior 3.0%
  • The key takeaway from the report is that both components had the right skew for market sentiment in that productivity was higher than previously reported while unit labor costs (an inflation gauge) were lower than previously reported, aided by the improved productivity.
• January Wholesale Inventories 0.8% (Briefing.com consensus 0.7%); Prior was revised to -0.4% from -0.5%

Looking ahead, market participants receive the Employment Situation Report for February at 8:30 ET. Other data includes the January Consumer Credit report at 3:00 ET.