Market Insights

Stocks are falling again as tariff fears deflate the AI trade and economic sentiment.

The S&P 500 erased a Monday rally to slide 1.5 percent between Friday, March 21, and Friday, March 28. It was the fifth decline in the last six weeks. Selling focused on the technology sector, which is headed for its biggest monthly drop in over two years. AI-related names like Super Micro Computer (SMCI) and Broadcom (AVGO) had some of the biggest declines.

Fears about international trade grew after President Trump announced new tariffs on imported cars and restrictions on Chinese technology companies. Wall Street is bracing for more import taxes on Wednesday. (Last week’s tariffs could raise car prices by $6,000-$7,000, according to a summary of analyst reports by CNBC.)

There’s “a clear [negative] consensus across all demographic and political affiliations,” University of Michigan economist Joanne Hsu wrote in Friday’s consumer sentiment report. (It was revised down to its lowest reading since November 2022). She cited “worsening expectations since February for … personal finances, business conditions, unemployment, and inflation.”

The Personal Consumption Expenditures (PCE) core price index rose 2.8 percent in February from a year earlier, one-tenth of a percentage point more than forecast. The rate has stayed constant since last May, which may suggest inflation is getting stuck above the Federal Reserve’s 2 percent target. The same report showed spending up less than expected, despite strong income growth.

“The whiff of US stagflation is intensifying according to the latest economic data,” Mohamed El-Erian, the former head of Pimco and Obama adviser, posted in response to the numbers.

St. Louis Fed President Alberto Musalem warned that tariffs may have “a more persistent impact on underlying inflation.” He added that “when people expect inflation to increase, it can often be self-fulfilling.”

Tech Selloff

Technology was the worst-performing sector last week with a drop of 3.5 percent.

SMCI broke a potential bearish flag after TD Cowen said Microsoft (MSFT) was reducing data-center investment plans. The maker of AI servers is the most volatile member of the S&P 500 in the past month, according to TradeStation data. It was the index’s biggest decliner last week.

AVGO, another AI beneficiary, moved in a similar direction. It’s also lost its trillion-dollar market cap and has surrendered all its gains from a strong quarterly report in December.

The selling pushed the Philadelphia Semiconductor Index to a weekly low from last April. Will traders start looking for a potential breakdown in chips, the market’s leading industry for the last two years?

Another story last week showed potential strain in the AI space: CoreWeave (CRWV), a cloud-infrastructure company backed by Nvidia (NVDA), sold fewer shares than expected in its initial public offering. Pricing was 20 percent lower than hoped.

Airlines Keep Falling

Communications were the second-worst performing sector. Airlines, which warned of weakening demand earlier this month, also fell sharply.

Lululemon Athletica (LULU) dropped on weak same-store sales and guidance. Las Vegas Sands (LVS) didn’t seem to have any news, but it’s a classic cyclical exposed to discretionary travel.

Consumer staples (the opposite because they’re non-discretionary) were the only major sector to rise last week. Gold miners climbed as the yellow metal hit a new high above $3,000.

W.R. Berkeley was the best-performing member of the S&P 500. Japan’s Mitsui Sumitomo Insurance plans to purchase a 15 percent stake in the U.S. commercial insurer.

Dollar Tree (DLTR) climbed after announcing plans to sell Family Dollar to a private-equity firm.

Cintas (CTAS) rose after the uniform company’s earnings, revenue and guidance surprised to the upside.

Charting the Market

The S&P 500 just had its lowest weekly close since early September. That, and other patterns, may confirm a more lasting downtrend has begun.

The index rebounded to its January low before dropping. Has “old support” become “new resistance?”

S&P 500, with select patterns and indicators. (Stochastics in lower study.)

It also made a higher high than the preceding week and a lower low: a bearish “outside week.”

Prices additionally stalled at the 21-day exponential moving average and the 200-day simple moving average. That may confirm bearish trends in both the short and longer terms.

Traders looking for support may eye the recent low of 5504. Below that is the September low of 5403.

The Week Ahead

This week has several events. While few earnings are scheduled, investors may worry about companies issuing weak guidance ahead of reporting season. (FactSet said more companies than normal have issued poor outlooks so far.) Tesla (TSLA) is likely to report quarterly deliveries Wednesday or Thursday.

Today is the last day of March and the first quarter. (It’s on pace to be the first negative quarter in the last six.) Nothing important is scheduled.

The Institute for Supply Management’s manufacturing index tomorrow morning may draw scrutiny because of its price index. (Similar reports have recently shown inflationary pressures.) The JOLTs job openings report and construction spending are at the same time.

The White House is expected to announce tariffs on Wednesday. ADP’s private-sector payrolls report and crude-oil inventories are also due.

Thursday features initial jobless claims and ISM’s service-sector index.

Friday morning brings the key non-farm payrolls report.