Optimism on Wall Street After a Prolonged Decline
The U.S. stock market started the week with solid gains, continuing its recovery after four weeks of losses. On Monday, major indices showed positive momentum as investors sought buying opportunities at lower prices. At the same time, market participants analyzed fresh macroeconomic data, assessing its potential impact on U.S. economic policy.
Weak Retail Sales and Industrial Production Data
February's retail sales data came in weaker than analysts expected, signaling growing economic uncertainty. The main factors weighing on consumer spending were newly imposed trade tariffs and widespread layoffs in federal agencies.
Another troubling signal came from the industrial sector. The New York manufacturing index for March showed its steepest decline in two years, indicating a slowdown in regional production activity.
Stock Indices Continue to Rise
Despite mixed economic data, U.S. stock markets posted solid gains:
- Dow Jones Industrial Average rose by 353.44 points (+0.85%) to 41,841.63.
- S&P 500 added 36.18 points (+0.64%) to 5,675.12.
- Nasdaq Composite increased by 54.58 points (+0.31%) to 17,808.66.
Construction Sector Under Pressure from Tariffs
Negative sentiment persists in the construction industry. The U.S. homebuilder confidence index dropped to its lowest level in seven months, driven by rising costs of building materials due to new trade tariffs, making construction projects less profitable.
The Fed Prepares for a Key Meeting
Investors are closely watching the upcoming Federal Reserve meeting on Wednesday. According to forecasts, the central bank is expected to keep its key interest rate unchanged. However, the Fed's updated macroeconomic outlook will be of particular interest, as it could offer insights into how policymakers assess the economic outlook amid the ongoing trade policies of the Trump administration.
Atlanta Fed Downgrades Economic Forecast
The Federal Reserve Bank of Atlanta revised its economic outlook for the first quarter, now predicting a 2.1% contraction in GDP. Earlier, on March 7, its estimate was more optimistic at -1.6%, but worsening macroeconomic conditions and market instability forced analysts to lower their expectations.
Markets Searching for a Bottom: Investors Cautiously Buying Assets
The past few weeks have been challenging for the U.S. stock market. The S&P 500 has lost more than 10% from its February record high, officially entering correction territory. However, on Friday, signs of a rebound appeared as investors began selectively buying stocks that could benefit from the Trump administration's economic policies.
Dow Jones Trims Losses, but Nasdaq Remains Under Pressure
The Dow Jones managed to recover some losses and is now about 3% away from exiting correction territory after two consecutive sessions of gains. Meanwhile, the Nasdaq confirmed its correction status on March 6, highlighting ongoing volatility in the tech sector.
Winners: Real Estate and Energy Sectors Lead
Among the 11 key S&P 500 industry sectors, the strongest gains were seen in:
- Real estate (.SPLRCR) – Investors sought safe-haven assets, including real estate investments.
- Energy (.SPNY) – Demand for energy resources remains stable.
Conversely, the consumer sector (.SPLRCD) was the only one to decline, indicating potential weakness in consumer confidence and spending.
Treasury Secretary Warns of Recession Risk
Amid market instability and worsening economic forecasts, Treasury Secretary Scott Bessent issued a stark warning: "There are no guarantees that the U.S. will avoid a recession." These remarks added further uncertainty to markets, as investors closely monitor the Fed's actions and economic indicators.
Tesla Struggles: Investors Disappointed with Forecasts
Tesla (TSLA.O) shares tumbled 4.79% after Mizuho analysts downgraded the company's target price from $515 to $430. This was another setback for the automaker, whose stock has already lost 41% year-over-year.
Quantum Computing Stocks Surge
Stocks of companies specializing in quantum computing saw significant gains. On Monday, D-Wave Quantum (QBTS.N) jumped 10.15%, while Quantum Corp (QMCO.O) soared 40.09%. This rally was driven by the start of Nvidia's (NVDA.O) annual conference, which boosted investor enthusiasm for emerging technologies.
Intel's New Strategy Boosts Share Price
Intel (INTC.O) shares surged 6.82% after reports that new CEO Lip-Bu Tan is planning major reforms in the company's manufacturing processes, including a renewed focus on AI chip development. Investors welcomed these strategic shifts, seeing them as a potential turnaround for the semiconductor giant.
Hong Kong Markets Hit Records as Asian Stocks Rise
On Tuesday, Asian markets also showed positive momentum. Hong Kong's Hang Seng Index (.HSI) jumped 2% in early trading, cementing its status as the best-performing global stock market of the year. Since the start of 2024, the index has gained 23%, outperforming all other major markets.
Investor optimism is driven by strong economic data and Chinese government measures to boost domestic consumption, reinforcing confidence in the region's economic prospects.
Currency Markets React to Chinese Growth Prospects
The forex market also reflected improving sentiment in Asia. Traders who had previously bet against the New Zealand dollar rushed to close positions, pushing the currency to a three-month high of $0.5827.
The Australian dollar followed a similar trajectory, reaching a one-month peak near $0.64. Meanwhile, the Chinese yuan remains near its highest levels of the year, underscoring investor confidence in China's economic stability.
OECD Warns: U.S. Tariff Policies Could Hurt North America
On Monday, the Organization for Economic Cooperation and Development (OECD) issued a grim forecast, warning that tariff hikes initiated by the Trump administration could slow economic growth in the U.S., Canada, and Mexico. The report also predicted rising inflationary pressures, which could complicate the Federal Reserve's policy decisions.
China Benefits Amid U.S. Uncertainty
Despite Washington's trade restrictions, China has unexpectedly emerged as a beneficiary. Investors, worried about a potential U.S. slowdown, have been shifting capital overseas, strengthening China's position in global markets.
Further boosting confidence, the Chinese government recently announced subsidies for childcare expenses and a broad consumer stimulus program, helping accelerate retail sales growth in January and February.
Additionally, Donald Trump hinted at a potential visit by Chinese President Xi Jinping to the U.S. in the near future, sparking hopes for breakthrough negotiations that could ease trade tensions.
Asian Financial Markets Show Resilience
Hong Kong's financial markets also reacted positively to capital inflows. The Hong Kong dollar strengthened, hovering near the upper limit of its trading range against the U.S. dollar, while interbank lending rates in Hong Kong declined, signaling increased liquidity in the financial hub.
Mainland Chinese stocks (.SSEC) posted moderate gains, while the broader MSCI Asia-Pacific index climbed 1%. Other key regional markets also closed in positive territory:
- Seoul (.KS11)
- Sydney (.AXJO)
- Taipei (.TWII)
Nikkei Posts Best Gain in Three Weeks
The Nikkei (.N225) surged 1.5%, marking its best performance in three weeks, fueled by investor optimism and expectations of continued economic recovery in Asia.
Investors Seek New Growth Opportunities
Amid global economic uncertainty, China and Asian markets continue to attract capital, demonstrating relative resilience to market turbulence. Meanwhile, White House policies remain a crucial factor, with investors eagerly awaiting a potential Trump-Xi meeting that could bring positive shifts in trade relations.
U.S. Stock Market Stabilizes, but Uncertainty Remains
After volatile trading sessions, the U.S. stock market has managed to avoid further declines, but investor caution remains high. April looms ahead, bringing the implementation of new Trump administration tariffs, which could have significant economic repercussions and heighten market volatility.
Weak U.S. Data Weighs on Dollar and Bonds
Recent U.S. economic data disappointed analysts, with retail sales and industrial production falling short of expectations. This led to a weaker U.S. dollar and lower Treasury bond yields.
Amid these conditions, gold surged to a record high, reaffirming its status as a safe-haven asset.
Gold Hits Record High as Euro and Pound Strengthen
During the Asian trading session, gold prices reached an all-time high of $3,005 per ounce, driven by economic uncertainty and a weakening dollar, making the metal more attractive to global investors.
In forex markets, the euro remained above $1.09, reflecting the relative stability of the European economy, while the British pound reached a four-month high near $1.30, though it has yet to break through this key level.
