Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed

Tom Lee, CFA

VIDEO: Equities failed to follow thru from Friday’s bounce. We discuss several important events this week including the Biz Roundtable Tue and Wed CPI.

Please click below to view our Macro Minute (duration: 7:46).

Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed

Markets experienced a challenging day today, as the S&P 500 fell sharply by 2.7%, marking the worst daily decline since December 16, 2024, when markets dropped by nearly 3%.

  • Today’s downturn didn’t occur in isolation; stocks have been struggling under persistent pressure ever since the tariff war started.
    • Broad-based liquidation was particularly severe in technology stocks.
    • The ongoing administration commentary about anticipated economic pain has exacerbated investor fears.
  • Several economists exacerbated market fears by downgrading their forecasts due to tariff uncertainties.
    • Goldman Sachs notably revised its economic outlook downward.
    • Mark Zandi increased recession probability forecasts from 15% to 35%.
  • Canada’s new Prime Minister intensified trade concerns by adopting a tougher stance compared to Trudeau.
    • His combative rhetoric underscored determination with a stark assertion about winning in trade.
  • TSLA experienced a notable decline, down 15%, amid unusual external disruptions.
    • Coordinated vandalism at Tesla dealerships coincided with a significant cyberattack on X, also owned by Elon Musk, attributed to a state-level actor from Ukraine.
  • However, the upcoming week presents opportunities for market stability.
    • Investors are beginning to price in the potential magnitude of trade disruptions, likening their potential impact to Brexit.
    • This sentiment parallels Fed Chair Powell’s Jackson Hole remarks from 2022, highlighting necessary economic pain to curb inflation.
  • President Trump’s meeting with business leaders at the business roundtable on Tuesday will be closely watched.
    • Observers will be attentive to whether CEOs can influence White House tariff policies amid growing backlash, including opposition from Senator Rand Paul.
  • Important economic data this week will be critical for markets.
    • Tuesday’s January JOLTS report will provide insights into labor market trends, with weaker figures potentially beneficial for market sentiment.
    • Wednesday’s February core CPI report, with a consensus forecast of 0.30% MoM, will significantly impact market movements; lower-than-expected inflation could reinforce optimism around Fed rate cuts.
    • Thursday’s core PPI report and Friday’s continuing resolution deadline for government funding add further importance to the week’s events.
  • Mark Newton notes that despite today’s sell-off, signs of capitulation remain absent.
    • His cycle analysis, however, suggests we may be approaching market lows.
  • Today’s market reaction, particularly regarding Tesla, appears to have been an overreaction.
    • Jeff DeGraaf of RenMac highlighted that despite Tesla’s substantial equity decline, its credit default swap spreads barely moved, indicating limited credit market concerns.
  • The Federal Reserve’s implicit support (“Fed put”) seems increasingly probable.
    • The probability of a May rate cut surged to 54%, with markets now expecting 3.4 rate cuts this year compared to the Fed’s guidance of 2 cuts.

Bottom line: We believe today’s market decline was an overreaction. Stay on Target.

Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed

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Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed
Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed

Key incoming data March:

  • 3/3 9:45 AM ET: Feb F S&P Global Manufacturing PMI Tame
  • 3/3 10:00 AM ET: Feb ISM Manufacturing PMI Tame
  • 3/5 9:45 AM ET: Feb F S&P Global Services PMI Tame
  • 3/5 10:00 AM ET: Feb ISM Services PMI Tame
  • 3/5 10:00 AM ET: Jan F Durable Goods Orders Tame
  • 3/5 2:00 PM ET: Mar Fed Releases Beige Book Tame
  • 3/6 8:30 AM ET: 4Q F Non-Farm Productivity Tame
  • 3/6 8:30 AM ET: Jan Trade Balance Tame
  • 3/6 8:30 AM ET: 4Q F Unit Labor Costs Tame
  • 3/7 8:30 AM ET: Feb Non-Farm Payrolls Tame
  • 3/7 9:00 AM ET: Feb F Manheim Used Vehicle index Tame
  • 3/10 11:00 AM ET: Feb NY Fed 1yr Inf Exp Tame
  • 3/11 6:00 AM ET: Feb Small Business Optimism Survey
  • 3/11 10:00 AM ET: Jan JOLTS Job Openings
  • 3/12 8:30 AM ET: Feb CPI
  • 3/13 8:30 AM ET: Feb PPI
  • 3/14 10:00 AM ET: Mar P U. Mich. Sentiment and Inflation Expectation
  • 3/17 8:30 AM ET: Feb Retail Sales Data
  • 3/17 8:30 AM ET: Mar Empire Manufacturing Survey
  • 3/17 10:00 AM ET: Mar NAHB Housing Market Index
  • 3/19 9:00 AM ET: Mar M Manheim Used Vehicle index
  • 3/19 2:00 PM ET: Mar FOMC Decision
  • 3/19 4:00 PM ET: Jan Net TIC Flows
  • 3/20 8:30 AM ET: Mar Philly Fed Business Outlook
  • 3/20 10:00 AM ET: Feb Existing Home Sales
  • 3/24 8:30 AM ET: Feb Chicago Fed Nat Activity Index
  • 3/24 9:45 AM ET: Mar P S&P Global Manufacturing PMI
  • 3/24 9:45 AM ET: Mar P S&P Global Services PMI
  • 3/25 9:00 AM ET: Jan S&P CoreLogic CS home price
  • 3/25 10:00 AM ET: Mar Conference Board Consumer Confidence
  • 3/25 10:00 AM ET: Feb New Home Sales
  • 3/26 10:00 AM ET: Feb p Durable Goods Orders
  • 3/27 8:30 AM ET: 4Q T GDP
  • 3/28 8:30 AM ET: Feb PCE Deflator
  • 3/28 10:00 AM ET: Mar F U. Mich. Sentiment and Inflation Expectation
  • 3/31 10:30 AM ET: Mar Dallas Fed Manuf. Activity Survey

Economic Data Performance Tracker 2025:

Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed

Economic Data Performance Tracker 2024:

Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed

Economic Data Performance Tracker 2023:

Equities continue to sell-off given lack of visibility of tariffs clouds near-term outlook but odds rising of a dovish Fed

Disclosures (show)