Stock Market Week March 3: What to Expect
This article offers a comprehensive analysis of last week’s stock market performance and examines the potential impact of upcoming tariffs on the market from March 3-7. It highlights key macroeconomic events for investors to monitor during the week of March 3. Additionally, the article provides a technical analysis of stock market indices and proposes an investment strategy for the forthcoming week.
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Key Points
Geopolitical Tensions and Economic Indicators Signal Market Volatility
In the past week, U.S. equities experienced notable fluctuations, ultimately closing higher on Friday. The S&P 500 and Nasdaq recorded gains of 1.59% and 1.62%, respectively, while the Dow Jones Industrial Average increased by 1.39%.
The market’s trajectory was momentarily disrupted by a tense interaction between President Donald Trump and Ukraine’s President Volodymyr Zelenskyy in the Oval Office, which sparked concerns about escalating geopolitical risks. Compounding these concerns were President Trump’s renewed tariff threats, which prompted retaliatory warnings from China, thereby increasing uncertainty, particularly for large technology companies.
Economic data presented mixed signals. While core Personal Consumption Expenditures (PCE) inflation eased to 3.7% as anticipated, consumer spending saw a decline of 0.2% in January. This backdrop of heightened volatility, which surged by 8.52% over the past five trading days, contributed to the S&P 500 and Nasdaq experiencing their steepest monthly declines since April 2024 and September 2023, respectively, down by 1.20% and 3.62%. However, the Dow managed to end the five-day trading period with a modest gain of 0.80%.
The most significant macroeconomic development of the week was the Atlanta Federal Reserve’s GDPNow model’s substantial downgrade of the U.S. GDP growth for Q1 2025. The growth estimate was drastically revised from +2.3% to -1.5%. This sharp adjustment was primarily driven by a severe contraction in net exports’ contribution to GDP, which plummeted from -0.41% to -3.70%. Additionally, consumer spending growth weakened, dropping from 2.3% to 1.3%.
These developments suggest that the economy is decelerating more rapidly than expected, with key growth drivers such as trade and consumer spending showing signs of distress. Should the economy contract to this extent, it could herald the onset of a recession, particularly given the challenges posed by rising borrowing costs and persistent inflation.
On a more optimistic note, the probability of an interest rate cut on June 18, 2025, has increased to 57.7%.
In my assessment, the stock market remains in a precarious position. The numerous geopolitical uncertainties and the impending tariffs set to take effect on March 4, 2025, are likely to exert additional downward pressure on the market.
Anticipated Economic Impact of New Tariffs and Historical Market Recessions
The recent imposition of new tariffs is projected to have a swift and noticeable impact on the U.S. economy. We expect to see a reduction in the U.S. GDP ranging from 1% to 1.5% as early as the second quarter of 2025. Additionally, the decline in economic growth could be exacerbated by potential retaliatory measures from key trading partners such as Canada, China, Mexico, and the European Union. As these tariffs are set to take effect on March 4, marking the conclusion of the first quarter of 2025, the full extent of their negative impact will likely manifest in the second quarter. Consequently, it is anticipated that many analysts will begin to adjust their earnings per share (EPS) forecasts for companies downward.
In examining historical stock market performance during past U.S. recessions, the S&P 500 Index has consistently shown significant declines. Notable instances include:
You can also read my previous article related to the impact of tariffs on the U.S. industries here >>>
Market Analysis: Technical Indicators and Trading Strategy
Let’s take a quick look at the technical charts. Starting with the Dow Jones Industrial Average Index, it posted a solid gain of +0.80% over the past week. The last trading day on February 28 showed a significant upward movement, supported by high trading volume. The Index has surged past the 100-day and 50-day moving averages, entering bullish territory. However, I’m cautious about taking long positions just yet. The positive momentum was likely influenced by options expiration at the end of February, which can heighten trading volume and volatility as traders adjust their positions—even though February 28 was not a quadruple witching day.
Dow Jones Industrial Average Index, Daily Chart
Turning to the S&P 500 Index, we saw a robust positive momentum on the last trading day, accompanied by substantial volumes. The Index approached the 100-day moving average, slightly breaching the 5,952.6 mark. However, as I’ve highlighted in previous articles, negative sentiment may gradually surface in the coming weeks unless there’s unexpected positive economic data. I advise investors to consider selling stocks during bullish market days to capitalize on gains.
S&P 500 Index, Daily Technical Chart + Forecast
Finally, examining the Nasdaq 100 Index, it presents the most bearish picture. Despite a strong positive move last Friday, the Index couldn’t surpass the 100-day moving average, which now stands as a formidable resistance level at 21,070.8.
Nasdaq 100 Index, Daily Technical Chart + Forecast
Upcoming Macroeconomic Data Releases: March 3-7
Let’s dive into the key macroeconomic data scheduled for release during the week of March 3-7.
On March 3, the PMI Manufacturing data is expected, with forecasts holding steady at 51.6. Any decline in the index could potentially lead to negative sentiment in the stock market. Additionally, the construction spending report for January 2025 is anticipated, with market consensus predicting a slowdown from 0.5% to 0.2% month-over-month. While March 3 is likely to be a relatively quiet day for the stock market, negative momentum may emerge on March 4 if the proposed tariffs are implemented.
On March 5, January’s Factory Orders, Durable Goods Orders, and ISM Service Index are expected to be released. All three indicators are predicted to show positive improvements. However, despite the anticipated positive data, I would advise against going long on stocks. In my view, geopolitical risks and tariffs may exert more negative pressure on investor sentiment than any potential positive effects.
On Thursday, March 6, attention will turn to the Initial Jobless Claims report, with the consensus indicating an increase from 242,000 to 236,000. On Friday, March 7, U.S. Nonfarm Payrolls will rise from 143,000 to 156,000 in February. The Federal Reserve’s Monetary Policy report will also be released in the evening (Central European Time), with no significant changes expected.