Market Minute

Weekly analysis from the FS Investments Research team
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March 10, 2025

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Equities

U.S. equities plummeted amid a rollercoaster of policy uncertainty and softer macroeconomic data, as the S&P 500 finished near a 6-month low. The Nasdaq 100 fell -3.45% and entered correction territory as the policy environment has ruptured the previously dominant momentum trade. Perhaps the most alarming message sent by traders came in the lack of a rally even when tariffs were delayed, demonstrating the uncertainty gripping markets. Ironically, U.S. Q4 earnings have been quite strong, with S&P 500 EPS rising 14% y/y compared to a 7% expectation. International equities continued to perform better, with the big news last week being Germany’s plan to scrap their “debt brake” to invest in defense and infrastructure, sending bond yields and the Euro higher while stocks were flat.

Fixed income

The U.S. yield curve steepened as traders priced more Fed cuts into the curve while long-term rates were up modestly. The market now sees three rate cuts this year, driving the two-year yield below 4% for the first time since October. Rate volatility has returned with a vengeance amid policy uncertainty, with the MOVE Index rising to a four-month high. Both core fixed income and credit markets declined on the week.

Commodities

Crude oil traded lower for most of the week, with WTI ended at $67.04/bbl and Brent dipping below $70/bbl for the first time since September. Prices are being hit from both ends, as OPEC+ begins to slowly reverse production cuts and demand concerns increase amid a new trade war. Copper shot higher to a four-month high on potential U.S. tariffs on the metal. Gold continues to be the favored trade amid policy uncertainty, rising 2.30% last week.

Economic overview

Economic data are beginning to show the impacts from new federal policies. The ISM Manufacturing Index fell slightly to 50.3, while the Prices Paid index surged. Monthly layoffs more than doubled from last year, mostly driven by job losses among federal workers. While the headline job gain of 151k in the payrolls report was roughly in line with expectations, details were somewhat soft. The unemployment rate rose a tenth to 4.1%, and the percent of workers who report being “part time for economic reasons” jumped to 3%, the highest since 2021.