Stocks fell deeper into tariff despair at Monday’s opening bell but started to climb early in the final trading session of the first quarter. It’s D-day minus two, and investors, traders and speculators are still trying to get their heads around the implications of President Donald Trump’s so-called Liberation Day.
At the closing bell, the Dow Jones Industrial Average was up 1% at 42,001, the S&P 500 added 0.6% at 5,611, and the Nasdaq Composite was off 0.1% to 17,299. While mixed today, all three indexes closed lower for the first three months of 2025.
The S&P 500 shed 4.6% from January to March to end a five-quarter winning streak. The Nasdaq lost 10.6% for the quarter, the Dow 1.2%.
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The Wall Street Journal reported on Sunday night that the administration “is scrambling to determine the specifics of its new tariff agenda ahead of its self-imposed deadline of Wednesday, weighing options as the president has promised to remake the American economy with a swath of new levies.”
President Trump has promised to use both reciprocal and industry-specific tariffs. Ideas include an across-the-board levy of up to 20% on basically all U.S. trading partners effective April 2 as well as 25% levies on automobiles and car parts effective April 3.
Canada and Mexico, the U.S.’s biggest trading partners, are considering retaliatory measures.
“April 2 has long been circled on investors’ calendars,” writes Michael Zezas, the global head of fixed-income research at Morgan Stanley. Zezas notes that beyond “fairer trade” as the goal and “reciprocity” as the governing principle, “little is known about what this policy will entail.
“This isn’t exactly reassuring to investors we talk to,” he observes. They’re “perplexed by the dynamic of tariff announcements, negotiations, delays, and shifting levels of implementation for Mexico, Canada, China, and some key products.”
Zezas is waiting until Wednesday to answer two questions. No. 1 is, “Do the announcements clarify tariff policy, turning it from an unknown to a known?” No. 2 is, “Are the tariff increases large enough to further erode the economic outlook?”
Economics and earnings
Goldman Sachs Chief Economist Jan Hatzius now sees a 35% probability the U.S. economy enters a recession during the next 12 months. That’s up from 20% on March 7.
The upgrade reflects a “lower growth baseline, the sharp recent deterioration in household and business confidence, and statements from White House officials indicating greater willingness to tolerate near-term economic weakness in pursuit of their policies.”
This week’s economic calendar is highlighted by the release of the March jobs report on Friday at 8:30 am Eastern Standard Time.
Goldman Sachs Chief U.S. Equity Strategist David Kostin cited “higher tariffs, weaker economic growth, and greater inflation” as he lowered his 12-month S&P 500 return forecast to 6% from 16%. That suggests a year-end level of 5,900 for the broad-based index.
Kostin cut his S&P 500 earnings per share (EPS) growth forecast to 3% from 7% for 2025 and to 6% from 7% for 2026. According to Kostin, “Slowing growth and rising uncertainty warrant a higher equity risk premium and lower valuation multiples for equities.” Kostin’s forecasts are lower than consensus estimates for the S&P and for earnings growth.
According to John Butters of FactSet, the consensus prediction among analysts is that the S&P 500 will rise 21.3% over the next 12 months. The calculation is based on “the difference between the bottom-up target price and the closing price for the index” as of March 27.
Analysts expect tech stocks (+30.4%), consumer discretionary stocks (+27.0%) and communication services stocks (+25.1%) to lead the way higher from here.
Consumer staples stocks (+11.1%), energy stocks (+12.0%) and financial stocks (+12.2%) will lag among the 11 S&P 500 sectors.
“It is interesting to note,” Butters writes, “that while the price of the S&P 500 has declined by 4.4% since the end of February, the bottom-up target price has decreased by only 0.5% during this same period.”
The question on Butters’ mind is whether analysts are “waiting for the upcoming earnings season to revise their company-level target prices.”
It’s a quiet week on the earnings calendar. Things will pick up next Friday, April 11, when JPMorgan Chase (JPM), Morgan Stanley (MS) and Wells Fargo (WFC) report first-quarter results.
CRWV and AI
It’s the biggest initial public offering (IPO) of the year so far, and AI-focused cloud computing platform CoreWeave (CRWV) has failed to meet expectations.
That’s despite the fact that Nvidia (NVDA), the leader of the AI revolution, bought $250 million of CRWV at the IPO price.
As Renaissance Capital details in its weekly IPO report, CRWV shares were priced “well below the range to raise $1.5 billion at a $22.4 billion market cap,” traded flat on Friday and sank 7.3% on Monday.
“The company grew revenue more than 8-fold from a year earlier to $1.9 billion in 2024,” RenCap notes, “and has signed multi-year multi-billion dollar contracts with leading names such as Microsoft and OpenAI.”
Microsoft (MSFT) accounted for more than 60% of CoreWeave’s revenue last year, and capital-intensive infrastructure investments leave it with “a large negative free cash flow.”
“There’s a lot of headwinds in the macro,” said CEO Michael Intrator on CNBC. “And we definitely had to scale or rightsize the transaction for where the buying interest was.”
NVDA was down 1.2% on Monday, while MSFT lost 0.9%.