Stocks Down On Friday And For The Week, All Eyes On Wednesday's Tariff Announcements And Friday's Jobs Report Stocks closed sharply lower on Friday, dragging the indexes down for the week. Friday's hotter-than-expected (albeit not by much) Personal Consumption Expenditures (PCE) index (the Fed's preferred inflation gauge) showed headline inflation up 0.3% m/m, which was in line with last month and the consensus, while the y/y rate came in at 2.5%, also in line with last month and the consensus. The core rate (ex-food & energy) however, was up 0.4% m/m vs. last month's 0.3% and views for the same, while the y/y rate rose to 2.8%, up from last month's upwardly revised 2.7% (from 2.6%), and estimates for 2.7%. While it wasn't a huge increase, it was a bit of a disappointment given the last 3 inflation reports (CPI, PPI and the previous PCE) all showed the core rate had eased by two-tenths of a percent for each, raising hopes that progress on inflation had finally resumed. That report alone was not likely the sole cause for Friday's pullback. But that, in combination with the impending tariff announcements on April 2nd, have some investors bracing for the worst. (Although, if the 'worst' doesn't come, that could potentially lead to an upside surprise.) What we know about tariffs so far, based on comments by President Trump last week, are that he's ready to levy a 25% tariff on imports from any country that purchases oil or gasoline from Venezuela; he announced that there'll be a 25% tariff on imported autos; and he suggested that he might reduce tariffs on China if they can help approve a sale of TikTok. While he said he would "probably be more lenient than reciprocal" on tariffs come April, the aforementioned comments suggest otherwise. But we shall see. For example, U.S. Treasury Secretary Scott Bessent said, "I am optimistic that on April 2, some of the tariffs may not go on because a deal is pre-negotiated, or once countries receive their reciprocal tariff number, right after that, they will come to us and want to negotiate it down." But as I mentioned last week, it's important to know that imports make up only about 15% of U.S. GDP. Moreover, it's highly unlikely that there will be a commensurate decrease in spending in relation to the tariffs. It's also unlikely that all of the tariffs will result in pass-through price increases. Additionally, there's also the substitution effect of people simply switching to domestic products. In other news, Friday's Consumer Sentiment Index slipped to 57.0 vs. last month's 57.9 and estimates for the same. The year-ahead inflation expectations (which is part of that report) put the pace at 5.0%, up from last month's 4.9%. This week, we'll get our usual slate of economic reports. But the main event will be Friday's (4/4) Employment Situation Report by the Bureau of Labor Statistics (BLS). A solid report would underscore the Fed's narrative of a strong economy and labor market, while a weak one would undercut it. Last month's (February) unemployment rate came in at 4.1%. Per the previous week's FOMC Announcement, the Fed sees the unemployment rate rising slightly to 4.4% in 2025, up from December's 2025 estimate of 4.3%. Looking further out, they see it at 4.3% in 2026, and 4.3% in 2027.
Between Wednesday's tariff announcements, Friday's jobs report, and all of the jockeying and position squaring in between, this week looks like it will be a busy one. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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