Daily Commentary
Commentary prepared by Alloya Investment Services, a division of the wholly owned CUSO of Alloya Corporate Federal Credit Union. Alloya Investment Services is a leading broker/dealer consultant to credit unions.
Friday, March 14, 2025 at 8:00 am CT
Commentary prepared by Tom Slefinger, Market Strategist
Market Indications
Other Market Indicators
| Market Indicators | ||
|---|---|---|
| 2s/5s Tsy Spread | 0.09 | +0.01 |
| 2s/10s Tsy Spread | 0.33 | +0.02 |
| 2s/30s Tsy Spread | 0.65 | +0.02 |
| DJIA-30 | 40,813.57 | -537.36 |
| S&P-500 | 5,521.52 | -77.78 |
| NASDAQ | 17,303.01 | -345.44 |
| Dollar Idx | 103.62 | -0.20 |
| CRB Idx | 303.01 | -0.76 |
| Gold | 2,996.29 | +7.45 |
Daily Commentary
Recap – TGIF! It was another red day in the equity markets. The S&P 500 dropped 1.4% and is now down 10% from its recent high. The S&P now joins the Nasdaq in what is called a correction (down at least 10% from the high). Notably, this was the seventh quickest move to official correction terrain since 1929. For the day, the Nasdaq fell 2% and is now down 14% from its record high in February. The Dow dropped 1.3% while the small cap Russell 2000 declined 1.62%.
Moving forward, investors are wondering if the correction is the beginning of something worse or the end. It all depends on the tariffs. Yesterday the president doubled down on steel and aluminum tariffs, as well as reciprocal tariffs that begin April 2 – and threatened a 200% levy on European Union (EU) wine imports in response to the EU's response. President Trump said he would not "bend". So far, the only thing that seems to be bending is the stock market.
The 10-year Treasury yield reversed lower yesterday – up +3 basis points at one point but closed with a -4 basis point drop.
I should also point out that the credit market is starting to crack, finally playing catch-up to the equity space – high yield spreads have blown out +56 basis points in just the past month to a six-month high of 322 basis points. The investment grade market has shown a bit more resilience, having seen spreads widen +13 basis points to +94 basis points.
Elsewhere, in the past three months, the DXY dollar index has succumbed to a -5% decline. This is pure fodder for the gold price, which closed at a record high of $2,989 per ounce yesterday.
In the good news column, wholesale prices came in lower than expected (-0.1% readings in the headline and core Producer Price Index (PPI) consumption deflators in February) but as usual the devil was in the details. Based on the PPI inputs, the Fed’s preferred inflation metric the Personal Consumption Expenditures (PCE) index is not expected to show a further decline. And let’s not forget, that is pre-March tariff data. So the big question for the markets is what happens in the post-tariff environment.
We just saw a pullback in small business confidence via the National Federation of Independent Business (NFIB) with the uncertainty measure near the highest level on record. A separate survey from large firms via the Business Roundtable showed reductions in hiring and capex spending plans. As Apollo’s Torsten Slok aptly put it:
“If you are waiting and seeing, then you are not buying a new car or going on vacation, and if you are a business, then you are not hiring or spending money.”
This is how high and rising uncertainty on its own can manage to generate the conditions for an economic recession.
As we end a somewhat chaotic week the only economic release is the University of Michigan consumer sentiment reading.
Have a great day!
Economic Calendar
March 10 - 14, 2025: The Week Ahead
Future Fed Expectations
Source: Bloomberg
| Select Probabilities based on the Futures | |
|---|---|
| Probability of Fed Funds rate CUT on March 19, 2025 | -04% |
| Probability of Fed Funds rate CUT on May 7, 2025 | -39% |
**All quoted rates are indications and are subject to change without notice.
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