March 21st Market Overview

Happy Friday.

It’s the weekend. Markets got hammered early, then Trump threw a bone—maybe softer tariffs by April 2.

FedEx and Nike earnings say the economy isn’t liking the current environment. Boeing’s up on an Air Force deal.

Contracts for stock index futures, stock index options, stock options, and single stock futures expire simultaneously making today a volatility session (quadruple witching).

Let's dig in...

Executive Summary

• U.S. stocks trimmed session losses but remained in negative territory as tariff uncertainties continue weighing on sentiment
  

• FedEx ($FDX) and Nike ($NKE) warned of economic headwinds, citing industrial slowdown and consumer weakness
  

• The Fed this week maintained its projection for two rate cuts despite revising inflation forecasts upward and growth expectations downward
  

• Quadruple witching - over $4.7 trillion in options exposure expiring today
  

Market Overview

Key Market Drivers

1. Tariff Uncertainty: President Trump's April 2 "liberation day" looms over markets, with Michael Green of Simplify Asset Management noting companies are "increasingly citing confusion and uncertainty around planning and capital spending" leading to economic slowdown.
   

2. Earnings Warnings: Economic bellwethers sounded alarms with FedEx ($FDX) slashing guidance due to "continued weakness and uncertainty in the U.S. industrial economy" and Nike ($NKE) forecasting double-digit sales declines.
   

3. Fed Policy Tension: While the Fed maintained its projection for two rate cuts, Chair Powell acknowledged tariffs would likely drive up prices while the central bank simultaneously lowered growth forecasts.
   

4. Quadruple Witching Volatility: Goldman Sachs estimates more than $4.7 trillion of notional options exposure expired today when stock options, index futures, index options, and single-stock futures all terminated simultaneously.
   

Stock Spotlight

Lennar ($LEN ( ▼ 0.93% ) ) declined after projected quarterly orders fell short of estimates. CEO Stuart Miller noted February showed a lack of "seasonal pickup" with "actionable demand limited by affordability."

FedEx ($FDX ( ▼ 1.47% ) ) moved lower after cutting full-year earnings guidance from $19-20 per share down to $18-18.60. CFO John Dietrich cited "weakness and uncertainty in the U.S. industrial economy."

Tesla ($TSLA ( ▲ 0.7% ) ) moved up following CEO Elon Musk's all-hands meeting where he urged staff to "hang onto your stock." The company remains on track for a nine-week losing streak.

Nike ($NKE ( ▼ 1.05% ) ) declined despite beating quarterly expectations. The athletic wear maker warned of "double-digit" current quarter sales declines, with fourth-quarter results projected at the "low end of the mid-teens range."

Big Name Updates

Tesla ($TSLA ( ▲ 0.7% ) ) shares have moved lower year-to-date as Musk's political activities raise investor concerns. Morgan Stanley's Adam Jonas trimmed his price target, citing a "buyers strike" from negative brand sentiment.

Boeing ($BA ( ▼ 2.36% ) ) moved higher after President Trump awarded the company a contract to build the U.S. Air Force's next-generation fighter jet.

Technology sector tracks for its fifth straight weekly loss, the first such streak since May 2022. Laggards include Accenture ($ACN ( ▼ 0.39% ) ), Nvidia ($NVDA ( ▲ 1.35% ) ), Micron ($MU ( ▲ 0.03% ) ), Applied Materials ($AMAT ( ▲ 0.64% ) ), and Gartner ($IT ( ▼ 1.07% ) ).

Other Notable Company News

Lockheed Martin ($LMT ( ▼ 1.21% ) ) shares declined after losing the U.S. Air Force fighter jet contract to Boeing.

Micron Technology ($MU ( ▲ 0.03% ) ) moved lower as margin weakness (37.9% vs 38.4% expected) overshadowed better-than-expected sales results.

PDD Holdings ($PDD ( ▼ 0.75% ) ), parent of e-commerce site Temu, declined following Nomura's downgrade to neutral, citing U.S. business slowdown amid geopolitical tensions.

Cleveland-Cliffs ($CLF ( ▼ 2.85% ) ) moved down after the Minnesota Star Tribune reported the steel producer would idle two factories, cutting hundreds of jobs due to reduced automaker orders.

The iShares MSCI Turkey ETF ($TUR ( ▼ 0.87% ) ) declined following Istanbul Mayor Ekrem Imamoglu's arrest, President Erdogan's top political rival.

Sector Watch

Bond Market

• Mortgage rates remain anchored around 6.6%, dampening spring housing market activity
  

• Quadruple witching expiration amplified fixed-income volatility alongside equity markets
  

• Bond traders pricing in shifting recession probabilities following mixed economic signals

Policy Watch

NY Fed President John Williams emphasized the difficulty in forecasting economic evolution amid policy shifts

• Williams specifically highlighted uncertainties from changing fiscal, trade and immigration approaches

• President Trump increased pressure on the Fed, suggesting rate cuts should accompany tariff implementation

• Market participants increasingly divided on Fed timing with April 2 tariff deadline approaching

• Treasury market showing widening divergence between short and intermediate-term yield expectations

What to Watch

1. April 2 Tariff Implementation: President Trump has dubbed this "liberation day" when reciprocal tariffs will be imposed.

   • Watch for details on affected countries, products, and potential exemptions

   • Monitor market reaction and corporate guidance adjustments

   • Pay attention to potential retaliation from trading partners
     

2. Next Week's Economic Data: Several crucial indicators will provide fresh signals on economic health.

   • Consumer confidence readings will reveal whether sentiment weakness is translating to spending changes

   • Manufacturing and services PMI data will show if business activity is further deteriorating

   • Housing market indicators could signal if high rates continue dampening the spring buying season
     

3. Earnings Warning Follow-Through: Whether more companies follow FedEx and Nike with warnings.

   • Transportation sector companies may provide additional clues about freight demand

   • Consumer-facing businesses could signal broader spending shifts

   • Listen for specific mentions of tariff impacts in upcoming reports and guidance

P.S. 

Please fuel my coffee pot with a quick click to our sponsor today.

Thanks for reading 🙂

- John