March 28th Market Overview

Happy Friday.

Markets took a blow today as hot inflation data and tariff worries sent stocks down further. Core PCE hit 2.8%, above expectations, while consumer inflation fears reached levels not seen since the air of The Fresh Prince of Bel Air.

Most folks keeping the power dry until the big April 2nd tariff date.


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Let's dig in...

Executive Summary

• Markets took a beating today as indices tumbled on trade uncertainties and hotter inflation data
  

• February's core PCE price index came in at 2.8%, above the 2.7% forecast, reducing hopes for imminent rate cuts
  

• Consumer sentiment fell sharply with long-term inflation expectations reaching levels not seen since 1993
  

• Canadian Prime Minister Mark Carney told President Trump that Canada will implement retaliatory tariffs after the April 2 announcements
  

Market Overview

Key Market Drivers

1. Inflation Exceeds Forecasts: February's core PCE reached 2.8% against 2.7% expected, with monthly growth of 0.4% versus the predicted 0.3%
   

2. Consumer Outlook Darkens: University of Michigan's March reading showed long-term inflation expectations jumping to 4.1%, a level not seen since 1993
   

3. Tariff Tensions Mount: Markets remain on edge ahead of Trump's April 2 announcements, with Canada already pledging retaliatory measures
   

4. Earnings Warnings Emerge: Multiple companies led by $LULU ( ▼ 0.49% ) point to weakening consumer spending affecting their outlook
   

Stock Spotlight

Lululemon ($LULU ( ▼ 0.49% ) ) shares plunged after disappointing guidance overshadowed their earnings beat. Despite Q4 EPS of $6.14 (vs $5.85 estimated) and revenue of $3.6B, the company's FY25 outlook missed expectations. Raymond James downgraded the stock to Market Perform, citing slowing U.S. growth despite innovation acceleration.

CoreWeave ($CRWV ( ▼ 0.32% ) ) opened at $39 in its Nasdaq debut after pricing its IPO at $40. The AI tech seller raised $1.5 billion, making it the largest U.S. tech IPO since 2021.

Rocket Lab ($RKLB ( ▼ 2.55% ) ) gained after being included in the U.S. Space Force's pool of launch providers and winning a $5.6B national security launch deal with Stoke Space. Citi issued a buy rating with a $33 price target.

U.S. Steel ($X ( ▲ 2.12% ) ) jumped after reports that Nippon Steel increased its investment offer to $7 billion in upgrades to Rust Belt plants, up from the previously pledged $2.7B, hoping to save their $14B merger deal.

Big Name Updates

Tesla ($TSLA ( ▲ 0.02% ) ) is on track to end its record-setting nine-week losing streak with a gain for the week. Deutsche Bank maintained its buy rating but lowered the price target to $345 from $420, citing weaker demand trends and slower Model Q launch.

Meta ($META ( ▼ 2.22% ) ) received support from Citi, which reiterated its buy rating with a $780 price target, dismissing concerns about advertiser slowdown and affirming that advertiser demand remains strong.

Alphabet ($GOOGL ( ▲ 1.23% ) ) refuted claims about ending open source Android, explicitly committing to keep AOSP open. Nevertheless, shares dropped amid the broader tech sell-off.

Amazon ($AMZN ( ▼ 1.49% ) ) saw AWS China denying 10% layoff claims, calling the reports "seriously inaccurate" and affirming ongoing recruitment efforts.

Other Notable Company News

AppLovin ($APP ( ▼ 5.55% ) ) found defenders after yesterday's short report hit. Loop Capital maintained a Buy rating with a $650 price target, stating their checks still point to strong fundamentals, while Wells Fargo reiterated their buy rating.

Alibaba ($BABA ( ▲ 5.79% ) ) received a price target increase to $170 from $140 from Mizuho, which maintained an outperform rating and named it a top pick in the Asia Internet market, citing strong positioning in scaling models toward AGI.

Eli Lilly ($LLY ( ▲ 3.0% ) ) faced a setback as Kisunla failed to gain EU approval for Early Alzheimer's treatment.

Cadence Design Systems ($CDNS ( ▲ 0.42% ) ) was named Morgan Stanley's top pick, replacing ARM, with the firm noting all three names—ARM, CDNS, and SNPS—offer mid to long-term value.

Intel ($INTC ( ▲ 2.89% ) ) confirmed receipt of approximately $1.9B from SK Hynix in the second closing of their NAND deal.

Sector Watch

Bond Market

Bond yields climbed as markets digested the hot inflation data. The jump in long-term consumer inflation expectations to 4.1% has markets dialing back hopes for aggressive Fed rate cuts this year. Despite the equity sell-off, bonds saw limited safe-haven demand as inflation concerns took center stage.

Policy Watch

Trump's April 2 tariff announcement looms large over markets. His recent 25% tariff on foreign-made cars has already rattled auto stocks. The Wall Street Journal reported that Trump warned automaker CEOs against raising prices in response to these tariffs, suggesting such moves would face administration pushback.

BlackRock's Rick Rieder observed that market sentiment has shifted from "animal spirits" to "animals in hibernation," potentially leading to slower economic growth in the coming quarters.

What to Watch

1. Trump's Tariff Plans: April 2 announcements will set market tone

   • Watch the breadth and depth of new tariffs

   • Monitor international responses and potential trade partner retaliation
     

2. Inflation Data Drop: Upcoming March CPI and PPI will be market-moving

   • These numbers will reshape Fed rate cut expectations

   • Persistent high readings could push rate cuts further into the future
     

3. Earnings Season Kickoff: Mid-April reports will reveal corporate resilience

   • Key focus on consumer spending commentary

   • How are companies handling the tariff and inflation headwinds?
     

4. Crypto Signals: Bitcoin heads for first three-week decline of 2025

   • Bitcoin hovering near $83,850 with fading momentum

   • Ether down 15% for the month, suggesting risk appetite may be waning

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- John