March 3rd Market Overview

Happy Monday.

Markets tumbling today as President Trump confirmed 25% tariffs on Canada and Mexico will begin tomorrow, slashing us all in the heart for a last-minute deal. Big selling volume on the Q’s into the afternoon.

Let's dig in...

Executive Summary

• Markets closing deep in the red after Trump confirmed tariffs on Canada/Mexico start tomorrow, with “reciprocal tariffs” beginning April 2
  

• Tech sold off heavily with $NVDA ▼ 9.43% leading declines on reports of Chinese buyers circumventing export controls
  

• Crypto assets jumped following Trump’s announcement of a U.S. Strategic Crypto Reserve featuring Bitcoin and Ethereum - yet are getting crushed this afternoon loosing almost all their previous 24h gains
  

• Manufacturing data showed modest expansion at 50.3 vs 50.6 expected, with concerning drops in new orders and employment

Market Overview

Key Market Drivers

1. Tariff Implementation: Trump confirmed today, “Tariffs, 25% on Canada and 25% on Mexico, will start tomorrow,” while also announcing “reciprocal tariffs” on “external product” beginning April 2.
   

2. Manufacturing Weakness: ISM Manufacturing registered 50.3, with new orders falling to 48.6 and employment dropping to 47.6. One respondent noted, “The incoming tariffs are causing our products to increase in price.”
   

3. Global Data Mixed: Chinese Caixin Manufacturing PMI surprised at 50.8 vs 50.3 expected, while Eurozone inflation ran hotter at 2.4% year-over-year.
   

4. Analyst Caution Growing: BCA Research downgraded U.S. stocks to underweight, citing “ebullient growth expectations,” while Q1 earnings estimates have been cut 3.5%, exceeding historical averages.
   

Stock Spotlight

• $NVDA ▼ 9%: Tumbled on WSJ reports of Chinese buyers circumventing export controls for Blackwell chips, despite news of testing chips on Intel’s 18A process.
  

• $TSLA ▼ 3.97%: Reversed early gains despite Morgan Stanley naming it top U.S. auto pick with $430 target, highlighting its transition to “a highly diversified play on AI and robotics.”
  

• $INTC ▲ 2%: Rose in todays early session on reports $NVDA and $AVGO are testing chips on its 18A process, despite a six-month delay for some customers. Closing in the red around 4%

Big Name Updates

• $MSFT users hit by widespread outages affecting M365, Outlook, and Teams services.
  

• $DIS's ESPN plans to exit its $550M annual MLB TV contract, walking away from the final three years due to declining value in baseball rights.
  

• $CMG upgraded by Morgan Stanley to overweight with price target to $70 from $65, citing “automation and unit growth support long-term upside.”
  

• $MOS upgraded to overweight by JPMorgan with target raised to $29 from $26 on “higher fertilizer prices and sales volume recovery.”

Other Notable Company News

• $KR CEO resigned following a Board investigation into personal conduct violating company ethics policy.
  

• Honda shifted plans to build its new Civic Hybrid in Indiana instead of Mexico, directly citing U.S. tariff concerns.
  

• $LUV shares fell after JPMorgan’s downgrade to underweight, with analyst Jamie Baker stating “Southwest’s best margin and ROIC days lie in the past.”
  

• $SMCI announced a third campus in Silicon Valley, expanding manufacturing capacity.

Sector Watch

Bond Market

• Treasury yields fell as investors sought safety amid tariff concerns

• 10-year yield dropped 5.5 basis points to 4.174%

• Growth worries currently outweighing inflation fears

• Chris Rupkey of FWDBONDS warned: "Whether the stock market can survive this change remains to be seen"

Policy Watch

Tariffs:

• 25% tariffs on Canada and Mexico start tomorrow

• Additional "reciprocal tariffs" on unspecified "external product" begin April 2

Crypto Initiative:

• Trump announced Strategic Crypto Reserve

• White House Cryptocurrency Summit scheduled for March 7

• Stated goal: "Make sure the U.S. is the Crypto Capital of the World"

What to Watch

1. Tariff Details and Retaliation:

   • Commerce Department guidance on implementation specifics

   • Retaliatory measures from Canada and Mexico that could escalate tensions

   • Market sectors most vulnerable to supply chain disruptions

2. Friday’s Jobs Report:

   • Coming after today’s weak manufacturing employment data

   • Key indicator for Fed policy direction

   • Could determine market sentiment for remainder of month

3. Crypto Policy Momentum:

   • March 7 White House Cryptocurrency Summit could provide regulatory clarity

   • Implementation timeline for the Strategic Crypto Reserve

   • Potential institutional adoption following government endorsement

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Thanks for reading 🙂

- John