EU and Asia stocks outperform as a result
S&P 500 index dips 1%; U.S. stocks volatile; Euro, China markets rise on stimulus. Tariffs raise stagflation fears. Fed speeches ahead
United States and US Index
The U.S. stock market faced volatility, with the S&P 500 down over 1% on Tuesday amid recession concerns. The Dow Jones Industrial Average climbed 0.4% to 42,711.74, while the Nasdaq Composite gained 0.25% to 18,330.77. The Russell 2000 fluctuated, reflecting broader uncertainty. The U.S. dollar (DXY) index dropped to its lowest level since early December, indicating weakening confidence in the currency. Treasury yields also declined, with the 10-year Treasury yield down to 4.20%.
Economic indicators show mixed signals: February’s private sector payrolls, ISM and S&P Global service sector surveys, and January’s factory goods orders are due this week. The Federal Reserve’s Beige Book will provide further insight into economic conditions. Consumer confidence has soured due to potential tariff-driven inflation, while U.S. manufacturers report growth approaching stall speed.
Tariffs and Trade
The Biden administration announced new tariffs on imports from Mexico, Canada, and China, prompting retaliatory measures from major trading partners. Economists warn that these tariffs could drive inflation and disrupt supply chains, increasing the risk of stagflation. Ford and General Motors stocks rose 2% and 2.9%, respectively, amid hopes of tariff modifications.
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Stoxx Europe 600 Index outperforms
Germany’s decision to ease debt limits and commit nearly €500 billion to infrastructure and defense spending sent European markets soaring. The Stoxx Europe 600 index outperformed the S&P 500 by over 10% in 2025, while European defense stocks outpaced the Nasdaq 100 by 35%. Germany’s DAX index rose 3%, driven by the government’s commitment to rearmament.
Bond markets, however, faced turbulence, with German bund yields surging as traders reacted to fiscal policy shifts. European investors appear to be reallocating capital from Wall Street to domestic markets, bolstered by improved regional economic conditions.
Asia and Hang Seng Index climb
China announced additional fiscal stimulus to sustain its 5% GDP growth target amid the ongoing trade war with the U.S. Asian markets responded positively: Hong Kong’s Hang Seng Index climbed 2.8%, South Korea’s Kospi rose 1.2%, and Japan’s yen strengthened to its highest level of the year against the dollar.
Corporate Highlights
CrowdStrike Holdings issued a weak earnings outlook following last year’s software crash.
Microsoft received clearance from the UK’s antitrust authority for its $13 billion investment in OpenAI.
Mars Inc. plans the largest corporate bond sale of the year to fund its acquisition of Kellanova.
Foot Locker Inc. forecast weaker-than-expected earnings as budget-conscious consumers limit spending.
Bayer AG expects a third consecutive year of profit decline due to litigation, falling agriculture prices, and new competition in pharmaceuticals.
Oil and Commodities
Oil markets remained steady, with prices fluctuating amid geopolitical tensions and tariff impacts. Phillips 66 is engaged in a proxy battle with activist investor Elliott Investment Management over governance and strategy.
Key Events to Watch
Eurozone GDP and retail sales (Thursday)
European Central Bank rate decision (Thursday)
U.S. trade data and jobless claims (Thursday)
U.S. jobs report (Friday)
Fed Chair Jerome Powell’s keynote speech (Friday)
Additional Federal Reserve speakers throughout the week
Market Summary
Dow Jones Industrial Average: 42,711.74 (+0.45%)
S&P 500: 5,772.26 (+0.10%)
Nasdaq Composite: 18,330.77 (+0.25%)
10-year U.S. Treasury yield: 4.20% (-0.04%)
Bloomberg Dollar Spot Index: -0.8%
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