Morning Roundup

By Mark Masterson on February 27, 2025

Good morning,

Below are the news items moving markets today:

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Executive Summary

Markets working on a bounce back day after being down a few days.

I’ll look at market sentiment below in the charts.

First – jobless data weaker this morning, GDP steady, and inflation data a little higher…..

• Initial claims came in at 242K vs consensus 220K and prior week’s upwardly revised 220K (was 219K).
• Meanwhile, second reading of Q4 GDP rose 2.3% Q/Q, in line with consensus and prior reading of 2.3%. On an annualized basis, GDP standing at 2.5%, in line with expectations. Q4 reading again driven by strong consumer and government spending though partly offset by a decrease in investment.

At the moment – the data matters less than the headlines.  Tariff policy is taking center stage. 

President Trump provides clarification on tariffs

• Following somewhat confusing/conflicting tariff headlines on Wednesday, President Trump said today that tariffs on Mexico and Canada will go into effect on 4-Mar, as originally scheduled.
• He added that China will be charged with an additional 10% tariff on that date. He also said the 2-Apr reciprocal tariff date will remain in effect.

• Trump says EU to be hit with 25% broad tariff, non-committal on Taiwan protection:
• President Trump said Wednesday the US will soon impose 25% tariffs on the EU, which would be applied generally, while specifically called out tariffs on autos (FT).
• Trump also said that tariffs on Canada and Mexico would go into effect on 2-Apr, though Bloomberg noted the president was unclear whether that was a delay from the previously proposed 4-Mar date for tariffs on Canada and Mexico, or a separate tariff program under development with the Commerce Department and USTR.
• Trump’s latest tariff comments also come after the president on Tuesday issued executive order to look into copper tariffs (NY Times).
• Trump also said Wednesday that he wouldn’t comment on whether it is the administration’s policy to protect China from taking Taiwan by force (Bloomberg), adding further to geopolitical uncertainty narrative. Strategists continue to cite tariffs, geopolitics as key overhangs to markets.
• Morgan Stanley recently said earnings revisions have fallen recent weeks, blaming higher rates, stronger dollar, and potential growth headwinds from tariffs, while JPMorgan recently noted link between tariff threats and rising inflation expectations, which could reinforce Fed’s extended rate cut pause.

Tariffs:

• Trump creates uncertainty around 4-Mar tariff deadline for Canada and Mexico; floats EU tariffs (Bloomberg)
• Fed study finds China tariffs and end of de minimis exemption could have larger than expected economic impact (Bloomberg)
• India looking for ways to lower tariffs on range of imports in bid to avoid any trade war with US (Bloomberg)
• China’s steel exports under heightened pressure from Trump tariffs which threaten transshipment estimated at $7B (Reuters)
• EU trade chief intends to visit China amid growing tensions with Trump administration (SCMP)

Update from Washington:

Senate Republicans have issues with House-passed budget resolution:

• House GOP somewhat surprisingly passed a multitrillion dollar budget resolution on Tuesday evening.
• However, the measure has quickly come under scrutiny in the Senate, complicating the prospects for a compromise, even as the upper chamber seems to be willing to shift its approach to baking Trump’s policy priorities into one big bill.
• House Speaker Johnson noted there is little room for concessions given the slim majority.
• Taxes a key area of focus as while Republican senators (and President Trump) want a permanent extension of the TCJA, the $4.5T for tax cuts in the House bill is not sufficient.
• Some senators also concerned about the potential cuts to Medicaid given the lofty $880B savings target for the House Energy and Commerce Committee, which has jurisdiction over Medicaid.
• Trump has also repeatedly said Medicaid should not be touched aside from addressing fraud, while Johnson ruled out some of the biggest potential cuts in comments to CNN.
• Other Senate concerns revolve around the planned $4T debt ceiling hike and roll back of Democratic energy subsidies in the House bill.
• Washington:
  • Republican senators want major changes to House-passed budget resolution that could complicate GOP efforts to reach a compromise (Politico , The Hill)
  • House Speaker Johnson rules out some of biggest potential cuts to Medicaid for Republican reconciliation bill (Politico)
  • Shutdown risk elevated as Democrats unable to get assurances from Republicans about Trump and Musk adhering to planned spending (Politico)
  • House Speaker Johnson working on plan to avoid government shutdown that does not rely on Democratic support (Axios)
  • House Republican budget plan would pair tax cuts that primarily benefit the rich with cuts to programs that help the poor (NY Times)
  • Trump administration axing 92% in foreign assistance-related grants under USAID to save nearly $60B (Axios)
  • Trump signs EO empowering DOGE to scrutinize how federal agencies spend money, giving Musk more cost cutting powers (Axios)

No – this is not a chart of a hot tech stock, nor a meme coin.

It’s a chart showing the percentage of congress over 70.

Perhaps term limits are in order.

Wall Street Mav 2 27 28

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Articles of Interest:

• Economy:
  • Trump’s tariffs and spending cuts challenge the US economy (NY Times)
  • Investors foresee sharpest divergence for three years between the US and Eurozone inflation (Reuters)
• Markets:
  • US exceptionalism trade faltering amid weakening consumer, business indicators (Reuters)
  • Investor sentiment around small-caps worse than it’s been in months, executive sentiment sours too, BofA says (Bloomberg)
  • JPMorgan’s Benhamou says US stocks will struggle early March amid weaker economic data, but rally later in spring (Bloomberg)
  • Hedge funds punt on turnaround in unloved China property sector (Reuters)
• Geopolitics:
  • Ukraine sees US minerals deal as first step towards broader security arrangement (Politico)
  • Critical minerals has become core to US foreign policy, with Trump turning to high pressure tactics to acquire them (NY Times)
  • Trump declines to comment when asked whether US would protect Taiwan from Chinese invasion (Reuters)
  • Chevron weighing implications of Trump’s decision to end US concessions on Venezuela’s energy sector (link, FT)
  • Trump’s view of European allies raises alarm, sparking debate if its indifference or hostility to the EU (NY Times, Bloomberg)
  • UK PM Starmer seeks US backstop for Ukraine as Trump downplays security guarantees (Politico, FT)
  • Director of National Intelligence Gabbard calls for probe into UK demand for Apple backdoor (Bloomberg, FT)

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Charts of the day:

The chart below has helped stocks stay elevated during this window of market turbulence.

The stock market is down 3% from the highs – yet sentiment is getting quite negative. 

The below chart shows the overlay of both the US dollar, in blue, and the 10 year treasury yield in red.  Both have been moving lower.  Without that happening, the stock market would likely be down 10%, not 3%

Luke Gromen 2 27 25

As mentioned above, the market is down 3% from the highs – yet retail investors are turning very bearish.

Tells me that the market is probably due for a bounce soon.

Retail investors have turned decisively bearish.

The Daily Shot 2 27 25

The smart money/dumb money index is not showing the same negativity though.

It is more neutral.

The retail/dumb money line (red) is in the middle, and the smart money is also in the mid range.

Typically, the red line gets to the lower (extreme pessimism) level before a meaningful market bounce.

Sentimenttrader.com 2 27 25

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Quote of the day:

“Learning never exhausts the mind.”

 -Leonardo da Vinci