Major Indices Post Biggest Weekly Losses Since COVID-Era

• Dow Jones Industrial Average fell 8% last week, and is now down 10% year-to-date (YTD).
• S&P 500 shed 9%, bringing its YTD loss to 14%.
• Nasdaq entered correction territory after falling 10% in just two days, totaling a 19% YTD decline.
• Investor sentiment has shifted sharply due to macroeconomic uncertainty and geopolitical tensions.

Trade War Heats Up: Tariffs Take Center Stage

• The Trump administration’s new wave of tariffs could escalate global trade tensions.
• Countries hit by U.S. tariffs are preparing to retaliate with their own, or form new trade alliances to bypass the U.S.
• This policy shift introduces fresh tax burdens and inflation risks, shaking up global markets.

Inflation Metrics to Watch This Week

• CPI (Consumer Price Index) – due Thursday – is expected to show a 2.6% YoY increase.
• PPI (Producer Price Index) – due Friday – is forecast at 3.3%, while Argus predicts a slightly lower 3.2%.
• According to Yale’s Budget Lab, tariffs may add +2.3% to consumer prices in the short term, potentially lifting inflation to 4.5%–5.0%, well above the Fed’s December PCE forecast of 2.5%.

Financial Stress Indicators Remain Calm – For Now

• The OFR Financial Stress Index, a real-time gauge from the U.S. Treasury, still shows below-average market stress.
• Built from 33 market variables (rates, volatility, spreads, etc.), this index is often a leading indicator of financial system strain.
• A sharp rise here could tip an already fragile economy into recession.

Earnings Season Begins – Expect Key Corporate Insights

• Delta Air Lines kicks off reporting season on Wednesday, with JPMorgan, Morgan Stanley, Wells Fargo, and BlackRock following on Friday.
• Analysts and investors will be watching closely for guidance on tariffs, inflation, and the recession outlook from CEOs and CFOs.

What’s Next?:

• Markets are clearly on edge, and while inflation data and financial stress indicators are still under control, the tariff shock could act as a wild card. Investors should watch for earnings calls and macro data this week.