"Liberation Day" and non-farm data hit simultaneously, U.S. stocks face a major test this week!

The US stock market continues to hover near its low point for the year, as President Trump's latest tariff statement and concerns about the US economic outlook have put pressure on the stock market in the last full trading week of the first quarter. Over the past five trading days, the S&P 500 index has fallen by nearly 3%, the Dow Jones Industrial Average has dropped by about 2%, and the technology-heavy Nasdaq Composite Index has led the declines with a drop of almost 4%. In the upcoming week, as the "liberation day" on April 2 approaches, Trump's tariff policy will be the focus of the market. The President is expected to announce retaliatory tariff measures on that day, and investors are closely watching the specific tariff rate levels. Subsequently, market attention will turn to the labor market, as the March non-farm employment report will be released on Friday, along with private sector employment data, job vacancy numbers, and activity indicators for the services and manufacturing industries. In terms of corporate earnings reports, this week is expected to be relatively quiet. The Market Cannot Ignore the Impact of Tariffs President Trump's highly anticipated tariff announcement is expected to be released on Wednesday. More and more Wall Street institutions believe that the market may not be adequately prepared for the impending impact. The Goldman Sachs economics team pointed out that the market may face downside risks beyond expectations. Alec Phillips, the chief political economist at the firm, revealed that Goldman's latest market survey shows that investors generally expect the equivalent tariff rate to be 9 percentage points, but the team believes that the initial proposed tariff rate may be higher, possibly close to twice the market's expectations. Phillips wrote in a report, "Government officials have made it clear that the soon-to-be-announced tariff rates will be used as a negotiating basis, which prompts the authorities to propose higher rates in the initial stages. There is precedence for this in the tariff measures taken against Canada and Mexico - both times implementing higher rates first, followed by partial or complete withdrawal days later." Last week, Trump announced a 25% tariff on imported cars, providing a "preview" to the market. Barclays Global Research Chairman Ajay Rajadhyaksha stated that this move is "more significant than the impact currently perceived by the market." Rajadhyaksha pointed out: "This releases a policy signal. At least in my view, it suggests that April 2nd may bring an impact that the market cannot ignore. We may face a negative surprise." Key Employment Report As economic data shows signs of slowing growth and sticky inflation, Trump's tariff disputes are further exacerbating consumer worries. Data from the US Bureau of Economic Analysis last Friday showed that inflation in February exceeded expectations, while consumer spending growth was below expectations. Less than two hours after the data was released, the University of Michigan Consumer Confidence Survey showed that inflation expectations for the next year in March jumped to 5%, reaching a new high since November 2022. These dynamics led to a sharp decline in the stock market, with the S&P 500 index falling by about 2% on Friday alone. In a client report, Citi's US equity strategist Scott Chronert pointed out that the movement of the market on Friday reflected further pricing in of "stagflation" expectations - that is, high inflation persisting alongside slowing economic growth. Currently, economists generally believe that the economy is only slowing from the super-trend growth of the past few years, and has not yet entered a recession. A key indicator of this judgment is that the labor market is cooling rather than collapsing. The upcoming employment data will reveal the pace of the labor market slowdown. The March non-farm employment report, scheduled to be released early on Friday, is expected to show an additional 135,000 jobs, down from 151,000 in February, with the unemployment rate expected to remain unchanged at 4.1%. Michael Gapen, Chief US Economist at Morgan Stanley, wrote in a preview report: "The risk of this report may be asymmetrically distributed. Strong job growth is needed to alleviate concerns about the economy slowing down, while slightly below-consensus data could exacerbate these concerns." Weak Profit Guidance Against the backdrop of escalating tariff discussions, the number of publicly traded companies issuing negative profit guidance has significantly increased. Data from FactSet shows that out of the 107 S&P 500 companies that issued first-quarter guidance, 68 gave negative guidance, higher than the five-year average of 57 and the ten-year average of 62 (negative guidance refers to companies announcing earnings per share expectations below the market consensus value prior to the announcement). This phenomenon confirms Wall Street's overly optimistic expectations for 2025. As the first quarter earnings season officially kicks off on April 11th, the key question for the market will be: Have analysts and the overall market sufficiently lowered expectations in the face of companies dealing with the headwinds of tariffs.