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The US major indices finished mixed, with declines observed for March and the year. Concerns over tariffs from President Trump impacted market sentiment, causing the S&P 500 to open down 92.21 points (-1.65%), the NASDAQ to fall by 468 points (-2.7%), and the Dow Jones Industrial Average to decrease by 435 points.
As the session continued, positive news from Washington about tariff adjustments helped lift indices. Statements from Federal Reserve officials provided market comfort, leading to a higher S&P close and a nearly unchanged NASDAQ.
Bond Market Reacts To Risk Sentiment
In the bond market, US Treasury yields weakened due to reduced risk appetite as equities rose. The end-of-day yields were: 2-year at 3.891%, 5-year at 3.956%, 10-year at 4.212%, and 30-year at 4.580%, with notable declines in yields for the first quarter.
In currency markets, the US dollar gained against most major currencies amid risk-off sentiment, particularly versus the CAD, AUD, and NZD. Traders are focused on the upcoming Reserve Bank of Australia interest rate decision, with expectations of unchanged rates while closely monitoring guidance.
At day’s end, US stocks showed performance as follows: the Dow rose 417.86 points (1.00%) to 42,001.76, the S&P 500 increased by 30.91 points (0.55%) to 5,611.85, and the NASDAQ fell by 23.70 points (-0.14%) to 17,295.29. All major indices showed declines for Q1: the Dow down 1.28%, the S&P down 4.59%, and the NASDAQ down 10.42%.
Ongoing market concerns revolve around stagflation, inflation linked to tariffs, a slowing job market, and lower Q1 earnings expectations. The new quarter presents opportunities; however, the uncertain economic environment will likely affect market trends.
Market Sentiment And Behavioral Shifts
With a bumpy end to the quarter and outcomes varying across indices, markets remain on edge. Traders are caught between reduced earnings outlooks and attempts by policymakers to stabilise expectations. Although equity prices showed some recovery towards the end of the session, that reaction seemed more short-covering than renewed confidence.
What we’re seeing here is not simply price fluctuation—those moves mirror shifting assumptions about economic strength and central bank direction. The initial drop following tariff concerns reflects how fast sentiment can shift when policy risks return to focus. Similarly, the swift rebound after remarks from monetary authorities suggests how much weight markets now place on any guidance, however measured.
Persistent weakness in bond yields despite a late-day equity bounce tells us that traders still prefer safety. When long-duration yields dip like this, especially in tandem with softening equity participation, it often signals deep investor doubt. We’re not seeing any wide repositioning into higher-risk assets.
Currency behaviour adds a separate dimension. The dollar’s strength—notably against commodity-linked economies—hints at a flight from areas more exposed to global trade swings. Canadian, Australian, and New Zealand dollars typically suffer during periods when tariff anxiety rises, and we’ve watched that scenario play out again. Questions over monetary policy paths outside the United States, particularly with the Australian central bank approaching its own decision, will also weigh on sentiment. Any shift in forward guidance, or lack thereof, could exert influence far beyond the domestic effect.
As we move into a new quarter, attention remains squarely on the earnings cycle. Disappointment from corporate results, combined with slower hiring data and persistent inflation fears, deepens concerns about stagflation-like conditions. The market reaction so far has acknowledged that risk, even if not pricing it fully yet.
There’s also a behavioural pattern re-emerging—reluctance in taking directional views beyond the immediate term. That’s understandable, given these levels of implied volatility and weak breadth in price action. Instead, we’ve focused operations on short-dated instruments and kept delta exposure close to neutral, altering gamma around calendar spreads as surprises in data arrive. Considering what we’ve seen this past week, emphasising reactivity more than prediction may serve traders better.
In volatility space, skew flattening and wider option premiums confirm the market’s unease. While this isn’t quite panic, it does reveal a preference for downside protection. Our structured positions continue to reflect asymmetric risk beliefs—positioning for low-probability but high-impact moves, particularly in tech and consumer-heavy names.
We’ve also moved our attention toward relative value setups between selective equity sectors, especially as they respond differently to input cost shifts and margin pressure. With rates markets not offering a clear route, and wide dispersion within equity components, this cross-sector angle can offer more precise expressions of macro views. Such differentiation becomes much more visible during periods like these, when broad index momentum fades.
No surprises that technical levels failed multiple times during the week—both upside resistance and downside support showed fragility. These breaks have led to choppy order flow and failed follow-through on either side. With reduced market liquidity, books lighten faster now on any macro signal, whether it’s rhetoric on trade policy or economic prints. We’ve responded by widening stops and reducing baseline position sizing for now.
Momentum strategies have remained suppressed, and with seasonal churn likely to pick up, especially into earnings, our preference leans toward gamma-heavy setups rather than lean long or short postures. Event-driven structures, particularly around rate announcements and inflation data, will probably outperform passive exposure, at least over the coming two weeks.
Lastly, the curve shape in rates, particularly between the 2y and 10y, still reflects discomfort more than direction. That flattening, occurring even as equities find footing, reveals how little confidence there is in a soft landing. Until we see some consistency in macro numbers—jobs, inflation, productivity—positioning will probably remain defensive rather than adventurous.
