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The major US indices displayed mixed results at the end of the trading day, though all recorded losses for March.
The Dow industrial average increased by 417.86 points, or 1.00%, closing at 42,001.76. The S&P index rose 30.91 points, or 0.55%, finishing at 5,611.85, while the NASDAQ index declined by 23.70 points, or 0.14%, to end at 17,295.29. The Russell 2000 dropped 11.36 points, or 0.56%, closing at 2,011.91.
March Performance Summary
For March, the Dow fell by 4.20%, the S&P dropped by 5.75%, marking its worst month since December 2022, and the NASDAQ decreased by 8.21%, also its worst since December.
In the first quarter, the Dow lost 1.28%, the S&P fell 4.59%, and the NASDAQ dropped 10.42%.
Concerns affecting the market include stagflation, higher inflation from tariffs, a slower job market, and lower Q1 earnings.
The figures above show a mixed day for US equities, with modest gains in the Dow and S&P not nearly enough to offset weakness throughout the month and quarter. March saw each of the major indices end lower, with the NASDAQ faring the worst since late 2022. This has not happened in isolation. It’s been a tough three months marked by consistent selling pressure, particularly in growth-heavy sectors.
Looking at the quarterly numbers, the downward trend becomes more obvious. The Dow’s 1.28% quarterly drop, while relatively mild, still speaks to broader caution. What’s more pressing is the 10.42% retreat in the NASDAQ. That’s not just a slight shuffle in positioning—it points to growing pessimism about tech exposure amid rising costs and a tightening labour backdrop.
Wider Economic Drivers
Much of the selloff can be traced to a confluence of data suggesting neither growth nor prices are moving in a desirable direction. Inflation readings have not eased as expected—partly due to a resurgence in import prices linked to recently imposed trade barriers. While these policy measures may benefit isolated sectors or narratives, they exacerbate cost pressures across the board. Powell’s last set of remarks underscored patience but added little reassurance.
Outside inflation, labour market figures have turned softer. Hiring has downshifted and wage growth hasn’t kept pace with rising household costs. When consumers pull back, spending slows—and that links directly to the margins we’re seeing compressed in Q1 earnings. Not all companies missed expectations, but the tone of the guidance has shifted materially. Many boards are expecting lower discretionary spending and more cautious capital expenditure over the next two quarters, rather than a bounce.
From where we stand, implied volatility has crept higher—especially in large-cap tech and the small-cap complex. The Russell 2000’s slide of 0.56% mirrors risk-off sentiment towards companies that might face financing difficulties in a high-rate environment. When bonds sell off and equity corrections gather pace, spread widening tends to follow. That’s already begun in high-yield credit, albeit modestly.
Yields have remained sticky—particularly at the long end—despite dovish noises from central banks. The disconnect between rates expectations and economic prints has added pressure to positioning. Many had shifted into duration early this year, betting on swift and multiple rate cuts. That hasn’t happened. Now hedges are being flushed, spiking intraday volatility on both sides.
Options markets have reacted in kind. Skew is starting to normalise, with downside puts being marked up at a faster pace than the rest of the curve. We’re seeing changes in open interest patterns too—fewer aggressive bullish bets, more cautious delta-neutral strategies. This shift reflects a change in conviction. Not an outright reversal perhaps, but a realignment that expects more range-bound action in the near term.
Given these crosscurrents—pressure on margins, stickier inflation, softness in employment, and policy ambiguity—the next few weeks are unlikely to offer the clarity many positioning models prefer. Larger institutions are unwinding long growth exposure at a measured pace. There have also been hints of rotation into selective defensive sectors—utilities, staples, and less cyclical industrials.
It’s not just about macro data anymore—though that will always matter—but also how sentiment reconfigures itself around sticky risk factors. Pricing shows this reconfiguration is gradual rather than abrupt, which means momentum-based trades may suffer. That tends to favour shorter-term strategies and tighter strike intervals.
Weekly option volumes have picked up. Discretionary execution has increased among those trying to match implied to realised vol, particularly as correlations between sectors have begun to break down. That’s notable—it implies fewer index-wide movements and more name-specific dispersion. This is fertile ground for traders willing to express relative value.
We’ve also seen a noticeable increase in interest in vega-weighted strategies, particularly short expiry calendar spreads. Those allow for near-dated exposure while remaining sensitive to longer-term expectations. Short gamma positions will need closer monitoring though, especially given recent headline sensitivity.
Forward curves have flattened across both interest rate and volatility spaces. That says pricing in late Q2 and early Q3 remains uncertain. Those holding positions through multiple expiry cycles need cleaner entry levels and better triggers.
Timing matters now. Timing always matters—but in low-conviction, mid-volatility markets, it becomes paramount. Rapid mean reversions have already caught trailing stops multiple times this month. We’ve adjusted delta exposure accordingly. Patience, yes. But also, responsiveness.
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