Wall Street Rebounds After Job Data Amid Tariff Relief Hopes

Key Highlights:

• Stock Market Rises: Dow (+0.6%), S&P 500 (+0.4%), Nasdaq (+0.2%), reversing a sharp sell-off.
• Tariff Relief Hopes: Commerce Secretary hints at possible easing of Trump’s tariffs on Canada and Mexico.
• Weak Jobs Data: ADP report shows only 77,000 private-sector jobs added in February, well below expectations.
• Service Sector Strength: ISM Services PMI rises to 53.5, signaling expansion.
• Market Volatility Persists: Uncertainty around trade policies and economic data continues to impact sentiment.

Stocks Bounce Back as Tariff Relief Talks Gain Momentum

After days of heavy selling, Wall Street found its footing on Wednesday, March 5, 2025, with major indices rebounding from four-month lows. Investors reacted positively to hints that President Donald Trump could scale back his latest tariffs on Canada and Mexico, providing a much-needed boost to sentiment.

The Dow Jones Industrial Average (DJI) climbed 0.6%, while the S&P 500 (GSPC) gained 0.4%. The Nasdaq Composite (IXIC) lagged slightly but still managed a 0.2% rise.

Despite these gains, uncertainty remains. The market had taken a beating earlier in the week as Trump’s 25% tariffs on Canadian and Mexican imports, coupled with doubled duties on China, rattled investors. While the president attempted to downplay the economic fallout, concerns over retaliatory measures and inflationary pressures continue to loom.

Commerce Secretary Howard Lutnick provided a silver lining, indicating that some relief for Canada and Mexico could be announced as soon as today. While details remain sparse, the possibility of tariff rollbacks was enough to spur a rally, especially in sectors hit hardest by rising costs.

Weak Jobs Data Fuels Economic Slowdown Fears

While investors welcomed the tariff relief speculation, fresh jobs data added a layer of concern about the economy’s health.

According to the latest ADP private payroll report, only 77,000 jobs were added in February, significantly missing the 140,000 jobs economists had forecast. This marks a steep decline from January’s revised figure of 186,000 jobs and the weakest monthly gain since July 2024.

What’s concerning investors?

1. Job Growth Slowdown: The 77,000 jobs added suggest that businesses may be pulling back on hiring.
2. Wage Growth Weakening: The median year-over-year pay increase for job switchers fell to 6.7%, significantly below its pandemic peak of 16.4%.
3. Economic Uncertainty: This data comes ahead of Friday’s crucial nonfarm payrolls report, which will provide a broader look at U.S. employment trends.

The soft jobs report added to fears that Trump’s tariff war could be further pressuring the labor market. Employers may be holding back on hiring due to concerns over higher import costs, supply chain disruptions, and potential retaliatory tariffs from trading partners.

Service Sector Surprises to the Upside

Amid the market’s rollercoaster ride, one bright spot emerged: the services sector showed resilience.

The Institute for Supply Management (ISM) Services PMI came in at 53.5 for February, beating expectations of 52.5 and rising from 52.8 in January.

Key Takeaways from the ISM report:
✔ New Orders (+0.9%) and Employment (+1.6%) increased, signaling business expansion.
✔ The Prices Paid Index surged to 62.6, indicating that inflationary pressures persist.
✔ This marks the third consecutive month where all four subindexes—Business Activity, New Orders, Employment, and Supplier Deliveries—were in expansion territory.

However, some ISM survey respondents expressed concerns over tariffs, with some industries already feeling the effects of federal spending cuts.

Stocks Most Impacted by Tariff and Economic News

While broad markets turned green, some sectors and stocks saw larger swings due to tariff updates and economic indicators.

Gainers:

📈 General Motors (GM) +3% – Auto stocks rallied as tariff relief talks gained traction.
📈 Ford (F) +2% – Investors expect reduced costs on imported materials.
📈 Canada Goose (GOOS) +2.1% – Affected by tariffs on Canadian goods, shares rebounded.

Losers:

📉 Abercrombie & Fitch (ANF) -6% – The retailer cut its sales growth outlook, citing slowing consumer spending and tariff headwinds.
📉 Semiconductor Stocks (SOXX -0.4%) – Ongoing concerns over China tariffs continue to weigh on chipmakers.

Stock Market Performance – March 5, 2025

Market Outlook: Cautious Optimism Amid Uncertainty

While today’s rebound provided some relief, the market remains volatile as investors juggle conflicting economic signals.

✔ Tariff uncertainty persists: Trump’s trade policies remain unpredictable, and markets are bracing for potential retaliation from China, Canada, and Mexico.
✔ Jobs data raises red flags: A sluggish labor market could point to slower economic growth ahead.
✔ Inflation concerns linger: Rising input costs in the services sector may keep the Federal Reserve cautious on interest rate cuts.

With Friday’s nonfarm payrolls report looming, markets will be looking for confirmation on whether the labor market slowdown is temporary or the start of a deeper economic shift.