Market Recap: Stocks Rebound Amid Tariff Uncertainty as Q2 Begins

Major Indexes Close Higher After Volatile Trading Session

The U.S. stock market closed higher on Tuesday, April 1, 2025, marking a positive start to the second quarter after a tumultuous first three months of the year. The S&P 500 gained 0.4% while the tech-heavy Nasdaq Composite rose 0.9%, both recovering from early losses in a volatile trading session. The Dow Jones Industrial Average finished fractionally lower.

Investors continued to navigate uncertainty surrounding President Donald Trump’s upcoming tariff announcements, expected on Wednesday. The market has been on a rollercoaster ride as traders await clarity on the scope and scale of these potential trade measures, with reports suggesting tariffs of approximately 20% could be implemented on most imports into the U.S.

Q1 Performance Review: Worst Quarter Since 2022

Tuesday’s gains came after a challenging first quarter for U.S. equities:

– The S&P 500 declined 4.6% in Q1
– The Nasdaq Composite plummeted 10.5%
– The Dow Jones Industrial Average dropped 1.3%

This marked the worst quarterly performance for both the S&P 500 and Nasdaq since 2022, largely driven by uncertainty around the Trump administration’s economic agenda, particularly regarding tariffs. The “Magnificent Seven” technology stocks, which had propelled markets higher throughout 2023 and 2024, weighed heavily on performance as investors rotated away from growth names.

Key Stock Movers and Sector Performance

Tesla (TSLA) shares surged 3.96% to $269.41 on Tuesday, showing resilience despite a challenging first quarter where the stock dropped nearly 36%. The electric vehicle maker was among the most active stocks in terms of options trading, with significant open interest growth.

Nvidia (NVDA) closed nearly flat at $108.41, up just 0.03%. The semiconductor giant lost approximately 20% in the first quarter amid the broader tech selloff. Investors continue to evaluate the company’s position in the AI market, with one analyst noting, “This is a big test” for Nvidia stock.

Apple (AAPL) declined 0.22% to $221.65. Goldman Sachs recently commented that “There may be an iPhone bounce back in China,” suggesting potential recovery for the tech giant in a key market.

Core Scientific (CORZ) was a standout performer, jumping 7.46% to $7.78, with significant options activity indicating investor interest in the stock.

Sector performance remained mixed, with energy stocks rising on the back of higher crude prices, while consumer staples—often considered a safe haven—led gains with a 1.6% increase.

Economic Data: Manufacturing Sector Contracts

The Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) fell to 49.0 in March, down from 50.3 in February and below the forecast of 49.5. This indicates contraction in the manufacturing sector after two consecutive months of expansion.

Key details from the report show:

– New orders declined further into contraction territory, registering 45.2% versus 48.6% in February
– Production fell from 50.7 to 48.3, a four-month low
– Employment index dropped to 44.7, with only one of eighteen industries reporting higher employment

Notably, the prices paid index jumped to 69.4, the highest level since the inflation surge of 2022, indicating persistent pricing pressures despite manufacturing weakness.

In more positive economic news, construction spending rose 0.7% in March, led by increases in homebuilding, highway and street projects, and commercial construction.

Upcoming Market Events

Investors are closely watching several key events that could impact market direction:

1. **Trump’s Tariff Announcement**: The White House is expected to unveil reciprocal tariffs on goods from virtually all countries on Wednesday, April 2.

2. **Federal Reserve Speeches**: Several Fed officials, including Chair Jerome Powell, are scheduled to speak this week, potentially providing insights into future monetary policy decisions.

3. **Employment Data**: The crucial non-farm payrolls report will be released later this week, offering a comprehensive view of the U.S. labor market.

Market Outlook

As the second quarter begins, market sentiment remains cautious. Goldman Sachs has raised the probability of a U.S. recession to 35% from 20% due to tariff uncertainties and cut its year-end target for the S&P 500 to 5,700.

JPMorgan has refreshed its list of favorite stocks for April, adding Boeing, Energy Transfer, Freeport-McMoRan, Carpenter Technology, and Broadstone Net Lease, while removing Abercrombie & Fitch and RTX.

Analysts note that diversification proved valuable in Q1, with Adam Turnquist, chief technical strategist for LPL Financial, commenting: “Investors, more or less in this first quarter, threw their hands in the air, as you really cannot trade around this.” Michael Reynolds of Glenmede added, “Our big lesson from the first quarter is diversification is not dead.”

As markets navigate the uncertainty of potential trade wars, inflation concerns, and shifting monetary policy, volatility is likely to remain elevated in the near term, with the CBOE Volatility Index (VIX) jumping to a two-week high at 22.28 points.