Will Wall Street adapt to tariff tensions and AI disruption?

Tariff tensions and AI challenges impact US markets

United States (US) stocks closed higher on Friday, recovering from earlier losses that followed a mixed non-farm payrolls report on soothing reassurances from Federal Reserve (Fed) Chair Powell.

In a week that included tariff announcements on Canada and Mexico, which were later amended to include a one-month delay for the auto sector and United States–Mexico–Canada Agreement (USMCA) goods, the US 500 fell by 3.10%.

The US Tech 100 entered correction territory, ending the week 3.27% lower, as the release of a new artificial intelligence (AI) model by Alibaba. This follows DeepSeek's emergence in January, which sparked further debate over the valuations of US tech stocks. Meanwhile, the Wall Street dropped by 1,039 points, closing 2.37% lower for the week.

Jobs data and Fed commentary

Returning to Friday night's action, February non-farm payrolls rose by 151,000, slightly below expectations of 160,000. The unemployment rate unexpectedly increased to 4.1% even as labour force participation declined to 62.4% from 62.6%. If the participation rate had remained stable, the unemployment rate would have risen to 4.4%.

Fed Chair Powell emphasised that the Fed is in no rush to cut interest rates, noting that despite uncertainty stemming from changes in trade, immigration, fiscal policy, and regulation, the US economy is in a 'good place' and the Fed is 'well positioned to wait for greater clarity.'

Focus shifts to inflation data

This week, the focus will be on:

• US consumer price index (CPI) and producer price index (PPI) numbers
• Job Openings and Labor Turnover Survey (JOLTS) job openings
• Michigan consumer sentiment index for further insights into the health of the US economy.

The US rates market starts this week fully priced for a 25 basis point (bp) Fed rate cut in June and holds a cumulative 63 bp of Fed rate cuts this year, up from 31 bp after the warmer CPI print in mid-February.

CPI preview

Date: Wednesday, 12 March at 11.30pm AEDT

At the last Federal Open Market Committee (FOMC) meeting in late January, the Fed kept the Fed Funds rate on hold at 4.25% - 4.50%. Fed Chair Jerome Powell offered a more optimistic view on the labour market while omitting a key reference from the December statement that inflation 'has made progress toward"' the Fed's 2% inflation goal.

The omission appeared well-timed, coming a few weeks before a hotter-than-expected inflation report for January released in mid-February. Headline CPI increased by 0.5% month-on-month (MoM), the most since August 2023, taking the annual rate to 3% year-on-year (YoY) from 2.9% prior. Core CPI increased by 0.4% MoM, which saw the annual rate of core inflation rise to 3.3% in January from 3.2% the prior month, exceeding expectations of 3.1%.

Looking ahead, the preliminary expectation is for both headline and core inflation to rise by 0.3% MoM in February, which will see the rate of headline inflation ease to 2.9% YoY and the pace of core inflation ease to 3.1% YoY.

US core CPI chart

US Tech 100 technical analysis

After making a marginal fresh record high on 19 February, the US Tech 100 promptly retreated below 22,000, falling back into its prior eight-week range. The retreat was highlighted as a false break higher and has been followed by a fall of more than 2200 points.

On Friday night, the US Tech 100 recovered from early weakness to close the session back above the uptrend support from the December 2022 low at 19,900. A potential loss of momentum daily candle on Friday can also be observed.

While the US Tech 100 remains above uptrend support at 19,900 and Friday's 19,736 spike low, a rebound is possible back towards 20,800 - 20,900ish.

Aware that if the US Tech 100 sees a sustained break below uptrend support at around 19,900, and then takes out Friday's 19,736 low, it opens the way for a deeper pullback towards 18,000.

US Tech 100 daily chart

US 500 technical analysis

We have been working with the theory that the US 500 made a false break higher at the 6147 high on 19 February.

A move that opened up a test of a support band consisting of three key levels:

1. Uptrend support at 5860 from the October 2023, 4103 low
2. The year-to-date 5773 low
3. The 200-day moving average (MA) at 5733

On Friday night, the US 500 recovered from early weakness to close the session back above the 200-day MA at 5720. A potential loss of momentum daily candle on Friday can also be observed.

While the US 500 remains above the 200-day MA and Friday's 5666 spike low, a rebound is possible back towards the 5900 area.

Aware that if the US 500 sees a sustained break below the 200-day MA now at 5733 and then takes out Friday's 5666 low, it opens the way for a deeper pullback towards 5400.

US 500 daily chart

• _{Source: TradingView. The figures stated are as of 10 March 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}