S&P 500 Falls as "Magnificent Seven" Stocks Drop

The S&P 500 (Index: SPX) fell 1.5% during the final full trading week of March 2025, dropping to 5,580.94 on Friday, 28 March 2025, after dropping 1.97% that day.

By our standards, Friday’s trading action doesn’t quite qualify as an interesting day for the U.S. stock market, where we define “interesting” as a change in the level of the S&P 500 from the previous day’s closing value of 2.00% or more for statistical reasons. Still, it was close to that threshold and came as we’re trying to determine whether the U.S. stock market has undergone a regime change since Friday, 21 February 2025.

We’re not quite 100% to a full determination, but the data so far is more consistent with the market regime change hypothesis being true than not. The latest update of the alternative futures-based chart is based on the observation that such regime change got underway on 24 February 2025, with the basic trajectory of the S&P 500 following the dividend futures-based model‘s projection that assumes investors are mostly focusing on the now-current quarter of 2025-Q2 in setting current day stock prices.

As we’ve kept hammering home, most of the negative change in the S&P 500 since 21 February 2025 has been associated with the deflation of the AI-bubble in stock prices. This deflation has ensnared several companies whose stocks represent the highest weighted components of the S&P 500 index. Collectively known as the “Magnificent Seven”, the next chart reveals how they’ve changed from Friday, 21 February 2025 through Friday, 28 March 2025:

Of these seven stocks, only the stock price of Microsoft (NASDAQ: MSFT) has fallen by a smaller percentage than the overall S&P 500 during this period. Regardless, because of their high weighting within the index, each has made an outsized contribution to the index’ decline.

Here are the week’s market-moving headlines, many of which from mainstream news outlets are still missing out on what’s been the biggest stock market-moving story of the year to date. We’ve selected some minor headlines to include in this week’s edition just to emphasize the extent to which AI-technology associated stocks have dropped.

Monday, 24 March 2025

• Signs and portents for the U.S. economy:

• Oil prices hold steady as investors monitor Russia-Ukraine ceasefire talks
• US copper imports soar to 500,000 tons amid tariff threats, says Bloomberg

Fed minions try to pull back expectations of more rate cuts in 2025:

• Atlanta Fed’s Bostic now sees only one rate cut this year

Bigger trouble developing in Japan:

• Japan’s factory activity declines accelerate, services sag, PMI shows

Eurozone gets some better economic data, ECB minions getting excited to cut rates again:

• Euro zone economy growth accelerates to seven-month high in March, PMI shows
• Key ECB dove makes case for more easing, others more cautious

S&P 500 ends sharply higher, Nvidia and Tesla rally

• Nasdaq jumped 2%, S&P and Dow also rallied on hopes of more targeted tariffs by Trump

• Trump says he will soon announce tariffs on autos, aluminum, pharmaceuticals

Tuesday, 25 March 2025

• Signs and portents for the U.S. economy:

• Oil rises for fifth day on supply concerns after Venezuela tariffs
• US new home sales rebound in February
• Stagflation on the radar for the US economy, but no repeat of the ’70s
• How companies are responding to Trump’s tariffs

Fed minions worry about persistent Bidenflation:

• Fed’s Kugler: Uptick in goods inflation ‘unhelpful’

Bigger trouble developing in China:

• Trade of Venezuelan oil to China stalls after new Trump order
• Chinese Tech Stocks Plunge From 3 Year High To Correction In Just 5 Days

ECB minions getting super excited for more rate cuts:

• ECB rates could fall to 2% by end of summer, Villeroy says

Wall Street posts first three-day win streak since early Feb

Wednesday, 26 March 2025

• Signs and portents for the U.S. economy:

• Oil settles up 1% on US crude and fuel stock draw, Venezuela supply worries

• US oil, gas activity rose in first quarter, but energy execs wary of tariffs, Dallas Fed says

Front-loading ahead of tariffs boosts US durable goods orders

Trump sets auto tariffs announcement for Wednesday

• Trump likely to use 2019 probe to justify tariffs on auto imports

Fed minions worried about persistent inflation staying higher for longer:

• St. Louis Fed’s Musalem says tariffs could trigger more persistent inflation
• Fed should stay put for extended period amid policy uncertainty, Kashkari says
• Fed’s Goolsbee sees lower interest rates in a year’s time, but warns of uncertainties, FT reports

Bigger trouble developing in China:

• China’s industrial profits fall in January-February as economic risks mount

ECB minions trying to curb some of their enthusiasm for more rate hikes:

• ECB must be pragmatic, data driven in setting rates, Panetta says

Wall Street’s three-day rally turns sour as traders brace for new auto tariffs

• Magnificent 7 stocks ‘look attractive’ right now, CIO says

Thursday, 27 March 2025

• Signs and portents for the U.S. economy:

• US oil producers face new challenges as top oilfield flags

Fed minions worry over how tariffs might affect auto industry:

• Fed’s Barkin: Auto firms under tariffs will face tough choices on pricing, margins

• Fed’s Barkin: Extensive uncertainty could hit demand, policy in good place awaiting more clarity

Fed’s Collins says it is clear tariffs will drive inflation up near term

Bigger stimulus developing in China:

• China vice premier pledges more policy support, says economy started 2025 well
• China accelerates government bond issuance in Q1 to highest on record
• China’s central bank says debt level rising, easing on track

BOJ minions say they’ll raise rates to fight inflation, but also that inflation is making real interest rates in Japan very low:

• BOJ’s Ueda vows to raise rates if inflationary pressures broaden
• New BOJ board member Koeda says real interest rates very low

ECB minions claim they’re keeping close watch on how solvent Eurozone banks are:

• ECB says it watches bank liquidity closely, works well with Fed

U.S. stocks close slightly down as traders mull over auto tariffs

• S&P 500 ends lower as investors digest Trump’s auto tariffs

Friday, 28 March 2025

• Signs and portents for the U.S. economy:

• Moderate US consumer spending, increasing prices raise specter of stagflation

• VIEW US Feb PCE prices index shows inflation picture still a conundrum

Oil slips on recession fears but posts 3rd weekly gain

Surge in gold imports continues to distort trade figures, analysts say

Fed minion admits they failed to fix Bidenflation, think it will persist longer:

• Exclusive: Fed’s Daly: Inflation progress has been flat, dents confidence in rate cut view

Bigger trouble, stimulus developing in China:

• China’s top airlines post fifth year of losses in 2024 as competition weighs
• Top Chinese banks’ profits stagnate, margins shrink as economy weighs
• China will resolutely respond to US reciprocal tariffs, state media says

Bigger inflation trouble developing in Japan:

• Core inflation in Japan’s capital accelerates, stays above BOJ target

ECB minions think Eurozone consumers are idiots, see more lending in Eurozone:

• Euro zone consumers may be put off by inflation ‘misperception,’ ECB’s Schnabel says
• ECB’s Nagel encouraged but warns against ‘over-optimism’ on inflation target
• Euro zone lending growth accelerates further, ECB data shows

Wall Street puts in worst session since early March, slides to weekly loss

• Wall Street tumbles as fresh data fuels inflation fear
• The “Magnificent Seven” Stocks Are Selling Off. Here Are My Top 5 to Buy Now.
• Nasdaq Correction: 2 AI Stocks Down 26% and 46% to Buy Before They Soar, According to Wall Street

The CME Group’s FedWatch Tool‘s projections are mostly unchanged going into this week. The FedWatch Tool projects the Fed will resume cutting rates with a quarter point rate reduction when Fed meets on 18 June (2025-Q2). The FedWatch tool also anticipates additional quarter point rate cuts at 12-week intervals in the second half of 2025, coinciding with the Fed’s FOMC meetings on 18 June (2025-Q2), 17 September (2025-Q3), and 10 December (2025-Q4). The only notable change is there’s now a dividend cut projected in mid-2026, which outside investors’ typical 0-12 month investment horizon window.

The Atlanta Fed’s GDPNow tool‘s projection of what real GDP growth will be in 2025-Q1 hels steady at -1.8%. However, the GDPNow tool is now providing an alternate model forecast that corrects for the surge in gold imports, which are skewing it’s projection. That adjusted forecast indicates -0.5% growth.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of a Wall Street bear looking at a stock chart that’s falling. The chart says ‘Magnificent Seven’.”