April 4, 2025 – The S&P 500 ( $S&P 500(.SPX)$ ) is at a critical juncture, reeling from a tariff-driven selloff that has already shaved 2.84% off the index, closing at 5394.52 on Thursday, April 3. This sharp decline—part of a broader 4.8% drop, marking the index’s worst single-day performance since June 2020—comes on the heels of President Donald Trump’s sweeping tariff announcement, which introduced a 10% baseline tariff on all imports, with higher rates for specific countries, effective April 5. As markets brace for the Nonfarm Payrolls (NFP) report due today at 8:30 AM EDT, the stakes couldn’t be higher. A disappointing NFP print, combined with the tariff shock, could push the S&P 500 into a deeper correction, heightening the risk of a U.S. recession and amplifying economic uncertainty.
S&P 500
A Market in Turmoil: The Tariff Shock
The S&P 500 has already entered correction territory, down 12.17% from its February 2025 record high of around 6144. Thursday’s plunge erased $2.4 trillion in market value—the largest single-day loss since the 2020 pandemic. The tariff announcement, which caught investors off guard with its scope and immediacy, has reignited fears of supply chain disruptions, resurgent inflation, and slower economic growth. Tech-heavy stocks like Apple (-9%), Nvidia, and Tesla bore the brunt, dragging the Nasdaq 100 down 5.4%, its worst day since September 2022, per Bloomberg.
The daily chart of the S&P 500 reveals a clear bearish trend. The index has sliced through the 50-day moving average (5447.63) and is trading below all major moving averages, including the 10-day (5464.51) and 20-day (5496.27). It has also broken below the lower Bollinger Band (5344.79), a sign of extreme selling pressure, though not necessarily a reversal signal in a strong downtrend. Volume spiked to 834.839 million shares on the selloff, confirming the conviction behind the bearish move. The Relative Strength Index (RSI) at 31.24 and the Stochastic Oscillator (%K at 0.46) indicate oversold conditions, but these can persist in a sustained downturn.
The NFP Wildcard: A Potential Catalyst for Deeper Losses
Today’s NFP report is expected to show 200,000 jobs added in March, with the unemployment rate holding steady at 3.8%. However, recent labour market data has been mixed. The Job Openings and Labor Turnover Survey (JOLTS) reported a dip to 7.568 million openings in February, down from 7.762 million, per Investing.com. Initial weekly jobless claims were tame at 219,000, but continuing claims jumped to a three-year high above 1.9 million, and U.S. Challenger job cuts data showed 275,000 jobs slashed in March—the highest since May 2020, according to Charles Schwab.
If the NFP data underperforms—say, below 150,000 jobs added or with an unexpected rise in the unemployment rate—it could confirm fears of a slowing economy, exacerbating the tariff-induced selloff. A weak report would likely push the S&P 500 toward its next support at 5300, a psychological level and prior consolidation zone from late 2024. A break below this could target the 200-day moving average at 5100, putting the index in a deeper correction—potentially 16-17% off its peak, well beyond the 10% threshold for a standard correction.
What a Deeper Correction Means for Markets
A deeper correction in the S&P 500 would signal a significant shift in market sentiment, moving beyond a temporary reaction to tariffs and into broader concerns about economic health. Historically, the S&P 500 has declined by an average of 31% during recessions, according to The Motley Fool. If the index were to follow this pattern from its February high of 6144, it could fall to around 4239—a 26% drop from its current level of 5394.52. Even a more modest 25% drawdown, as projected by Goldman Sachs in a recession scenario, would see the index at 4600, a 15% decline from today’s close.
Such a drop would have far-reaching implications. Investor confidence, already shaken by tariff uncertainty, would take a further hit, likely triggering a flight to safe-haven assets like U.S. Treasuries (yields on the 10-year note have already fallen to 4%) and gold, which hit a record high this week. Sectors reliant on global supply chains—tech, consumer discretionary, and manufacturing—would face continued pressure, while defensive sectors like consumer staples and utilities might outperform, as seen in the S&P 500 consumer staples index’s 1.6% gain this quarter.
The Rising Risk of a U.S. Recession
The tariff fallout and potential NFP miss are stoking fears of a U.S. recession, with several Wall Street firms revising their forecasts. Goldman Sachs has raised its recession probability to 35% from 20%, citing the tariffs’ impact on growth and inflation, while J.P. Morgan has lifted its global recession odds to 60%, per Reuters. BCA Research’s Peter Berezin pegs the chance of a U.S. recession at 75%, warning of a “fairly nasty” downturn, according to Yahoo Finance. The Atlanta Fed’s GDPNow model projects a 2.8% contraction for Q1 2025, a stark contrast to last year’s 2% growth.
Tariffs are expected to raise consumer prices, eating into inflation-adjusted income and curbing spending—a key driver of U.S. economic growth. Goldman Sachs now forecasts average U.S. tariff rates at 18%, up 15 basis points from last year, with core PCE inflation accelerating to 3.5% in 2025, well above the Federal Reserve’s 2% target. This stagflationary environment—slow growth paired with high inflation—could squeeze corporate profit margins, as noted by Investing.com, which lowered S&P 500 earnings per share estimates from $275 to $260 for 2025.
A weaker NFP report would amplify these risks. Rising unemployment, as suggested by posts on X warning of potential layoffs due to tariff-related cost pressures, could further dampen consumer confidence, which has already plunged to a 32-year low, per Goldman Sachs. The combination of higher prices from tariffs and a softening labour market could create a vicious cycle, pushing the economy into a shallow recession by late 2025, as predicted by some CFOs surveyed by CNBC.
Consequences of Tariffs and Poor NFP Data: A Perfect Storm
If today’s NFP data disappoints, the consequences could be severe when overlaid with the tariff impact. A weak jobs report would confirm the labour market’s vulnerability, potentially leading to a 5-10% further drop in the S&P 500 in the near term, as markets price in a higher recession risk. Companies reliant on international trade—already battered by the tariffs—would face increased pressure, with tech giants like Apple and Nvidia likely to see further declines, given their exposure to global supply chains.
The broader economic fallout would be significant. Higher tariffs could lead to retaliatory measures from trading partners, as seen with the EU’s 50% tax on American whiskey exports, prompting Trump to threaten a 200% tariff on European wines, per Reuters. This escalating trade war could shrink export markets, hitting U.S. manufacturers and exacerbating the slowdown. The Asian Development Bank’s chief economist warned that the tariff regime risks slowing both U.S. and global growth, a sentiment echoed by J.P. Morgan’s heightened recession odds.
For investors, the immediate focus will be on defensive positioning—favouring sectors like utilities and consumer staples, which have held up better amid the turmoil. However, the longer-term outlook hinges on whether Trump’s tariffs are a negotiating tactic, as some analysts suggest, or a permanent policy shift. If the latter, the S&P 500 could face a prolonged bear market, with a recession potentially dragging the index down 20-40%, as speculated by some analysts.
Looking Ahead: Volatility and Uncertainty
The S&P 500’s immediate path depends on today’s NFP data. A strong report—exceeding 250,000 jobs with steady unemployment—could spark a relief rally, potentially pushing the index back toward the 50-day moving average at 5447.63. But a weak print would likely accelerate the selloff, with 5300 as the next key support. Beyond that, the 200-day moving average at 5100 looms at a critical level.
The risk of a deeper correction and a U.S. recession is real, driven by the dual shocks of tariffs and a potentially weakening labour market. Investors should brace for continued volatility, with the VIX already up 40% this week, signalling heightened fear. While oversold indicators like RSI and Stochastic suggest a short-term bounce is possible, the broader trend remains bearish until clarity emerges on both economic data and trade policy. For now, the S&P 500—and the U.S. economy—hang in the balance, with today’s NFP report as the next pivotal moment.
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