US Stocks Likely To Open Lower After 3-Day Fall: ‘Equity Drawdown Probability Hasn’t Peaked Yet,’ Says Goldman Sachs Analyst

U.S. stock futures fell on Monday after three consecutive days of decline on Friday. Futures of major benchmark indices were lower in premarket trading.

Stocks decline as investors await the day of incoming reciprocal tariffs on April 2nd. This is termed “Liberation Day” by U.S. President Donald Trump.

Goldman Sachs, in its recent note, predicted a 35% recession risk and reciprocal tariffs that average 15% across all U.S. trading partners, although product and country exclusions could whittle the addition to the average U.S. tariff rate down to 9 percentage points.

The stock market ended the month of March and the first quarter on a rough note. As of Friday, the Nasdaq 100 index was 13.24% from its previous high. The S&P 500 was 9.22% lower from its record level, and the Dow Jones was down 7.74% from its 52-week high.

With the 10-year Treasury yield at 4.63% and the 2-year at 3.88%, the CME Group’s FedWatch tool shows markets pricing in an 82.1% likelihood of the Federal Reserve maintaining current interest rates through its May meeting.

The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, dropped in premarket on Friday. The SPY was down 0.71% to $551.70, while the QQQ declined 1.16% to $463.49, according to Benzinga Pro data.

Cues From Last Session:

Most sectors on the S&P 500 ended Friday in the red, with consumer discretionary, communication services, and information technology stocks posting the steepest losses. In contrast, utilities outperformed, closing the session higher despite broader market weakness.

Adding to market jitters, the Fed’s preferred inflation gauge, the core Personal Consumption Expenditures price index, rose 2.8% year-over-year in February, exceeding expectations of 2.7%.

Investor anxiety was further fueled by the University of Michigan Survey of Consumers, which revealed a jump in 5-year forward inflation expectations to 4.1%, marking the highest level since February 1993.

In corporate earnings, AAR Corp. AIR shares plunged more than 16% after the company reported a third-quarter sales miss.

Insights From Analysts:

As the date for “reciprocal tariffs” or “Liberation Day,” as termed by President Trump, gets closer, Louis Navellier of Navellier & Associates says that there is a lot for investors to be excited about in April.

“Overall, despite continued tariff distractions, after ‘Liberation Day,’ I am expecting economic optimism to rise steadily in the upcoming months. Continued strong corporate earnings and lower interest rates are a powerful one-two punch that is expected to drop kick and propel economic growth dramatically higher,” he said.

However, Goldman Sachs has increased its U.S. recession probability from 20% to 35% in its recent note.

Christian Mueller-Glissmann, the leading asset allocation researcher at Goldman Sachs, has warned that the risk of further market correction is still looming in the U.S. “The equity drawdown probability hasn’t peaked yet,” he said.

The factors supporting Goldman Sachs Research’s view that the market correction has further to go include:

• Its model’s forecast has signaled heightened risk since January and has yet to indicate a peak in the likelihood of continued declines.

• A weakening macroeconomic backdrop, combined with the equity drawdown, suggests that the market has not yet found a bottom.

• The risk appetite indicator, which measures investor sentiment, remains above the ‘-2′ threshold that historically signals a potential market reversal absent policy or economic shifts, indicating that a strong buying opportunity has not yet emerged.

• The Magnificent Seven tech stocks, which play a key role in retail investor confidence, have experienced notable declines, and further weakness in these stocks could weigh on sentiment.

• European and Chinese equities, which are currently outperforming the U.S., have historically led initially but ultimately followed the U.S. during broader market corrections, suggesting that a deeper U.S. downturn could pull global markets lower.

Mueller-Glissmann notes a key limitation of his equity drawdown model: it doesn’t factor in policy shifts. “If President Trump or the Federal Reserve makes a major policy pivot, markets could recover much faster,” he said.

See Also: How to Trade Futures

Upcoming Economic Data

Here’s what investors will keep an eye on this week:

• On Monday, March’s Chicago Business Barometer (PMI) will be released by 9:45 a.m. ET.

• On Tuesday, Richmond Federal Reserve President Thomas Barkin will speak at 9:00 a.m. ET.

• March’s S&P final U.S. manufacturing PMI will be out by 9:45 a.m. ET.

• February’s construction spending, job openings, and March’s ISM manufacturing data will be released by 10:00 a.m. ET and the time for auto sales data is yet to be determined.

• On Wednesday, March’s ADP employment data will be out by 8:15 a.m. ET.

• February’s factory orders data will be released at 10:00 a.m. ET.

• Fed Governor Adriana Kugler will speak at 4:30 p.m. ET.

• On Thursday, the initial jobless claims data for the week ending March 29 and February’s U.S. trade deficit data will be released by 8:30 a.m. ET.

• March’s S&P final U.S. services PMI and ISM services will be announced between 9:45 and 10:00 a.m. ET.

• Fed Vice Chairman Philip Jefferson will speak at 12:30 p.m., and Fed Governor Lisa Cook will speak at 2:30 p.m. ET.

• On Friday, March’s U.S. employment report, unemployment rate, and hourly wages data will be out by 8:30 a.m. ET.

• Fed Chairman Jerome Powell will speak at 11:25 a.m. ET.

• Fed Governor Michael Barr will speak at noon, and Fed Governor Christopher Waller will speak at 12:45 p.m. ET.

Stocks In Focus:

• PVH Corp. PVH fell 0.66% in premarket on Monday ahead of its earnings after the closing bell. Analysts expect a quarterly earnings of $3.22 per share on revenue of $2.34 million.

• Progress Software Corp. PRGS tumbled 0.31% as Wall Street expects it to report a quarterly earnings of $1.06 per share on revenue of $235.63 million after the closing bell.

• Loar Holdings Inc. LOAR declined 1.64% ahead of its earnings before the opening bell. Analysts expect a quarterly earnings of 10 cents per share on revenue of $102.54 million.

• Babcock & Wilcox Enterprises Inc. BW was up 1.27% as Wall Street expects it to report a quarterly loss of 1 cent per share on revenue of $213.07 million after the closing bell.

• Xos Inc. XOS jumped 9.01% as its 2024 revenue surged to $56 million, compared to $44.5 million in 2023. The company delivered 297 units in 2024, up from 283 units in the previous year.

• Acuren Corp. TIC slumped 37.78% after a revenue miss and reported a $105.5 million Successor Net Loss for 2024, mainly due to one-time transaction costs. Combined Adjusted EBITDA rose 11.5% to $186.7 million, with margins improved to 17.0% from 15.9% in 2023.

• Treasure Global Inc. TGL surged 47.50% as it announced plans to develop and deploy an advanced AI cloud infrastructure in Malaysia capable of supporting trillion-parameter models, last week.

• Lexicon Pharmaceuticals Inc. LXRX was up 1.38% as it signed an exclusive global license deal with Novo Nordisk A/S NVO for a first-in-class oral non-incretin drug for obesity and metabolic disorders. The agreement includes up to $1 billion in potential payments, with $75 million upfront and in near-term milestones

Commodities, Gold, And Global Equity Markets:

Crude oil futures were trading higher in the early New York session by 0.74% to hover around $69.87 per barrel.

Gold Spot US Dollar advanced 1.24% to hover around $3,122.41 per ounce. Its fresh record high stood at $3,127.88 per ounce. The U.S. Dollar Index spot was lower by 0.05% at the 103.997 level.

Asian markets closed on a lower note on Monday. China’s CSI 300, India’s S&P BSE Sensex, Hong Kong’s Hang Seng, South Korea’s Kospi, Japan’s Nikkei 225, and Australia’s ASX 200 index declined. European markets were also lower in early trade.

Read Next:

• Goldman Sachs Warns US Stocks ‘Are At Risk Of Further Declines,’ But Policy Pivot From Trump Or Fed Could Stoke Recovery

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