ORLANDO, Florida, March 18 (Reuters) - TRADING DAY

Another wild one on Wall Street as Fed, BOJ decisions loom.

U.S. stocks fell on Tuesday, buckling under the weight of worry

building on multiple fronts from geopolitical tensions to the

outlook for Big Tech, from economic uncertainty to deepening

unease around President Donald Trump's trade wars.

The selloff is a reminder, as if one were needed, of how

fragile market sentiment is right now - visibility on the

economic, policy, and geopolitical outlooks is minimal. No

wonder investors are jittery.

Treasuries failed to catch much of a safe-haven bid, perhaps

because investors wanted to keep positioning light ahead of the

Fed's policy decision on Wednesday. But gold did, leaping 1% to

a new high above $3,000 an ounce.

Wall Street's losses on Wednesday, coupled with Europe's

rally after Germany's parliament approved plans for a massive

spending surge, highlight the degree of America's equity

underperformance against the 'Rest of the World'.

It's a trend that seems more likely to continue than

reverse. More on that below, but first, here are how world

markets stacked up on Tuesday.

Today's Key Market Moves.

* Wall Street's main three indices all fall, with the Dow

shedding

0.6%, the S&P 500 losing 1%, and the Nasdaq sliding 1.7%.

* Eight of the 10 sectors in the S&P 500 index close in the

red.

Consumer cyclicals and tech lead the way, down 1.8% and 1.7%,

respectively.

* Shares in Google parent company Alphabet slide 2.2% to a

six-month low after agreeing to buy Wiz for $32 billion - its

biggest ever deal - as it doubles down on cybersecurity.

* Tesla shares slump 5.3%, bringing the decline since the

December

peak to more than 50%. That's around $800 billion market cap

gone in three months.

* Gold rises for a fifth session out of the last six, up

more than

1% to a fresh high of $3,038/oz.

* Oil's decline in the face of rising tensions in the Middle

East

underscores investors' broader worries over demand. WTI futures

close 1% lower, Brent down 0.7%.

* China's spot yuan posts its strongest close since November

at

7.2216 per dollar. This tightens the spread over the PBOC fixing

to less than 5 bps, the narrowest since November.

* The dollar trades in a tight range and Treasury

yields

slip no more than 2 bps across the curve, suggesting FX and bond

investors are sitting tight before the BOJ and Fed tomorrow.

U.S. President Donald Trump and Russian President Vladimir

Putin on Tuesday discussed a potential 30-day ceasefire in the

Russia-Ukraine war. But while Moscow agreed to stop attacking

Ukraine's energy infrastructure, it did not agree to a blanket

30-day ceasefire.

This helped keep the selling pressure bearing down on Wall

Street, and maintain the bid under gold and the Swiss franc.

Barring unforeseen developments on the geopolitical or trade

war fronts - a brave assumption these days - investors'

attention now switches to the big central banks. First up on

Wednesday is the Bank of Japan, then the Federal Reserve.

It's probably no surprise, given the volatile global

climate, that hawkish expectations for the BOJ are fading. No

one was expecting another rate hike on Wednesday anyway, but

rates markets are not fully pricing in the next 25 bps hike

until September. And that's it for the year.

This could explain why the yen has eased off lately, failing

to get much support from safe-haven demand or surging Japanese

bond yields.

Investors' attention on the Fed, meanwhile, will be split

between policymakers' new economic projections, what they say

about the central bank's balance sheet rundown, and the signals

drawn from Chair Powell's press conference.

Markets, especially the bond market, could be coiled for a

big move, and there are several lines of questioning to Powell

that could provide the trigger - tightening financial

conditions, Wall Street's weakness, the impact of Trump's

tariffs on growth and inflation, recession risks, or spiking

consumer inflation expectations.

It's shaping up to be a fascinating day across U.S. and

world markets.

Investors RoW back on Wall Street exceptionalism

As the end of the first quarter approaches, world stock markets

are in a curious position. They are benefiting from capital

flowing out of Wall Street, but they also face major risks if

the U.S. selloff turns into a rout.

As President Donald Trump's trade war has snuffed out the

"U.S. exceptionalism" narrative, a yawning gap has opened

between U.S. equities and those in the 'Rest of the World'.

The selloff abated briefly and the S&P 500 notched its first

consecutive daily rises in a month. But Wall Street was back in

the red on Tuesday, and U.S. underperformance - the widest in

more than 20 years, by some measures - shows little sign of

reversing course.

Indeed, history suggests this gap could widen further,

although only if the U.S. economy avoids tipping into a serious

recession.

CORRECTION THRESHOLD

As the S&P 500 flirted with 10% correction territory last

week, 'RoW' markets were outperforming by as much as 9

percentage points, the biggest such gap since 2002, according to

strategists at Citi.

Historically, when U.S. corrections eclipse the 10% mark but

don't breach the 20% 'bear market' threshold, Wall Street

underperforms over the entire downturn, Citi noted. In U.S. bear

markets and recessions, however, no country or market is immune

- growth and asset prices everywhere suffer.

This scenario appears to be unfolding. Most economists agree

that U.S. growth will slow this year, but few think it will fall

off a cliff. While the Atlanta Fed's GDPNow model is signaling a

2.1% contraction in Q1, that remains an outlier.

Contrast that with the sudden improvement in Germany's

growth outlook thanks to Berlin's proposed fiscal bazooka.

Beijing also appears ready to do whatever it takes to support

China's economy and markets - call it the 'Xi put'.

Indeed, the tailwinds for RoW outperformance seem to be

building.

CROWDED OUT

The rotation out of Wall Street to the rest of the world has

been underway all year. Bank of America's March fund manager

survey shows that allocations to euro zone markets are the

highest since 2021, while U.S. allocations plunged at the

fastest rate on record.

This might suggest the switch has run its course. But the

same survey also showed that the most crowded trade is still

'long' the Magnificent Seven shares of America's biggest tech

firms.

And even though U.S. earnings multiples have fallen to the

lowest point since September, they remain lofty by historical

standards due to Big Tech's still-rich valuations. Indeed, U.S.

stock valuations remain well above those in other developed

markets, so this rotation may be far from over.

FINE LINE

"Corrections are healthy, they're normal," Treasury

Secretary Scott Bessent told 'Meet The Press' on Sunday, adding:

"I'm not worried about the markets.

Corrections are indeed normal and healthy, occurring roughly

once every couple of years with an average decline of 14%. As

Mark Riepe at Charles Schwab points out, of the 27 corrections

since 1974 including the current one, only six have gone on to

become bear markets.

But Bessent's remarks could also be interpreted as a sign of

how relaxed the Trump administration is about the current

decline, suggesting they won't act to prevent a further slide.

It's a risky stance to take at such a delicate juncture for the

economy.

And the RoW needs to watch out, because its outperformance

will likely only continue if the U.S. doesn't implode. As Dario

Perkins at TS Lombard notes, "Make no mistake - a U.S. recession

would bring down the entire world."

That would quickly wipe out Wall Street's underperformance,

but unfortunately, also a whole lot more.

What could move markets tomorrow?

* U.S. Federal Reserve policy decision, revised economic

projections and Chair Jerome Powell's press conference

* Bank of Japan policy decision and Governor Kazuo Ueda's

press

conference

* Japan trade (February)

* Japan machinery orders (January)

* Japan Tankan non-manufacturing index (March)

* Bank Indonesia interest rate decision

* China's Tencent earnings (Q4)

* Euro zone HICP inflation (February, final)

* ECB board member de Guindos speaks in Madrid

If you have more time to read today, here are a few articles

I recommend to help you make sense of what happened in markets

today.

1. Israeli strikes kill over 400 in Gaza, say

Palestinians,

ceasefire on brink

2. European shares climb after German lower house

passes

fiscal reform bill

3. China stocks offer hedge against fading US

exceptionalism: Taosha Wang

4. Maybe BoE should 'cut through the noise': Mike

Dolan

5. Fed watchers see good chance of change in balance

sheet

drawdown

I'd love to hear from you, so please reach out to me with

comments at . You can also follow me at [@ReutersJamie and

@reutersjamie.bsky.social.]

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