The S&P 500 Index ($SPX) (SPY) has decreased by -1.24%, while the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.64%. The Nasdaq 100 Index ($IUXX) (QQQ) fell by -1.98%. Additionally, June E-mini S&P futures (ESM25) have dropped -1.25%, and June E-mini Nasdaq futures (NQM25) are down -2.01%.

Today’s stock indexes are losing traction, primarily due to declines in the chip sector. ASML Holding NV experienced a decline of more than -6% after posting Q1 bookings that fell short of expectations. Nvidia is seeing a drop greater than -7% after facing a ban on the sale of its H20 chips to China. This restriction could cost Nvidia an estimated $5.5 billion in Q1, linked to inventory and pre-existing commitments. Losses deepened after the World Trade Organization (WTO) revised global trade projections downwards for 2025.

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Mixed Economic Signals and Trade Talks

On a more positive note, recent US economic news mostly surpassed expectations, providing some support to stocks. Reports indicate that China is awaiting certain actions from the Trump administration before commencing trade talks, including a call for more respect and curbing offensive remarks from administration officials.

For the week ending April 11, US MBA mortgage applications decreased by -8.5%, with the purchase mortgage sub-index dipping -4.8% and the refinancing mortgage sub-index falling -12.4%. Meanwhile, the average rate for a 30-year fixed mortgage rose by 20 basis points to 6.81% from 6.61% the previous week.

March retail sales in the US rose by +1.4% month-over-month, aligning with expectations, while retail sales excluding autos increased by +0.5% month-over-month, surpassing the anticipated +0.4% month-over-month growth. Additionally, March manufacturing production edged up +0.3% month-over-month, slightly exceeding the forecast of +0.2%.

Global Trade Woes and Tariff Implications

The WTO announced a cut in its global trade forecast for 2025, now predicting a -0.2% decline, down from a previous estimate of +3.0% made in November. They cautioned that if the US persists with reciprocal tariffs, global trade could contract by -1.5% this year.

In a related development, President Trump recently indicated a temporary exemption for consumer electronics from reciprocal tariffs, while still maintaining a 20% tariff on electronics imported from China. On the flip side, the EU announced a 90-day delay in the implementation of a 25% tariff on €21 billion worth of US goods sent to Europe. Overall, looming tariff hikes have pressured stocks, raising concerns over weakened economic growth and corporate earnings.

Since March 4, President Trump has levied a 25% tariff on Canadian and Mexican goods and doubled the tariff on Chinese goods from 10% to 20%. Furthermore, on April 2, he signed a proclamation for a 25% tariff on US auto imports, initially targeting fully assembled vehicles and expanding to include automobile parts by May 3. Following this, China retaliated by increasing tariffs on US goods from 84% to 125%.

Market Reactions and Outlook

The ongoing tariff disputes have weakened the dollar, contributing to a surge in gold prices, reaching an all-time high. As trade policy worries persist, the dollar index fell to a three-year low. This situation has undermined consumer confidence, resulting in many companies halting capital spending plans and negatively impacting GDP growth. There is also growing concern over the dollar’s status as a reserve currency as the US employs tariffs as leverage.

Market participants will keep a close watch on developments concerning US trade policy during the upcoming shortened week. Fed Chair Powell is scheduled to address the Economic Club of Chicago later today about the economic outlook. On Thursday, housing starts for March are projected to decline by -5.7% month-over-month to 1.416 million, while building permits are forecasted to fall by -0.6% to 1.450 million.

The market is currently pricing in a 19% chance of a -25 basis point rate cut following the FOMC meeting on May 6-7. The Q1 earnings season commenced last Friday with results from major US banks. According to Bloomberg Intelligence, the consensus for year-over-year earnings growth for S&P 500 companies in Q1 is +6.7%, a decrease from earlier forecasts of +11.1%. Full-year 2025 corporate profits for the S&P 500 are now anticipated to rise by +9.4%, down from an earlier estimate of +12.5%.

Overseas Markets Mixed

International stock markets displayed mixed results today. The Euro Stoxx 50 dropped -0.48%, while China’s Shanghai Composite rose to a one-and-a-half week high, closing up +0.26%. Japan’s Nikkei Stock 225 concluded the day down -1.01%.

Interest Rates

June 10-year T-notes (ZNM25) are up +3 ticks today, with the yield on the 10-year T-note dipping -1.2 basis points to 4.321%. Slight gains in T-notes are supported by recent rallies in European government bonds, following a less-than-expected increase in UK March consumer prices. However, upward momentum is tempered by supply pressures, as the Treasury is set to auction $13 billion of 20-year T-bonds later today.

In Europe, bond yields are trending lower. The yield on the 10-year German bund fell to a one-week low of 2.479%, decreasing by -3.3 basis points to 2.502%. The 10-year UK gilt yield also slid to a one-week low of 4.571%, down -4.2 basis points to 4.606%.

UK March CPI rose by 2.6% year-over-year, slightly underperforming expectations of +2.7%. Core CPI for March increased by +3.4% year-over-year, aligning with forecasts. Market swaps are currently predicting a 99% chance for a -25 basis point rate cut at the ECB’s meeting on April 17.

US Stock Movers

Today, chip stocks are under pressure, impacting the broader market. Advanced Micro Devices (AMD) saw a decline of more than -5%, leading the S&P 500 and Nasdaq 100 losers. Nvidia (NVDA) is also down more than -5%, topping the Dow Jones Industrials decliners list after the ban on its H20 chip sales to China. ASML Holding NV (ASML) is down more than -5% due to weaker-than-expected Q1 bookings. Other companies such as Applied Materials (AMAT), Lam Research (LRCX), Marvell Technology (MRVL), and Broadcom (AVGO) are down by more than -3%.