US Stock Markets Show Gains Amid Tariff Tensions and Economic Indicators

The S&P 500 Index ($SPX) (SPY) is up +0.64% today, while the Dow Jones Industrials Index ($DOWI) (DIA) has gained +0.29%. The Nasdaq 100 Index ($IUXX) (QQQ) shows a more significant increase of +1.49%. Meanwhile, June E-mini S&P futures (ESM25) are up +0.60%, and June E-mini Nasdaq futures (NQM25) are up +1.24%.

Strength in megacap technology stocks and chip makers is driving the upward trend in stock indexes. Additionally, airline stocks are rising after Delta Air Lines reported quarterly earnings that exceeded expectations.

However, gains in stocks are limited due to new reciprocal tariffs implemented by the U.S., which have diminished foreign confidence in U.S. assets and contributed to dollar weakness. These tariffs have led to concerns about stagflation and have pushed bond yields higher, with the 10-year T-note yield reaching a 1-1/2 month high of 4.511%. Stock index futures were also negatively impacted when China announced retaliatory tariffs of 84% on U.S. goods, causing the yuan to drop to a 17-year low against the dollar.

Today, the U.S. increased tariffs on China by an additional 50%, bringing the total tariffs on Chinese imports to 104%. In a swift response, China applied 84% tariffs on selected U.S. products, effective this Thursday. The European Union has also joined in, imposing 25% tariffs on €21 billion worth of U.S. goods, including soybeans and agricultural products.

U.S. reciprocal tariffs took effect today, impacting imports from 60 countries. Tariffs on European Union imports rose by 20%, bringing the total to 39%. For Japan, the reciprocal tariff is set at 24%, resulting in total tariffs reaching 46%.

Comments from Minneapolis Fed President Neel Kashkari today added pressure to stocks and bonds. He noted, “The hurdle to change the federal funds rate one way or the other has increased due to tariffs,” suggesting the Fed may be less inclined to lower interest rates amid inflationary concerns spurred by tariffs, even if economic conditions begin to weaken.

In mortgage news, US MBA mortgage applications surged +20.0% for the week ending April 4. The purchase mortgage sub-index was up +9.2%, while the refinancing sub-index increased by +35.3%. The average 30-year fixed mortgage rate fell by 9 basis points to its lowest point in 5-1/2 months at 6.61% from 6.70% the prior week.

Recent market pressures stem from fears that U.S. tariffs will negatively impact economic growth and corporate earnings. Earlier tariffs, including a 25% levy on Canadian and Mexican goods and a doubling of tariffs on China, contributed to this anxiety. Last Wednesday, President Trump signed a proclamation for a 25% tariff on U.S. auto imports, initially targeting fully assembled vehicles from outside the U.S. and later extending to automobile parts. These tariffs are described as “permanent” with no exceptions anticipated. Additionally, a 10% baseline tariff for most U.S. trading partners took effect recently.

Market expectations now reflect a 52% chance of a -25 basis point rate cut after the upcoming FOMC meeting scheduled for May 6-7, an increase from 30% last week.

This week, market participants will closely watch U.S. trade policies and potential retaliatory measures from other nations. The minutes from the March 18-19 FOMC meeting will be released later today. On Thursday, the March CPI is expected to decrease to +2.6% year-over-year from +2.8% in February, while the CPI excluding food and energy is projected to ease to +3.0%. Finally, Friday will see the release of the March final-demand PPI, which is expected to climb to +3.3% year-over-year, as well as the April University of Michigan consumer sentiment index, predicted to fall to 54.0 from March’s 57.0.

The Q1 earnings season kicks off this Friday with major U.S. banks reporting their results. According to Bloomberg Intelligence, the market consensus anticipates a +6.7% year-over-year growth in Q1 earnings for the S&P 500, down from +11.1% predicted back in November. For full-year 2025, corporate profits for the S&P 500 are expected to increase by +9.4%, down from a January forecast of +12.5%.

International stock markets are displaying mixed results today. The Euro Stoxx 50 is down sharply by -3.01%. On a more positive note, China’s Shanghai Composite Index closed up +1.31%, while Japan’s Nikkei 225 decreased by -3.93%.

Interest Rates

June 10-year T-notes (ZNM25) are down -26 ticks today, with yields increasing by +8.7 basis points to 4.380%. T-notes have plunged to a 1-1/2 month low as concerns regarding U.S. tariffs and stagflation undermine bond market confidence. These trade policies have led to a lack of confidence in the dollar, prompting foreign investors to dispose of dollar assets, Treasuries included. Furthermore, supply challenges loom as the Treasury is set to auction $39 billion in 10-year T-notes today, part of a larger $119 billion auction package this week.

Meanwhile, European bond yields are mixed. The yield on 10-year German bunds has fallen by -4.1 basis points to 2.590%. In contrast, the 10-year UK gilt yield has risen to a 1-1/2 week high of 4.797%, increasing +15.1 basis points to 4.756%.

Comments from various ECB Governing Council members highlight the increasing pressure for potential interest rate reductions. Villeroy de Galhau suggested that the ECB should consider lowering rates “soon” due to the impact of U.S. tariffs on global markets. Rehn noted that indications for sustained rate cuts at the April meeting have become “clearly stronger” following a holistic assessment of inflation and economic growth, while Holzmann emphasized the need for clarity on global trade uncertainties before further cuts can be contemplated.

Swaps currently indicate a 100% probability of a -25 basis point rate cut by the ECB at the upcoming April 17 policy meeting.

US Stock Movers

The Magnificent Seven stocks are showing positive momentum today, bolstering the broader market. Tesla (TSLA) has risen by more than +5%, while Nvidia (NVDA) increased by more than +4%. Apple (AAPL) is also up by over +3%, and Amazon.com (AMZN) and Microsoft (MSFT) have gained +2%. Meanwhile, Meta Platforms (META) and Alphabet (GOOGL) are each up by more than +1%.

Conversely, pharmaceutical stocks are declining following President Trump’s announcement of an impending “major tariff” on the sector. This has led AstraZeneca Plc (AZN) to drop by more than -5%, marking the largest loss in the Nasdaq 100. Merck & Co. (MRK) has also experienced a decline of over -2%, leading losses in the Dow Jones.