Market Reacts to President Trump’s Tariff Announcement
Stocks are falling in after-hours trading as President Trump revealed details about his “Liberation Day” tariff plans. The Invesco QQQ Trust (QQQ) has dropped by -3.44% after closing the regular session up by +0.73%. Similarly, the SPDR S&P 500 ETF (SPY) has plummeted -2.45%, more than negating its Wednesday gain of +0.63%.
New Tariff Rates Announced
The White House disclosed that baseline tariffs of 10% will become effective on April 5, with increased rates set to kick in on April 9. The announced tariffs are higher than many anticipated, impacting China significantly, with the total tariff rate on Chinese imports now at 54%.
Market Summary of Recent Sessions
Earlier on Wednesday, the S&P 500 Index ($SPX) closed up +0.67%, the Dow Jones Industrials Index ($DOWI) finished up +0.56%, and the Nasdaq 100 Index ($IUXX) ended the day with a +0.75% increase. June E-mini S&P futures (ESM25) rose by +0.69%, while June E-mini Nasdaq futures (NQM25) increased by +0.77%.
Investors witnessed recovery in stock indexes on Wednesday following better-than-expected economic news from the U.S. The labor market showed signs of improvement, as the March ADP employment change increased by +155,000, surpassing forecasts of +120,000. Additionally, February factory orders rose +0.6% month-over-month, beating the expected +0.5% increase.
Strength in major technology stocks also played a role in the market’s gains. Notably, Tesla surged over +5% on reports that Elon Musk would shift his focus back to his businesses in the wake of his work for the Trump administration. Amazon.com also enjoyed a +2% rise following news that it has made an offer to acquire TikTok’s U.S. operations. However, stocks initially opened lower as investors awaited President Trump’s tariff announcement.
Mortgage Applications and Economic Indicators
For the week ending March 28, mortgage applications in the U.S. fell by -1.6%. The purchase mortgage sub-index increased by +1.5%, while the refinancing mortgage sub-index dropped by -5.6%. The average 30-year fixed mortgage rate decreased slightly to 6.70%, down from 6.71% the previous week.
Ongoing Tariff Concerns Impacting Markets
Concerns over tariffs have put pressure on the stock market over the past month, as fears mount that they could weaken economic growth and corporate earnings. On March 4, President Trump announced a 25% tariff on goods from Canada and Mexico and increased the tariff on Chinese goods from 10% to 20%. Following that, he reaffirmed plans to impose additional tariffs on April 2. Last Wednesday, he signed a proclamation to enact a 25% tariff on U.S. auto imports, with the initial targets being vehicles assembled outside the country, followed by auto parts by May 3. Trump emphasized that these tariffs were “permanent,” with no room for negotiations.
Upcoming Economic Data
On Thursday, the March ISM services index is anticipated to decline by -0.5 to a level of 53.0. Additionally, Friday’s March nonfarm payrolls report is projected to show an increase of +138,000 jobs, while the unemployment rate is expected to remain steady at 4.1%. March average hourly earnings are anticipated to rise by +0.3% month-over-month and +4.0% year-over-year, consistent with February figures. Lastly, on Friday, Fed Chair Powell is scheduled to address the Society for Advancing Business Editing and Writing Conference regarding economic outlook.
Currently, markets assess a 16% likelihood of a -25 basis point rate cut following the May 6-7 FOMC meeting.
International Market Overview
Global stock markets exhibited mixed results on Wednesday. The Euro Stoxx 50 index closed down -0.31%, while China’s Shanghai Composite Index rose by +0.05%. Japan’s Nikkei Stock 225 recovered from its 6.5-month low, closing up +0.28%.
Interest Rate Movements
June 10-year T-notes (ZNM25) closed down -9 ticks on Wednesday. The 10-year T-note yield rose by +2.1 basis points to 4.192%. T-notes fell from a 4-week high, influenced by a slump in European government bonds and stronger-than-expected US economic reports, which weighed on T-notes. The recovery in stocks also reduced safe-haven demand for T-notes.
T-notes initially rose on speculation that U.S. tariffs might push the economy toward recession, leading the Fed to consider further rate cuts. Additionally, decreasing inflation expectations supported T-notes, with the 10-year breakeven inflation rate falling to a 1.5-week low of 2.321%.
European bond yields increased on Wednesday, with the 10-year German bund yield rebounding from a 4-week low of 2.654% to finish up +3.4 basis points at 2.721%. Similarly, the 10-year UK gilt yield rose from a 1.5-week low of 4.591% to end up +0.7 basis points at 4.640%.
According to ECB Governing Council member Holzmann, there is resistance to an interest rate cut at the upcoming ECB policy meeting, stating, “as we are neutral and inflation is converging to target, there is no reason to become accommodative.”
Swaps indicate a 77% probability for a -25 basis point rate cut by the ECB at the April 17 policy meeting.
US Stock Movers
Tesla (TSLA) led Nasdaq 100 gainers with a +5% increase after reports indicated Elon Musk may refocus on his businesses rather than his role in the Trump administration.
Caesars Entertainment (CZR) rose over +6% after Raymond James listed it as a “Favorite” stock. GE Vernova (GEV) climbed more than +5% following positive coverage initiation from Susquehanna Financial, setting a price target of $370.
Other notable gainers included DoorDash (DASH), which increased by over +3% after Domino’s Pizza announced they would begin taking orders via the platform. Amazon.com (AMZN) climbed by more than +2% after reports of its bid to buy TikTok in the U.S., while Rocket Companies (RKT) surged over +9% on Deutsche Bank’s upgrade to buy.
Citizens Financial Group (CFG) gained more than +2% after receiving an outperform recommendation and a $50 price target from Autonomous. Fiserv (FI) also rose over +2% after Goldman Sachs upgraded its rating to buy with a price target of $260.
Conversely, defensive food and beverage stocks faced downturns amid a broader market recovery. Hershey (HSY) fell more than -3%, accompanied by Mondelez International (MDLZ), which decreased by over -2%. Constellation Brands (STZ) and Campbell’s Company (CPB) both reported losses over -1%, while General Mills (GIS) and Conagra Brands (CAG) saw declines of -0.89% and -0.83%, respectively. Coca-Cola (KO) also declined by -0.75%.
Telecommunications stocks experienced pressure as well, with Verizon Communications (VZ), AT&T (T), and T-Mobile US (TMUS) all closing down by more than -1%.
Notably, nCino (NCNO) dropped over -19% following disappointing Q4 adjusted EPS results and forecasts for future earnings that missed consensus expectations. Deere & Co (DE) fell over -1% due to concerns that U.S. trade policies might adversely impact its second-half outlook.
Upcoming reports include Acuity Inc (AYI), Conagra Brands Inc (CAG), Lamb Weston Holdings Inc (LW), and MSC Industrial Direct Co Inc (MSM).
On the date of publication, Rich Asplund did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are intended solely for informational purposes. For more detailed information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
