Market Update: Mixed Signals Amid Ongoing Trade Concerns
This afternoon, the S&P 500 Index ($SPX) (SPY) is up +0.57%, while the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.18%, and the Nasdaq 100 Index ($IUXX) (QQQ) has climbed +1.10%.
Market Opening and Trade War Fears
Despite this afternoon’s gains, the market opened lower for the third consecutive session. Notably, the S&P 500 hit a 14-month low, and both the Dow Jones and Nasdaq 100 indexes fell to 15-month lows. Concerns over a potential trade war continue to weigh heavy on investor sentiment, with fears that it could potentially push the global economy into recession. Over the weekend, President Trump downplayed the selloff in equity markets, urging to “forget the markets for a second” while reaffirming his commitment to existing tariff policies. Treasury Secretary Bessent also minimized concerns around slowing economic growth, claiming an economic boom is imminent.
Afternoon Rally and Rate Cut Expectations
As the afternoon progressed, stock indexes began to rally off their lows. Investor optimism stemmed from hopes that ongoing tariff disputes could prompt the Federal Reserve to consider cutting interest rates. Currently, markets are pricing in a 39% chance of a 25 basis point rate cut following the FOMC meeting on May 6-7, an increase from last week’s 30% likelihood.
Trade Tariffs Impacting Markets
The recent downturn in equity markets was ignited last Wednesday when President Trump announced retaliatory tariffs that exceeded market expectations. This development raised fears that U.S. trade policies would negatively affect economic growth both locally and globally. The situation escalated further on Friday when China announced a 34% tariff on all U.S. imports, set to take effect on April 10.
The widespread selloff in global stocks has fostered a risk-averse environment among investors. This has resulted in a flight to safety, with significant inflows into government bonds and declining commodity prices. For example, WTI crude oil has fallen to a four-year low, while COMEX copper prices have dropped to a three-month low.
Details of New Tariff Policies
Last Wednesday, President Trump unveiled plans for at least a 10% tariff affecting nearly all countries, with additional higher reciprocal tariffs on around 60 nations. Most new tariffs took effect over the weekend, while higher reciprocal rates will come into play on April 9. It’s worth noting that certain sectors, including steel and automobiles, are excluded from these tariffs. Canada and Mexico remain exempt from the new tariffs but will still face previously announced 25% tariffs. However, a 34% reciprocal tariff will be applied to China, bringing total tariffs on the country to 67%. The EU faces a 20% reciprocal tariff, resulting in a total of 39%, while Japan will see a 24% rate, totaling 46%.
Market Pressure from Earnings Fears
Stocks have faced considerable pressure for the past month, largely due to worries that U.S. tariffs may stifle economic growth and corporate earnings. On March 4, President Trump enacted 25% tariffs on goods from Canada and Mexico, simultaneously raising tariffs on Chinese goods from 10% to 20%. Furthermore, Trump signed a proclamation last Wednesday that stated a 25% tariff on U.S. auto imports will take effect this week, initially covering vehicles fully assembled outside the U.S. This will extend to auto parts manufactured abroad by May 3. Trump emphasized that these tariffs are permanent, with no exceptions for negotiation.
Upcoming Market Focus
In the coming days, attention will focus on U.S. trade policies and potential retaliatory actions by other nations. The release of the minutes from the March 18-19 FOMC meeting is anticipated on Wednesday. Also, investors will look for March Consumer Price Index (CPI) data, which is expected to ease to +2.6% year-over-year from 2.8% in February. Additionally, March Producer Price Index (PPI) final demand is projected to rise to +3.3% year-over-year from 3.2%. Lastly, the University of Michigan’s April consumer sentiment index is forecasted to decrease to 54.0 from 57.0 in March.
Global Market Movement
International stock markets are also seeing significant declines. The Euro Stoxx 50 fell to an eight-month low, down -3.67%. China’s Shanghai Composite Index closed at a six-and-a-quarter-month low, down -7.34%. Japan’s Nikkei 225 experienced a -7.83% drop, reaching a 17-month low.
Interest Rates and Bond Market Updates
June 10-year T-notes (ZNM25) have fallen -26 ticks today, with the 10-year T-note yield increasing by +13.2 basis points to 4.126%. This decline follows a retreat from a six-and-a-quarter-month high. Ongoing tariff disputes are driving foreign investors to liquidate dollar assets amid worries about a U.S. recession, which is negatively impacting T-notes. The market is also responding to last Friday’s comments from Fed Chair Powell regarding the Fed’s cautious approach to monetary policy changes.
Despite these pressures, T-notes are supported by concerns of a global trade war potentially leading the U.S. into recession. The current equity market selloff has driven safe-haven demand for government debt. Additionally, T-notes found support from dropping crude oil prices, which reduced inflation expectations, lowering the 10-year breakeven inflation rate to a six-and-a-half-month low of 2.139%.
European bond yields saw recoveries from earlier losses today, with the 10-year German bund yield climbing from a one-month low of 2.430% to +5.0 basis points at 2.628%. Similarly, the 10-year UK gilt yield rose by +17.0 basis points from a three-and-three-quarter-month low of 4.363% to 4.618%.
Economic data released from the Eurozone showed February retail sales increasing by +0.3% month-over-month, falling short of the expected +0.5%. Additionally, the Eurozone’s April Sentix investor confidence index plunged -16.6, landing at a one-and-a-half-year low of -19.5, below expectations of -9.0. German industrial production also underperformed, falling by -1.3% month-over-month against estimates of a -1.0% decline. Swaps are now pricing in an 85% chance of a 25 basis point rate cut by the ECB at the upcoming April 17 meeting.
US Stock Movements
The tech giants commonly referred to as the Magnificent Seven are struggling today and causing an overall drag on the market. Tesla (TSLA) and Apple (AAPL) each dropped over -5%, while Microsoft (MSFT) fell more than -1% and Alphabet (GOOGL) declined by -0.85%. Other stocks such as Nvidia (NVDA) and Meta Platforms (META) also recorded minor losses of -0.46% and -0.27%, respectively.
Conversely, a rebound among chipmakers is somewhat offsetting the broader market’s losses. Stocks like Applied Materials (AMAT), Analog Devices (ADI), Lam Research (LRCX), and Microchip Technology (MCHP) saw increases of over +4%. Notable gains were also achieved by KLA Corp (KLAC), ON Technology (ON), Marvell Technology (MRVL), and GlobalFoundries (GFS), each up more than +3%.
Banking stocks faced headwinds after Morgan Stanley downgraded large-cap and midcap banks from attractive to inline ratings. Consequently, Franklin Resources (BEN) fell over -5%, and Goldman Sachs (GS) declined more than -3%. Additionally, Wells Fargo (WFC), Citigroup (C), US Bancorp (USB), and Synchrony Financial (SYF) also experienced drops in share prices.
Energy Stocks Drop as WTI Crude Prices Hit Four-Year Low
Energy stocks and service providers are experiencing a decline for the second consecutive day, following a significant drop in the price of WTI crude oil, which has reached a four-year low. Schlumberger (SLB) leads the S&P 500 with a loss exceeding -7%. Other notable decliners include Occidental Petroleum (OXY), down more than -5%, and Exxon Mobil (XOM) and Hess Corp (HES), both down over -3%. Additionally, ConocoPhillips (COP), Halliburton (HAL), Phillips 66 (PSX), and Devon Energy (DVN) have all dropped more than -2%.
US-Listed Chinese Stocks Fall on Tariff News
US-listed Chinese equities are falling for a second straight session after China announced a 34% tariff on all US imports. Major players, including Alibaba Group Holding Ltd (BABA), JD.com (JD), NetEase (NTES), and PDD Holdings (PDD), have all declined by more than -2%.
Airline Stocks Decline Following Analyst Downgrades
Airline stocks are sliding today as UBS has issued downgrades. Alaska Air Group (ALK), Delta Air Lines (DAL), and United Airlines Holdings (UAL) are all down more than -1% after their ratings were lowered to neutral from buy.
General Motors and Other Notable Declines
General Motors (GM) has dropped more than -2% following Bernstein’s downgrade of the stock from market perform to underperform, with a revised price target set at $35. Similarly, Vulcan Materials (VMC) is down over -1% after UBS decreased the stock’s rating from buy to neutral. Fox Corp (FOXA) also saw a decline of more than -1% after Wolfe Research downgraded it from peer perform to underperform, setting a price target of $48.
Dollar Tree Leads S&P 500 Gainers Following Upgrade
In contrast, Dollar Tree (DLTR) is up more than +7%, leading the S&P 500 in gains today after Citigroup upgraded the stock from neutral to buy, with a target price of $103.
Earnings Reports (4/7/2025)
Upcoming earnings reports include AMMO Inc (POWW), Dave & Buster’s Entertainment (PLAY), and Greenbrier Cos Inc/The (GBX).
On the date of publication, Rich Asplund did not have any positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data are solely for informational purposes. For further details, please review the Barchart Disclosure Policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
