The S&P 500 Index ($SPX) (SPY) has increased by +1.82%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.91%, and the Nasdaq 100 Index ($IUXX) (QQQ) has risen by +2.13%. Meanwhile, June E-mini S&P futures (ESM25) are up +1.98% and June E-mini Nasdaq futures (NQM25) are up +2.25%.

The financial markets are rebounding sharply today, recovering some losses from Monday’s decline. This increase is largely attributed to optimism surrounding trade negotiations, as U.S. trade officials announced they have made “significant progress” in discussions with India, following talks between Vice President Vance and Indian Prime Minister Modi. Furthermore, support in the stock market is bolstered by a decline in the 10-year Treasury note yield, which dropped -2.7 basis points to 4.383% after reaching a 1-week high.

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Additionally, positive earnings results for the first quarter are lifting stock prices today. Equifax has seen an increase of over +11% after reporting better-than-expected Q1 operating revenue. Similarly, 3M Co has gained more than +7% after its Q1 adjusted EPS exceeded expectations, while maintaining its full-year earnings guidance. Moreover, Danaher has increased by over +4% following stronger-than-expected Q1 sales.

Despite these positive trends, concerns regarding the Federal Reserve’s independence are limiting stock market gains. President Trump has suggested he may consider removing Fed Chair Powell due to his interest rate decisions. Earlier, the dollar plummeted to a 3-year low, while gold surged to a new record high as the possibility of Powell’s dismissal erodes confidence in the dollar. This situation risks prompting foreign investors to sell off their dollar assets, including stocks and Treasuries.

Today’s U.S. economic news was less favorable for stocks. The April Richmond Fed manufacturing survey reported a current conditions index decline of -9, reaching a 5-month low of -13, which was worse than anticipated.

In a notable move, the International Monetary Fund (IMF) has adjusted its global GDP forecast for 2025, lowering it to +2.8% from +3.3% estimated in January. The IMF warned of a deteriorating outlook, potentially exacerbated by U.S. tariffs igniting a global trade war. The organization also revised the 2025 U.S. GDP forecast to +1.8%, down from +2.7%, and reduced Eurozone and China GDP forecasts as well.

Bitcoin (^BTCUSD) has risen more than +3%, reaching a 6-week high as the dollar’s drop to a 3-year low fuels demand for cryptocurrencies. The ongoing uncertainty surrounding Fed Chair Powell adds to concerns about the Fed’s independence, diminishing confidence in the dollar and dollar-linked assets.

The markets are currently evaluating an 11% chance of a -25 basis points rate cut at the upcoming May 6-7 FOMC meeting. This week, market focus will remain on Q1 corporate earnings results and updates to U.S. trade policies. Upcoming data includes March new home sales, expected to rise +0.7% month-over-month, and the Fed Beige Book release. Additionally, Thursday will see reports on March capital goods orders and existing home sales.

The Q1 earnings reporting season continues to unfold. Recent data indicates a market consensus for year-over-year earnings growth of +6.7% for S&P 500 stocks, which is a downgrade from early November expectations of +11.1%. For full-year 2025, corporate profits for S&P 500 firms are now forecasted to grow by +9.4%, down from previous estimates of +12.5%.

International stock markets exhibited mixed results today. The Euro Stoxx 50 decreased by -0.12%, while China’s Shanghai Composite index climbed to a 2-1/2 week high, gaining +0.25%. On the other hand, Japan’s Nikkei 225 closed down -0.17%.

In recent developments regarding tariffs, President Trump announced on April 4 a temporary exemption for consumer electronics from reciprocal tariffs and the standard 10% global tariffs, although a 20% tariff remains on electronics imported from China. Following this, on April 9, Trump declared a 90-day pause on higher reciprocal tariffs affecting 56 nations, while still maintaining the 10% baseline tariff on nearly all markets. The EU also announced a delay in implementing 25% tariffs on $21 billion worth of U.S. goods.

Further escalations occurred as Trump imposed a 25% tariff on Canadian and Mexican goods on March 4 and doubled tariffs on Chinese goods. Additionally, he signed a proclamation on April 2 targeting a 25% tariff on U.S. auto imports, expanding to include parts made outside the U.S. by early May. Concurrently, China retaliated by upping tariffs on U.S. goods to 125% from 84%.

Interest Rates

June 10-year T-notes (ZNM25) increased by +3 ticks today, with the yield down -2.7 basis points to 4.383%. After falling to a 1-week low, the 10-year T-note yield dropped from a recent high of 4.434%. Investor short covering followed a rally in European government bonds reaching 2-week highs. Additionally, the IMF’s cut to the global GDP forecast provided support to T-notes.

Initial declines in T-notes were observed due to concerns over the potential removal of Fed Chair Powell, which could question the Fed’s independence and raise inflation expectations. These developments combined with supply pressures from upcoming Treasury auctions contributed to bearish trends in T-notes.

European government bond yields have also seen a downward trend. The 10-year German bund yield fell to a 2-week low of 2.442%, while the 10-year UK gilt yield dropped to a 2-week low of 4.540%. The Eurozone’s April consumer…