The S&P 500 Index ($SPX) (SPY) rose by +2.79% today, while the Dow Jones Industrials Index ($DOWI) (DIA) increased by +2.69%. The Nasdaq 100 Index ($IUXX) (QQQ) surged by +3.29%. Meanwhile, June E-mini S&P futures (ESM25) climbed +2.80%, and June E-mini Nasdaq futures (NQM25) rose +3.30%.

Stock indexes are rebounding strongly today, recovering from significant losses suffered over the last three sessions, during which the S&P 500 dropped nearly 15% since last Wednesday. The optimism stems from a recent discussion between President Trump and Japan’s Prime Minister Ishiba, suggesting a potential tariff deal to reduce or avert a 24% levy on imports set to begin tomorrow.

Further fueling stock gains were President Trump’s comments about prospects for a trade deal with South Korea, which he described as “looking good.” Additionally, Treasury Secretary Bessent mentioned that “very large countries with large trade deficits” would seek trade agreements with the US soon.

Ongoing Tariff Concerns and Global Market Impacts

Despite the positive sentiment, concerns about tariffs linger after President Trump dismissed a European Union (EU) proposal to eliminate tariffs on industrial goods between the US and the EU. This implies that the 20% EU tariff on US imports is set to take effect tomorrow. Compounding the situation, China’s Commerce Ministry stated its intent to retaliate against Trump’s latest tariff threats, indicating the US will impose a 50% tariff on China unless it retracts its own 34% tariffs by tomorrow. They termed the US threat as “a mistake on top of a mistake” and emphasized that China “will fight to the end” if the US pushes further.

Late Monday, Chicago Fed President Goolsbee relayed that some business leaders expressed concerns that the escalating tariffs could result in economic conditions reminiscent of 2021 and 2022 when inflation surged excessively.

Global equity markets suffered substantial losses on Monday due to fears that an escalating trade war might thrust the global economy into a recession. The market decline gained momentum after President Trump announced tariff rates that exceeded market expectations, raising alarms about the potential impact on both the US and global economies. These concerns deepened following China’s announcement on Friday of a 34% tariff on all US imports effective April 10. Trump reiterated on Monday that there would be no pause on tariffs, stating, “If China does not withdraw its 34% increase on tariffs to US goods by Tuesday, the US will impose additional tariffs of 50% on China, effective April 9.”

Details of the Imposing Tariffs

Last Wednesday, President Trump outlined plans for a minimum 10% tariff on nearly all countries, with higher reciprocal rates on around 60 nations. Newly instituted tariffs began Saturday, with some rates applying immediately, while others are set to escalate on April 9. Certain sectors like steel and automobile manufacturing will be exempt; however, Canada and Mexico will remain subject to previously established 25% tariffs. Under the new regime, China’s tariffs will escalate to 67%, EU tariffs to 39%, and Japanese tariffs to 46%.

Stocks have faced pressures over the past month due to fears that these tariffs might undermine economic growth and corporate earnings. Just last month, Trump issued 25% tariffs on Canadian and Mexican goods and increased the tariff on Chinese goods to 20% from 10%. Last Wednesday, he also signed a proclamation for a 25% tariff on US auto imports, targeted at vehicles assembled outside the US, with expansions to include auto parts by May 3. Trump described these tariffs as “permanent,” with no intention of allowing exceptions.

Markets now assign a 28% probability of a -25 basis point interest rate cut following the FOMC meeting on May 6-7, a slight decrease from last week’s 30% estimate.

Upcoming Economic Indicators & Earnings Reports

Attention this week will remain centered on US trade policies and potential retaliatory actions from other nations. The release of the March 18-19 FOMC meeting minutes is anticipated on Wednesday, while Thursday’s March CPI report is expected to show a decrease to +2.6% year-over-year from 2.8% in February. The March CPI excluding food and energy is predicted to ease to +3.0% from +3.1%. On Friday, the March final-demand PPI is expected to rise to +3.3% year-over-year, up from +3.2% in February, with the March PPI excluding food and energy forecasted to climb to +3.6% from +3.4%.

The first-quarter earnings season begins this Friday as major US banks release their results. Bloomberg Intelligence data indicates a consensus forecast of +6.7% for Q1 year-over-year earnings growth for the S&P 500, a decrease from prior expectations of +11.1% in early November. Projections for full-year 2025 S&P 500 corporate profits have also dipped, now expected to increase by +9.4%, down from +12.5% in early January.

International Market Movements

Today, overseas stock markets are trending upwards. The Euro Stoxx 50 increased by +3.55%, while China’s Shanghai Composite Index saw a rise of +1.58%. Japan’s Nikkei Stock 225 experienced a significant uptick of +6.03%.

Interest Rate Developments

In the bond market, the June 10-year T-notes (ZNM25) fell by -13 ticks, with the yield rising +2.5 basis points to 4.208%. The modest decline in T-notes correlates with a global equity recovery, which diminished the demand for safe-haven government debt. Commentary from Chicago Fed President Goolsbee raised concerns about the inflationary impacts of tariffs, further influencing T-note trends. Alongside, upcoming Treasury auctions of T-notes and T-bonds, totaling $119 billion this week, begin with today’s $58 billion auction of 3-year T-notes.

European bond yields are similarly on the rise today, with the 10-year German bund yield increasing by +5.7 basis points to 2.670%, and the 10-year UK gilt yield up by +2.8 basis points to 4.643%.

ECB Governing Council member Simkus stated that he believes the ECB should implement a rate cut this month. He indicated that further clarity on various issues, including tariffs, would emerge by June.

Swaps currently indicate a 90% probability of a -25 basis point rate cut by the ECB at its policy meeting on April 17.

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