The S&P 500 Index ($SPX) (SPY) has risen by +0.39%, while the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.41%, and the Nasdaq 100 Index ($IUXX) (QQQ) increased by +0.54%. Additionally, June E-mini S&P futures (ESM25) gained +0.86%, and June E-mini Nasdaq futures (NQM25) are up +1.04%.

Stock indexes experienced fluctuations today, oscillating between mild gains and losses amid a week characterized by significant volatility. Market headlines provided limited directional guidance after US consumer sentiment dropped sharply and inflation expectations surged. The University of Michigan’s April consumer sentiment index fell to a two-and-three-quarter-year low, while the one-year inflation expectations climbed to their highest level since 1981, largely due to heightened tariff concerns.

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Investor sentiment improved initially due to better-than-expected Q1 earnings from US banks. Additionally, Stock indexes were bolstered by reduced price pressures as US producer prices for March grew less than anticipated. Overall, the US March Producer Price Index (PPI) showed a year-over-year increase of +2.7%, a drop from +3.2% in February, and better than expectations of a rise to +3.3%. Excluding food and energy, the PPI eased to +3.3% year-over-year from +3.6% in February, again outpacing market predictions.

The University of Michigan’s April consumer sentiment index declined by -6.2 points to a low of 50.8, underperforming expectations of 53.5. Similarly, one-year inflation expectations jumped to 6.7%, well above forecasts of 5.2%, marking the highest level since 1981. Expectations for inflation over the next five to ten years also rose to 4.4%, exceeding expectations for 4.3% and the highest level since 1991.

Comments from the Federal Reserve contributed to bearish sentiment for stocks and bonds. Minneapolis Fed President Kashkari emphasized that the inflationary effects of tariffs would make it less likely for the Fed to reduce interest rates, despite signs of economic weakness. St. Louis Fed President Musalem warned of stagflation risks in the US economy linked to tariffs, indicating a potential for rising inflation amidst a weakening labor market.

The escalating US-China trade war added further pressure, with China announcing an increase in tariffs on all US goods to 125% in retaliation for US tariffs. China’s Ministry of Finance asserted its commitment to “resolutely counterattack and fight to the end” against US actions that threaten its rights and interests.

The turmoil surrounding US tariffs has negatively impacted the dollar, which fell to a three-year low today, while gold prices surged to an all-time high. Investor fears about the implications of US trade policies have undermined consumer confidence and caused many companies to reconsider capital spending plans, which is likely to adversely affect GDP growth. Additionally, the dollar is facing a confidence crisis as the US seeks to redefine its relationships with trading partners, diminishing its status as a reserve currency.

President Trump announced a 90-day suspension of increased tariffs on 56 nations, while keeping the new 10% baseline tariff on nearly all countries. Concurrently, the EU stated it would delay the implementation of 25% tariffs on €21 billion worth of US goods for 90 days.

Concerns have mounted in recent weeks regarding how US tariffs may dampen economic growth and corporate earnings. President Trump imposed 25% tariffs on Canadian and Mexican imports and doubled the tariff on Chinese goods. He also implemented a 25% tariff on US auto imports affecting vehicles assembled outside the US and plans to expand this to include auto parts shortly. Trump labeled these tariffs as “permanent” with no interest in negotiating exceptions.

Market analysts are currently pricing in a 28% probability of a -25 basis point cut after the upcoming May 6-7 FOMC meeting. The Q1 earnings reporting season begins today as major US banks release their results. Bloomberg Intelligence data forecasts a consensus of +6.7% year-over-year growth in Q1 earnings for the S&P 500, down from +11.1% projections made in November. Looking ahead to 2025, corporate profits for the S&P 500 are expected to rise by +9.4%, reduced from earlier forecasts of +12.5%.

Internationally, stock markets showed mixed results. The Euro Stoxx 50 declined by -1.06%, while China’s Shanghai Composite Index rose, closing up +0.45%. Japan’s Nikkei Stock 225 saw a decline of -2.96%.

Interest Rates

June 10-year T-notes (ZNM25) decreased by -1-5/32 points, with the 10-year T-note yield rising by +13.2 basis points to 4.557%. T-notes fell to a seven-week low, and the yield climbed to a seven-week high. The tariff situation has fueled a selloff in the dollar, raising concerns about potential liquidation of dollar assets by foreign investors. T-notes continued their downward trend following the rise in April 1-year inflation expectations to 6.7%, the highest in 43 years. Hawkish remarks from Minneapolis Fed President Kashkari regarding the inflationary impact of tariffs further pressured T-notes.

European bond yields showed mixed results. The 10-year German bund yield fell by -3.9 basis points to 2.541%, while the 10-year UK gilt yield jumped by +8.2 basis points to 4.726%.

UK manufacturing production rose by +2.2% month-over-month in February, significantly higher than expected increases of +0.2% and representing the largest boost in 20 months.

Swaps are currently pricing in a 95% probability for a -25 basis point cut by the ECB at the upcoming April 17 policy meeting.

US Stock Movers

US chip manufacturers faced notable declines today after the China Semiconductor Association stated that chip tariffs would depend on where chips are manufactured rather than shipped from. As a result, Texas Instruments (TXN) dropped over -8%, leading losses in both the S&P 500 and Nasdaq 100 indexes. Additionally, ON Semiconductor (ON) suffered similar declines.