Market Recap: S&P 500 Rises Amid Tariff Concerns

The S&P 500 Index ($SPX) (SPY) closed Tuesday up +0.38%. In contrast, the Dow Jones Industrials Index ($DOWI) (DIA) slipped by -0.03%, while the Nasdaq 100 Index ($IUXX) (QQQ) saw a gain of +0.82%. Similarly, June E-mini S&P futures (ESM25) and June E-mini Nasdaq futures (NQM25) were both up +0.38% and +0.81%, respectively.

After facing early losses, stock indexes turned around and finished the day higher, primarily driven by the robust performance of the Magnificent Seven stocks. Tuesday’s trading began on a weak note ahead of the imminent announcement regarding new US tariffs. President Trump is set to disclose the specifics of the reciprocal tariffs on Wednesday at 3 PM EST, with immediate implementation expected, according to a White House representative.

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Investor sentiment was dampened by a report from the Washington Post, indicating that President Trump’s proposed reciprocal tariffs could reach approximately 20% on most imports to the US. This uncertainty has heightened risk-off attitudes in asset markets, pushing investors towards safe-haven assets like government debt and gold. Consequently, the 10-year Treasury note yield fell to a four-week low, while gold prices rose to their highest levels to date.

Economic Indicators Raise Concerns

The latest US economic indicators have heightened worries about stagflation and provided bearish signals for stock markets. In February, JOLTS job openings decreased by 194,000 to 7.568 million, falling short of the anticipated 7.658 million. Additionally, the ISM manufacturing index dropped to a four-month low of 49.0 in March, down from expectations of 49.5. Notably, the prices paid sub-index from the ISM manufacturing report rose at the fastest pace in 2 years and 9 months, further fueling inflation fears.

On the domestic economic front, February construction spending increased by +0.7% month-over-month, exceeding expectations of +0.3%.

Stocks have experienced sustained pressure over recent weeks as fears mount that US tariffs will undermine economic growth and corporate earnings. On March 4, President Trump imposed a 25% tariff on Canadian and Mexican goods and raised the tariff on Chinese goods from 10% to 20%. Following this, Trump reiterated his commitment to impose reciprocal tariffs on foreign nations by April 2, and signed a proclamation to establish a 25% tariff on US auto imports effective April 3. These tariffs will target fully assembled vehicles and will expand to include automobile parts by May 3. Trump stated that these measures would be “permanent,” showing no interest in negotiating exceptions.

Upcoming Market Indicators

Market participants are focusing on key economic indicators this week. Wednesday’s March ADP employment change is anticipated to rise by +120,000. Following that, on Thursday, the March ISM services index is expected to dip -0.5 to 53.0. By Friday, analysts forecast an increase of +138,000 in March nonfarm payrolls, with the unemployment rate expected to remain steady at 4.1%. Average hourly earnings for March are projected to rise +0.3% month-over-month and +4.0% year-over-year, consistent with February’s data. Fed Chair Powell is also scheduled to speak at the Society for Advancing Business Editing and Writing Conference regarding the economic outlook.

The markets currently price in a 21% probability for a 25 basis point rate cut following the May 6-7 Federal Open Market Committee meeting.

Global Market Performance

Internationally, stock markets closed higher on Tuesday. The Euro Stoxx 50 gained +1.37%, while China’s Shanghai Composite Index was up +0.38%. Japan’s Nikkei Stock 225 bounced back from a 6.5-month low, ending the day flat, with a +0.02% increase.

Interest Rate Movements

June 10-year T-notes (ZNM25) closed up +18 ticks on Tuesday. The yield on the 10-year Treasury note fell by -5.0 basis points to 4.159%. This rise in T-notes can be attributed to speculation that US tariffs may push the economy into a recession, prompting the Federal Reserve to continue lowering interest rates. Additionally, a decline in inflation expectations was seen as bullish for T-notes, as the ten-year breakeven inflation rate dropped to a one-week low of 2.332%. T-notes also benefited from solid support stemming from the strength shown in European government bonds.

European bond yields fell on Tuesday. The 10-year German bund yield decreased to a three-and-a-half-week low of 2.656%, closing down -5.1 basis points at 2.687%. Meanwhile, the 10-year UK gilt yield reached a one-and-a-half-week low of 4.601%, finishing down -4.1 basis points at 4.634%.

The Eurozone’s March S&P manufacturing PMI was revised downward to 48.6 from the previously reported 48.7. The March CPI for the Eurozone increased by +2.2% year-over-year, aligning with expectations and representing the slowest rise in five months. Core CPI rose +2.4% year-over-year, missing expectations of +2.5% year-over-year and signaling the smallest increase in three years. On a positive note, the Eurozone’s February unemployment rate unexpectedly declined by -0.1 to a historic low of 6.1%, demonstrating a stronger labor market than anticipated.

Swaps imply a 77% chance of a 25 basis point rate cut by the ECB during its policy meeting on April 17.

Significant Stock Movements

The robust performance of the Magnificent Seven stocks positively impacted the market indices on Tuesday. Tesla (TSLA) surged by over +3% after Wells Fargo Securities included it in its Q2 Tactical Ideas list. Other tech giants, including Alphabet (GOOGL), Meta Platforms (META), Microsoft (MSFT), Amazon.com (AMZN), and Nvidia (NVDA), each posted gains of more than +1%. Additionally, Apple (AAPL) rose +0.48%.

Clothing companies Ralph Lauren (RL) and Tapestry (TPR) rose by more than +3%, following their peer PVH Corp (PVH) which jumped over +17% after posting stronger-than-expected guidance for 2026 earnings per share.

Cybersecurity firms CyberArk (CYBR) and Crowdstrike (CRWD) finished up more than +2%, following Stephens’ initiation of coverage on these stocks with an overweight rating.

Conversely, airline stocks declined on Tuesday due to downgrades. Southwest Airlines (LUV) fell more than -6% following a downgrade by Jeffries, which adjusted its rating to underperform with a price target set at $28. Both Delta Air Lines (DAL) and American Airlines Group (AAL) closed down over -2% after also being downgraded by Jeffries.

Chip manufacturers faced losses that impacted the broader market. Intel (INTC) dropped over -3%, while GlobalFoundries (GFS) and ON Semiconductor (ON) each closed down more than -2%. Texas Instruments (TXN) and Analog Devices (ADI) also ended the day down more than -1%.

Johnson & Johnson (JNJ) led the losses in the S&P 500 and Dow Jones with a decline of more than -7%.