The S&P 500 Index ($SPX) (SPY) is down -2.38%, the Dow Jones Industrials Index ($DOWI) (DIA) has decreased by -1.55%, and the Nasdaq 100 Index ($IUXX) (QQQ) has fallen -3.29%. Additionally, June E-mini S&P futures (ESM25) are down -2.16%, while June E-mini Nasdaq futures (NQM25) have dropped -3.20%.

Today, stock indexes are trading lower, hitting session lows following remarks from Fed Chair Jerome Powell during an event in Chicago. Powell stated that tariffs “are likely to move us away from our near-term goals,” warning that the economy may face a situation where the Fed’s dual-mandate goals become conflicting.

Cleveland Fed President Beth Hammack, although not part of the policy-setting committee, echoed some concerns about the economy. She proclaimed, “If the economy should falter and inflation decline, then it may be appropriate to ease policy by lowering the federal funds rate from its current level of 4-1/4 to 4-1/2 percent, perhaps even quickly.” However, she also made it clear that “there is a strong case to hold monetary policy steady” to balance risks from high inflation and a slowing labor market.

Earlier in the day, declines in chip stocks dragged down equity benchmarks. ASML Holding NV reported Q1 bookings below expectations, and Nvidia shares plummeted after the US government prohibited the sale of its H20 chips to China. This ban is projected to cost Nvidia $5.5 billion in Q1 linked to inventory and commitments. Losses intensified after the World Trade Organization (WTO) downgraded its 2025 global trade estimates.

Most economic news from the US today surpassed expectations. A Bloomberg report revealed that China is seeking significant gestures from the Trump administration before resuming trade talks, calling for respect and a cessation of disparaging comments from officials.

US mortgage applications fell -8.5% for the week ending April 11. The purchase mortgage sub-index decreased by -4.8%, while the refinancing sub-index dropped -12.4%. Moreover, the average 30-year fixed mortgage rate rose by +20 basis points to 6.81%, up from 6.61% the previous week.

Retail sales in the US increased by +1.4% month-over-month in March, aligning with forecasts, while retail sales excluding autos rose by +0.5%, outperforming the expected +0.4% gain. Also, March manufacturing production rose by +0.3%, slightly beating the anticipated +0.2% increase. Meanwhile, the NAHB housing market index unexpectedly improved by +1 to 40, contrary to expectations of a decline to 38.

The WTO has slashed its 2025 global trade forecast, predicting a -0.2% decline, down from the previously estimated +3.0%. They warned of a potential -1.5% contraction in global trade this year if the US continues to impose reciprocal tariffs.

Last Friday, President Trump announced a temporary exemption for consumer electronics from reciprocal tariffs and the baseline 10% global tariffs. However, a 20% tariff continues to apply to electronics shipped from China. In addition, Trump recently declared a 90-day delay on heightened tariffs involving 56 nations but maintained the new baseline 10% tariff on most countries. Last Thursday, the EU postponed for 90 days the implementation of 25% tariffs on approximately 21 billion euros worth of US goods sent to Europe.

Stocks have faced considerable pressure over the last five weeks due to concerns that US tariffs could stifle economic growth and impact corporate earnings. On March 4, Trump implemented 25% tariffs on Canadian and Mexican goods and increased the tariff on Chinese goods from 10% to 20%. On April 2, he signed a proclamation for a 25% tariff on US auto imports, initially targeting fully assembled vehicles from outside the US, expanding to parts by May 3. A 10% baseline tariff for most nations took effect on April 5. Following these actions, China retaliated by raising tariffs on all US goods to 125%.

The US tariff situation has weakened the dollar and surged gold prices. The dollar index recently slumped to a three-year low, while gold prices have hit an all-time high today. The market is increasingly worried about the ramifications of US trade policies, which have sapped consumer confidence and led many corporations to pause capital spending plans, negatively impacting GDP growth. The dollar is facing a crisis of confidence as tariffs erode its reserve-currency status, prompting some foreign investors to divest from dollar assets.

In this holiday-shortened week, market attention will remain on US trade policy developments. Later today, Fed Chair Powell is set to address the Economic Club of Chicago about the economic outlook. On Thursday, housing starts for March are anticipated to decrease by -5.7% month-over-month to 1.416 million, while building permits are expected to decline -0.6% to 1.450 million.

The market is currently pricing in a 19% chance of a -25 basis point rate cut following the May 6-7 FOMC meeting.

As for Q1 earnings season, reporting commenced last Friday with several major US banks announcing their results. According to Bloomberg Intelligence, the market consensus predicts Q1 year-over-year earnings growth of +6.7% for S&P 500 stocks, revised down from earlier expectations of +11.1% in November. Expectations for full-year 2025 corporate profits for the S&P 500 show a +9.4% increase, down from the initial forecast of +12.5% made in January.

Overseas markets today are mixed. The Euro Stoxx 50 fell -0.82%, while China’s Shanghai Composite rose +0.26% to a one-and-a-half week high. Japan’s Nikkei Stock 225 closed down -1.01%.

Interest Rates

June 10-year T-notes (ZNM25) are down -4 ticks today, with the 10-year T-note yield rising +1.7 basis points to 4.350%. Initially, T-notes gained ground before turning lower as stronger-than-expected economic data regarding retail sales, manufacturing production, and the NAHB housing market index surfaced. Supply pressures are also impacting T-notes today, as the Treasury plans to auction $13 billion of 20-year T-bonds later.

European bond yields are trending downward. The 10-year German bund yield fell to a one-week low of 2.479% and has decreased -2.5 basis points to 2.510%. The 10-year UK gilt yield also dropped to a one-week low of 4.571%, down -2.0 basis points to 4.628%.

UK March CPI rose 2.6% year-over-year, slightly below expectations of +2.7%. Meanwhile, March core CPI rose +3.4% year-over-year, exactly matching expectations.