Stocks Tumble as US Imposes Tariffs

The S&P 500 Index ($SPX) (SPY) today is down -1.42%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -1.20%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.51%.  March E-mini S&P futures (ESH25) are down by -1.52%, and March E-mini Nasdaq futures (NQH25) are down by -1.67%. 

Stock indexes today are sharply lower, with the S&P 50 falling to a 2-week low and the Dow Jones Industrials dropping to a 1-1/2 week low. Stocks are sliding globally today after President Trump on Saturday announced 25% tariffs on Canada and Mexico and 10% on China and warned that European tariffs are coming.  The tariffs are set to take effect on Tuesday and could spark a trade war that threatens economic growth worldwide.  Canada and Mexico are both announcing retaliatory measures against US products.  Goldman Sachs warned there's a risk of a 5% slump in US stocks because of the hit on corporate earnings, and RBC Capital Markets estimates stock declines of 5% to 10%. 

Earnings season is in full swing as companies report Q4 earnings results.  Megacap technology companies Alphabet and Advanced Micro Devices are set to report earnings on Tuesday.  Qualcomm will release earnings on Wednesday, and Amazon.com will release its quarterly results on Thursday.  According to Bloomberg Intelligence, analysts estimate S&P 500 earnings grew by +7.5% y/y in Q4, the second-highest pre-season forecast in the past three years.

The markets are discounting the chances at 17% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets today are sharply lower.  The Euro Stoxx 50 fell to a 1-week low and is down -1.65%.  China's Shanghai Composite Index did not trade today and will be closed through Tuesday for the week-long Lunar New Year holiday.  Japan's Nikkei Stock 225 dropped to a 2-week low and closed down -2.66%.

Interest Rates

March 10-year T-notes (ZNH25) today are up +12 ticks.  The 10-year T-note yield is down -3.2 bp to 4.506%.  March T-notes today are climbing on positive carryover from strength in European government bonds.  Also, today's selloff in stocks has boosted safe-haven demand for T-notes. 

Limiting gains in T-notes are US plans to impose a 25% tariff on goods from Canada and Mexico and a 10% levy on China on Tuesday, which are inflationary and hawkish for Fed policy.  Also, rising inflation expectations are bearish for T-notes as the 10-year breakeven inflation rate rose to a 2-1/2 week high today of 2.465%.

European government bond yields today are moving lower.  The 10-year German bund yield dropped to a 1-month low of 2.375% and is down -6.4 bp to 2.395%.  The 10-year UK gilt yield fell to a 7-week low of 4.455% and is down -5.1 bp to 4.487%.

Eurozone Jan CPI rose +2.5% y/y, stronger than expectations of +2.4% y/y.  Also, Jan core CPI rose +2.7% y/y, stronger than expectations of +2.6% y/y.

The Eurozone Jan S&P manufacturing PMI was revised upward by +0.5 to an 8-month high of 46.6 from the previously reported 46.1.

ECB Governing Council member Simkus said, "Going forward, we can allow ourselves a looser policy," and the ECB is likely to lower borrowing costs beyond its next meeting in March.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at the March 6 policy meeting.

US Stock Movers

Automobile makers are falling today after President Trump followed through on pledges to impose tariffs on Canada, Mexico, and China. General Motors (GM) is down more than -5%, and Ford Motor (F) and Tesla (TSLA) are down more than -4%.  Auto parts makers are also falling with Aptiv Plc (APTV) down more than -8% to lead losers in the S&P 500 and Autoliv (ALV) down more than -4%.

US chip makers are under pressure today after President Trump followed through on his tariff threats.  Nvidia (NVDA) is down more than -5% to lead losers in the Dow Jones Industrials and Nasdaq 100. Also, Broadcom (AVGO) and Micron Technology (MU) are down more than -3%. 

Companies exposed to manufacturing or imports from China are sliding on the US tariff announcements, with Dell Technologies (DELL) down more than -3% and Apple (AAPL) down more than -2%. 

Constellation Brands (STZ) is down more than -3% after Piper Sandler downgraded the stock to neutral from overweight.

Union Pacific Corp (UNP) is down more than -3% after Loop Capital Markets downgraded the stock to sell from hold with a price target of $200.

Lennox International (LII) is down more than -3% after Wells Fargo Securities downgraded the stock to underweight from equal weight. 

FedEx (FDX), Norfolk Southern (NSC), and CSX Corp (CSX) are down more than -2% after Loop Capital Markets downgraded the stocks to hold from buy.  

Triumph Group (TGI) is up more than +37% after Warburg Pincus and Berkshire Hathaway partnered to acquire the company for $26 a share or about $3 billion, including debt.

IDEXX Laboratories (IDXX) is up more than +10% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q4 RPS of $2.62, better than the consensus of $2.41 and forecast 2025 EPS of $11.74-$12.24, the midpoint above the consensus of $11.94. 

Defensive healthcare stocks are climbing today with the rout in the broader market.  As a result, Molina Healthcare (MOH) is up more than +3%.  Also, Elevance Health (ELV) and Centene (CNC) are up more than +2%.  In addition, UnitedHealth Group (UNH) and Cigna Group (CI) are up more than +1%.

Meta Platforms (META) is up more than +2% after the Insider reported the company plans to release 6 AI-powered wearable devices this year. 

Saia Inc (SAIA) is up more than +4% after reporting Q4 EPS of $2.84, stronger than the consensus of $2.78. 

Tempur Sealy International (TPX) is up more than +7% after Wedbush upgraded the stock to outperform from neutral with a price target of $80. 

Earnings Reports (2/3/2025)

Clorox Co/The (CLX), Equity Residential (EQR), Everest Group Ltd (EG), Healthpeak Properties Inc (DOC), IDEXX Laboratories Inc (IDXX), NXP Semiconductors NV (NXPI), Palantir Technologies Inc (PLTR), Tyson Foods Inc (TSN).