Stocks Finish Lower on US Tariff Hike on Canadian Steel and Aluminum

The S&P 500 Index ($SPX) (SPY) Tuesday closed down -0.76%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.28%.  March E-mini S&P futures (ESH25) are down -0.76%, and March E-mini Nasdaq futures (NQH25) are down -0.26%. 

Stock indexes Tuesday added to Monday’s sharp losses, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 falling to 5-3/4 month lows.  Stocks recovered from their worst levels as short-covering emerged Tuesday afternoon on news that Canada would hold off on some retaliatory tariffs, and Ukraine said it would accept US plans for a truce with Russia in exchange for aid. 

Stocks were under pressure Tuesday after President Trump announced an increase in the tariff on US imports of steel and aluminum from Canada to 50% from 25%, effective Wednesday, in retaliation for Ontario placing a 25% export tariff on electricity sent to the US.  However, stocks recovered when Bloomberg reported that Ontario Premier Ford said he would suspend the 25% surcharge on power to the US when US Commerce Secretary Lutnick agreed to meet him in Washington on Thursday.  President Trump also said he’s looking at backing down on the 50% tariffs he initially imposed on Canada that will go into effect Wednesday. The overall market also found support in a recovery of the Magnificent Seven stocks after Monday’s rout.

Tuesday’s US economic news showed strength in the labor market that supported stocks after the Jan JOLTS job openings rose +232,000 to 7.74 million, stronger than expectations of no change at 7.60 million.

Verizon Communications closed down more than -6% to lead telecommunication stocks lower and weigh on the Dow Jones Industrials.  Also, Delta Air Lines closed down more than -7% and led travel stocks lower after cutting its profit expectations for Q1, citing weakening travel demand. 

Stocks have been under pressure over the past week due to fears that US tariffs will weaken economic growth and corporate earnings.  Last Tuesday, President Trump imposed 25% tariffs on Canadian and Mexican goods and doubled the tariff on Chinese goods to 20% from 10%.  However, Mr. Trump granted US automakers a one-month tariff exemption and exempted tariffs for one month on Canada and Mexico for all goods and services compliant with the United States-Mexico-Canada Agreement (USMCA). However, Mr. Trump reiterated that he would impose reciprocal tariffs on foreign nations on April 2, as planned.

Bitcoin (^BTCUSD) rallied more than +4% Tuesday, recovering over half of Monday’s losses that were incurred on disappointment that President Trump’s new crypto reserve would be stocked only with crypto the government already owns from forfeitures and not from new crypto purchases.

Market attention this week will focus on Wednesday’s Feb US CPI report, which is expected to ease slightly to +2.9% y/y from +3.0% y/y in Jan.  The Feb core CPI is expected to ease to +3.2% y/y from +3.3% y/y in Jan.  Also, US trade policies will be in focus, with 25% tariffs on US imports of steel and aluminum scheduled to take effect on Wednesday. On Thursday, the Feb final-demand PPI is expected to ease to +3.2% y/y from +3.5% y/y in Jan.  On Friday, the University of Michigan’s March consumer sentiment index is expected to fall -1.2 to 63.5.  Finally, the markets will also see if Congress can approve a spending bill to avert a government shutdown ahead of a March 15 deadline.

The markets are discounting the chances at 4% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets on Tuesday settled mixed.  The Euro Stoxx 50 fell to a 1-month low and closed down -1.43%.  China’s Shanghai Composite Index closed up +0.41%.  Japan’s Nikkei Stock 225 fell to a 5-3/4 month low and closed down by -0.64%.

Interest Rates

June 10-year T-notes (ZNM25) Tuesday closed down -15.5 ticks.  The 10-year T-note yield rose +7.3 bp to 4.286%.  June T-notes Tuesday settled moderately lower after a rebound in stocks from early losses sapped safe-haven demand for government debt.  Also, Tuesday’s US economic news showed that the US Jan JOLTS job openings rose more than expected, which was a hawkish factor for Fed policy.  Strong demand for the Treasury’s $58 billion auction of 3-year T-notes limited losses in T-notes as the auction had a bid-to-cover ratio of 2.70, well above the 10-auction average of 2.60.

European bond yields on Tuesday moved higher.  The 10-year German bund yield rose +6.4 bp to 2.897%.  The 10-year UK gilt yield rose +3.1 bp to 4.674%.

Swaps are discounting the chances at 50% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

Magnificent Seven stocks on Tuesday moved higher, recovering some of Monday’s plunge.  Tesla (TSLA) (TSLA) closed up more than +3%, and Nvidia (NVDA), Amazon.com (AMZN), and Meta Platforms (META) closed up more than +1%, while Microsoft (MSFT) closed up +0.08%.

Travel stocks were under pressure Tuesday, led by a -7% fall in Delta Air Lines (DAL) after cutting its Q1 adjusted EPS forecast to 30 cents-50 cents from a previous estimate of 70 cents-$1.00, well below the consensus of 83 cents.  Also, Mariott International (MAR) closed down more than -4%, and Host Hotels & Resorts (HST) closed down more than -3%.  In addition, Booking Holdings (BKNG), Hilton Worldwide Holdings (HLT), and United Airlines Holdings (UAL) closed down more than -2%. 

Telecommunication stocks fell, led by a -6% fall in Verizon Communications (VZ) to lead losers in the Dow Jones industrials after company executives said Q1 is “challenging” from a competitive standpoint.  AT&T (T) and T-Mobile US (TMUS) closed down more than -3%. 

Chip stocks retreated Tuesday to weigh on the overall market. GlobalFoundries (GFS) closed down more than -67% to lead losers in the Nasdaq 100.  Also, Texas Instruments (TXN) and ARM Holdings Plc (ARM) closed down more than -4%.  In addition, ON Semiconductor (ON), Analog Devices (ADI), Microchip Technology (MCHP), Applied Materials (AMAT), and KLA Corp (KLAC) closed down more than -2%.

Teradyne (TER) closed down more than -17% to lead losers in the S&P 500 after forecasting Q2 revenue flat to down -10% q/q.

Oracle (ORCL) closed down more than -3% after reporting Q3 adjusted revenue of $14.13 billion, weaker than the consensus of $14.39 billion. 

Kohl’s (KSS) closed down more than -24% after projecting comparable sales this year will drop -6%, much weaker than the consensus of -0.55%. 

Ferguson Enterprises (FERG) closed down more than -5% after reporting Q2 US adjusted operating profit of $455 million, below the consensus of $485.1 million. 

Cybersecurity stocks rose after Elon Musk claimed that a massive cyberattack on X caused the site to be periodically offline on Monday.  Crowdstrike Holdings (CRWD) closed up more than +6%, and Palo Alto Networks (PANW) closed up more than +3%.  Also, Zscaler (ZS) and Fortinet (FTNT) closed up more than +2%. 

Southwest Airlines (LUV) closed up more than +8% after accelerating the completion of its $2.5 billion share repurchase program to July 2025 and announcing the end of its free checked-bag policy. 

Boeing (BA) closed up more than +3% to lead gainers in the Dow Jones Industrials after announcing it had delivered 89 commercial aircraft so far this year, beating the 65 aircraft delivered by rival Airbus SE.

Elevance Health (ELV) closed up more than +3% after forecasting full-year adjusted EPS of $34.15-$24.85, the midpoint above the consensus of $34.45.

ASML Holding NV (ASML) closed up more than +1% after signing a five-year strategic partnership agreement with Imec, focusing on developing high-end nodes using ASML systems.

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