Nasdaq Climbs as Retaliatory Tariffs Spark Mixed Session on Wall Street

The S&P 500 Index ($SPX) (SPY) today is up +0.64%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.43%.  March E-mini S&P futures (ESH25) are up +0.79%, and March E-mini Nasdaq futures (NQH25) are up +1.55%. 

Stock indexes today are mixed, with the Dow Jones Industrials falling to a 6-month low, while the Nasdaq is mostly higher.  Stocks today initially moved higher after the US Feb CPI rose less than expected.  Strength in the Magnificent Seven stocks and a rally in chip stocks today support gains in the broader market.  Verizon Communications is down more than -4% and is weighing on the Dow Jones Industrials. 

However, stocks fell back from their best levels and turned mixed around mid-morning on the escalation of trade tensions.  Today, the European Union imposed tariffs on up to $28.3 billion of US goods, including soybeans, beef, and poultry, in retaliation for US tariffs on steel and aluminum imports.  Also, Canada announced 25% counter-tariffs on about $20.8 billion of US-made items, such as computers and sporting goods, along with US steel and aluminum products.

US Feb CPI rose +0.2% m/m and +2.8% y/y, weaker than expectations of +0.3% /m and +2.9% y/y.  Feb CPI ex-food and energy rose +0.2% m/m and +3.1% y/y, weaker than expectations of +0.3% m/m and +3.2% y/y, with the +3.1% y/y gain the smallest year-on-year increase in 3-3/4 years.

US MBA mortgage applications rose +11.2% in the week ended March 7, with mortgage purchase applications up +7.0% and mortgage refinancing applications up +16.2%.  The average 30-year fixed rate mortgage fell -6 bp to a 3-month low of 6.67% from 6.73% in the prior week.

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.

Market attention this week will focus on US trade policies, with 25% tariffs on US imports of steel and aluminum scheduled to take effect today.  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 1% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is up +0.92%.  China’s Shanghai Composite Index fell from a 2-1/4 month high and closed down -0.23%.  Japan’s Nikkei Stock 225 closed up +0.07%.

Interest Rates

June 10-year T-notes (ZNM25) today are down -3 ticks.  The 10-year T-note yield is up +1.3 bp to 4.293%.  June T-notes today are under pressure on negative carryover from a slide in 10-year German bunds to a 16-month low.  Also, today’s sharp stock rebound has reduced safe-haven demand for T-notes.  In addition, supply pressures are weighing on T-notes as the Treasury will auction $39 billion 10-year T-notes later today as part of this week’s $119 billion T-notes and T-bonds auction package.  T-notes briefly pushed higher today after the US Feb CPI rose less than expected, a dovish factor for Fed policy.  Losses in T-notes are limited after stocks fell back from their best levels when Canada announced 25% counter-tariffs on some US goods.

European bond yields today are mixed.  The 10-year German bund yield fell from a 16-month high of 2.940% and is down -1.1 bp to 2.886%.  The 10-year UK gilt yield is up +2.1 bp to 4.695%.

ECB President Lagarde said that abrupt shifts in global trade and higher Eurozone defense spending will make it harder to keep inflation stable.

ECB Governing Council member Centeno said the ECB shouldn’t wait to lower interest rates and, “I would prefer to move sooner rather than later.”

Swaps are discounting the chances at 43% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

Magnificent Seven stocks are climbing today to provide support to the overall market.  Tesla (TSLA) is up more than +6% to lead gainers in the S&P 500 and Nasdaq 100, and Nvidia (NVDA) is up more than +5% to lead gainers in the Dow Jones Industrials.  Also, Meta Platforms (META) is up more than +1%, and Alphabet (GOOGL) is up +0.85%. In addition, Amazon.com (AMZN) is up +0.31%.

Intel (INTC) is up more than +43 after Reuters reported that Taiwan Semiconductor Manufacturing Co has pitched Nvidia, Advanced Micro Devices, and Broadcom about taking a stake in a joint venture that would operate Intel’s factories. 

Chip stocks are rallying today.  Micron Technology (MU) is up more than +5%, and ARM Holdings Plc (ARM), Marvell Technology (MRVL), Broadcom (AVGO), and Lam Research (LRCX) are up more than +3%.  Also, Advanced Micro Devices (AMD) is up more than +2%, and Applied Materials (AMAT) and KLA Corp (KLAC) are up more than +1%.

Groupon (GRPN) is up more than +32% after forecasting full-year revenue of $493 million-$500 million, above the consensus of $491.3 million.

Talen Energy (TLN) is up more than +7% after Morgan Stanley initiated coverage of the stock with a recommendation of overweight and a price target of $243.

Myriad Genetics (MYGN) is up more than +6% after Piper Sandler upgraded the stock to overweight from neutral with a price target of $12.50.

GE Verona (GEV) is up more than +5 after CEO Strazik said he sees an order backlog for the company's goods stretching into 2028.

Crox Inc (CROX) is up more than +2% after Loop Capital Markets upgraded the stock to buy from hold with a price target of $110.

Airline stocks are sliding today, led by a -6% fall in United Airlines Holdings (UAL) after TD Cowen cut its price target on the stock to $150 from $165.  Also, American Airlines Group (AAL) and Delta Airlines (DAL) are down more than -5%, and Southwest Airlines (LUV) is down more than -2%.

iRobot (IRBT) is down more than -40% after reporting Q4 revenue of $172 million, weaker than the consensus of $181 million.

Brown-Forman (BF.A) is down more than -6% to lead losers in the S&P 500 after the EU launched counter-tariffs against US goods.

Verizon Communications (VZ) is down more than -3% to lead losers in the Dow Jones Industrials and is leading telecommunication stocks lower after Wolfe Research downgraded the stock to peer perform from outperform.  Also, Charter Communications (CHTR) and AT&T (T) are down more than -2%.

Stellantis NV (STLA) is down more than -3% after Pekao Investment Banking double-downgraded the stock to sell from buy with a price target of $11.47.

PepsiCo (PEP) is down more than -3% after Jeffries downgraded the stock to hold from buy, saying the stock’s current price offers “limited upside.” 

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