Stocks Climb as Easing Tariff Worries Spark Risk-On in Asset Markets

The S&P 500 Index ($SPX) (SPY) today is up +1.58%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.23%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.96%.  June E-mini S&P futures (ESM25) are up +1.62%, and June E-mini Nasdaq futures (NQM25) are up +1.95%. 

Stock indexes today are sharply higher, with the S&P 500, the Dow Jones Industrials, and the Nasdaq 100 posting 2-week highs.  Stocks are rallying today on reports that upcoming US reciprocal tariffs will be more targeted than previously stated and narrower than initially planned, with some countries exempt and existing tariffs on steel and other metals possibly not being cumulative.  President Trump is preparing a "Liberation Day" tariff announcement on April 2 that will include a significant expansion of reciprocal tariffs but will be more focused than the wide-ranging global tariffs that Mr. Trump has threatened, calming market fears about the impact on global trade and growth. 

Strength in the Magnificent Seven stocks and a jump in chip stocks today are leading the overall market higher.  Also, increased M&A activity supports stocks after James Hardie Industries agreed to acquire Azek Co for $8.75 billion in cash and stock.   Also, Clearlake Capital Group agreed to acquire Dun & Bradstreet Holdings for about $4.1 billion.

Today's US economic news was mixed for stocks after the  Feb Chicago Fed national activity index and the Mar S&P Global services PMI rose more than expected, but the Mar S&P Global manufacturing PMI unexpectedly contracted.

The US Feb Chicago Fed national activity index unexpectedly rose +0.26 to 0.18, stronger than expectations of a decline to -0.17.

The US Mar S&P Global manufacturing PMI fell -2.9 to 49.8, weaker than expectations of 51.7.  However, the Mar S&P Global services PMI rose +3.3 to 54.3, stronger than expectations of no change at 51.0.

This week's attention will focus on Tuesday's reports on Feb new home sales (expected +3.5% m/m to 680,000) and the Conference Board's US Mar consumer confidence index (expected -4.7 to 93.6).  On Wednesday, the Feb capital goods new orders nondefense ex-aircraft and parts report is expected unchanged m/m.  On Thursday, Q4 GDP is expected to be unrevised at +2.3% (q/q annualized), and Mar pending home sales are expected +1.0% m/m.  On Friday, Feb personal spending is expected +0.5% m/m, and Feb personal income is expected +0.4% m/m.  Also, the Feb core PCE price index, the Fed's preferred inflation gauge, is expected +0.3% m/m and +2.7% y/y.  Finally, on Friday, the revised Mar University of Michigan consumer sentiment index is expected to remain unchanged at 57.9.

Heightened geopolitical risks in the Middle East are negative for stocks.  Israel continues its airstrikes across Gaza, ending a two-month ceasefire with Hamas, and Israeli Prime Minister Netanyahu vowed to act "with increasing military strength" to free hostages and disarm Hamas.  Also, the US continues to launch strikes on Yemen's Houthi rebels. US Defense Secretary Hegseth said strikes would be "unrelenting" until the group stops attacking vessels in the Red Sea.  The Houthi rebels said they would respond by attacking US vessels in the Red Sea. 

Stocks have been under pressure over the past three weeks due to fears that US tariffs will weaken economic growth and corporate earnings.  On March 4, President Trump imposed 25% tariffs on Canadian and Mexican goods and doubled the tariff on Chinese goods to 20% from 10%.  On March 8, Mr. Trump reiterated that he would impose reciprocal tariffs and additional sector-specific tariffs on foreign nations on April 2. 

The markets are discounting the chances at 16% for a -25 bp rate cut after the May 6-7 FOMC meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is up +0.16%.  China's Shanghai Composite Index recovered from a 1-1/2 week low and closed up +0.15%.  Japan's Nikkei Stock 225 closed down -0.18%.

Interest Rates

June 10-year T-notes (ZNM25) today are down -15 ticks.  The 10-year T-note yield is up +7.3 bp to 4.319%.  June T-notes today are under pressure as stocks rally on reports that President Trump's reciprocal tariffs on April 2 will be more targeted than previously expected, easing inflation concerns.  Also, higher 10-year German bund yields today are weighing on T-note prices.  Supply pressures are another bearish factor for T-notes as the Treasury will auction $211 billion of T-notes and floating-rate notes this week, beginning with Tuesday's auction of $69 billion of 2-year T-notes.  Losses in T-notes accelerated today as inflation expectations rose when the 10-year breakeven inflation rate rose to a 2-1/2 week high of 2.355%.

European bond yields today are mixed.  The 10-year German bund yield is up +2.1 bp to 2.786%.  The 10-year UK gilt yield fell from a 1-week high of 4.742% and is down -0.1 bp at 4.712%.

The Eurozone Mar S&P manufacturing PMI rose +1.1 to a 2-year high of 48.7, stronger than expectations of 48.2.

The UK Mar S&P manufacturing PMI unexpectedly fell -1.7 to 44.6, weaker than expectations of an increase to 47.2 and the steepest pace of contraction in 1-1/2 years.

ECB Executive Board member Cipollone said the ECB's case to keep cutting interest rates has strengthened since its last decision earlier this month.

Swaps are discounting the chances at 65% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

The Magnificent Seven stocks today are pushing higher and boosting the overall market.  Tesla (TSLA) is up more than +8% to lead gainers in the S&P 500 and Nasdaq 100.  Also, Nvidia (NVDA) is up more than +3% to lead gainers in the Dow Jones Industrials, and Amazon.com (AMZN) and Meta Platforms (META) are up more than +3%.  In addition, Alphabet (GOOGL) is up more than +1%.  Finally, Apple (AAPL) is up +0.74%, and Microsoft (MSFT) is up +0.22%. 

Chip stocks are rallying today to provide support to the broader market.  Advanced Micro Devices (AMD) and ARM Holdings Plc (ARM) are up more than +5%.  Also,  ON Semiconductor (ON), Microchip Technology (MCHP), NXP Semiconductors NV (NXPI), and Analog Devices (ADI) are up more than +4%.  In addition, KLA Corp (KLAC), Lam Research (LRCX), and Texas Instruments (TXN) are up more than +3%. 

Cryptocurrency-exposed stocks are climbing today, with the price of Bitcoin rising more than +4% to a 2-week high.  As a result, Coinbase Global (COIN), MicroStrategy (MSTR), MARA Holdings (MARA), and Riot Platforms (RIOT) are up more than +4%. 

Azek Co (AZEK) is up more than +12% after James Hardie Industries agreed to buy the company for $8.75 billion in cash and stock.

Coherent Corp (COHR) is up more than +8% after Raymond James upgraded the stock to strong buy from outperform with a price target of $91. 

Pinterest (PINS) is up more than +4% after Guggenheim Securities upgraded the stock to buy from neutral with a price target of $40. 

Viasat Inc. (VSAT) is up more than +9% after Deutsche Bank upgraded the stock to buy from hold with a price target of $15. 

FedEx (FDX) is up more than +4% after Jeffries upgraded the stock to buy from hold with a price target of $275.

Boeing (BA) is up more than +2% after Melius Research upgraded the stock to buy from hold with a price target of $204. 

Dun & Bradstreet Holdings (DNB) is up more than +2% after Clearlake Capital Group agreed to acquire the company for about $4.1 billion.

With the broad market rally, defensive food and beverage producers and their packagers are under pressure today.  Hormel Foods (HRL),  Ball Corp (BALL), Kraft Heinz (KHC), and Brown-Forman (BF.B) are down more than -1%.

Super Micro Computer (SMCI) is down more than -1% to lead losers in the S&P 500 after Goldman Sachs downgraded the stock to sell from neutral with a price target of $32. 

Lockheed Martin (LMT) is down more than -1%, adding to last Friday's -4% loss after the US government picked rival Boeing to build the next-generation US fighter jet.  Also, Melius Research LLC downgraded the stock to hold from buy.

Earnings Reports (3/24/2025)

Aerovate Therapeutics Inc (AVTE), AMMO Inc (POWW), Enerpac Tool Group Corp (EPAC), Intuitive Machines Inc (LUNR), KB Home (KBH).