Stocks Set to Extend Tariff-Driven Selloff as China Retaliates, U.S. Jobs Report and Powell Speech in Focus

June S&P 500 E-Mini futures (ESM25) are down -2.33%, and June Nasdaq 100 E-Mini futures (NQM25) are down -2.71% this morning, pointing to a continued selloff on Wall Street following U.S. President Donald Trump’s announcement of sweeping tariffs, while investors await the key U.S. payrolls report and remarks from Federal Reserve Chair Jerome Powell.

President Trump on Wednesday unveiled the most aggressive U.S. tariffs in a century, fueling fears of an escalating trade war and economic slowdown. Economists anticipate that the tariffs will drive prices and dampen economic growth, potentially even triggering a recession. JPMorgan has raised the likelihood of a global recession this year to 60%. In addition, UBS Global Wealth Management downgraded U.S. equities to Neutral from Attractive and lowered its year-end S&P 500 target by nearly 10% to 5,800, cautioning that reciprocal tariffs could trigger more market volatility.

Stock futures losses deepened after China retaliated against new U.S. tariffs. Beijing will impose a 34% tariff on all U.S. imports beginning April 10th, according to the official Xinhua News Agency.

In yesterday’s trading session, Wall Street’s major indices closed sharply lower, with the S&P 500, Nasdaq 100, and Dow falling to 6-1/2 month lows. Apple (AAPL) sank over -9% after President Trump announced sweeping tariffs, as the iPhone maker manufactures its devices in China and other Asian countries. Also, chip stocks sold off, with Microchip Technology (MCHP) tumbling more than -16% to lead losers in the Nasdaq 100 and Micron Technology (MU) plunging over -16%. In addition, RH (RH) plummeted more than -40% after the luxury home furnishing company posted downbeat Q4 results and provided disappointing FY25 revenue guidance. On the bullish side, Lamb Weston Holdings (LW) surged about +10% and was the top percentage gainer on the S&P 500 after the frozen potato giant reported better-than-expected FQ3 results and reaffirmed its FY25 guidance.

“Market uncertainty is likely to remain elevated in the weeks ahead, as investors consider likely downgrades to consensus US economic and earnings growth forecasts, the risk of a tit-for-tat escalation in tariffs, and the potential scope for tariffs announced to be negotiated down,” said Solita Marcelli at UBS Global Wealth Management.

Economic data released on Thursday showed that the U.S. ISM services index fell to a 9-month low of 50.8 in March, weaker than expectations of 53.0. Also, the U.S. trade deficit stood at -$122.70B in February, wider than expectations of -$122.50B. At the same time, the number of Americans filing for initial jobless claims in the past week unexpectedly fell -6K to a 7-week low of 219K, compared with the 225K expected. In addition, the final estimate of the U.S. March S&P Global services PMI was revised higher to 54.4 from the 54.3 preliminary reading.

Fed Vice Chair Philip Jefferson stated on Thursday that interest rates are well-positioned to manage competing risks despite significant uncertainty in the economic outlook due to major changes in U.S. policies on trade, immigration, and regulation. Jefferson noted that there might be a “modest softening” in the labor market this year, and ongoing uncertainty could dampen economic activity. Still, he said that “there is no need to be in a hurry to make further policy rate adjustments,” as officials await more clarity on the economic impact of President Trump’s policies. Also, Fed Governor Lisa Cook said, “Amid growing uncertainty and risks to both sides of our dual mandate, I believe it will be appropriate to maintain the policy rate at its current level while continuing to vigilantly monitor developments that could change the outlook.”

U.S. rate futures have priced in a 68.4% probability of no rate change and a 31.6% chance of a 25 basis point rate cut at the May meeting.

Meanwhile, Fed Chair Jerome Powell is set to deliver a speech on the economic outlook at the Society for Advancing Business Editing and Writing Annual Conference later today. Also, Fed Governor Christopher Waller and Fed Vice Chair for Supervision Michael Barr will speak today. 

Today, all eyes are focused on the U.S. monthly payroll report, which is set to be released in a couple of hours. Economists, on average, forecast that March Nonfarm Payrolls will come in at 137K, compared to February’s figure of 151K.

U.S. Average Hourly Earnings data will also be closely watched today. Economists expect March figures to be +0.3% m/m and +3.9% y/y, compared to the previous numbers of +0.3% m/m and +4.0% y/y.

The U.S. Unemployment Rate will be reported today as well. Economists forecast that this figure will remain steady at 4.1% in March.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.947%, down -2.66%.

The Euro Stoxx 50 Index is down -2.20% this morning, extending this week’s losses amid concerns about an intensifying global trade war. Bank stocks, vulnerable to the economic outlook, led the declines on Friday. Mining and energy stocks also underperformed. The benchmark index is on track for a steep weekly loss. On Wednesday, U.S. President Donald Trump imposed a 20% tariff on imports from the European Union and a 10% tariff on imports from the U.K. The EU stated on Thursday that it would prepare countermeasures against the U.S. should negotiations break down. French President Emmanuel Macron has called for a pause in EU investments in the U.S. and proposed using the bloc’s powerful anti-coercion instrument to target American technology firms, a step that would significantly escalate the trade war. Meanwhile, data from the Federal Statistical Office released on Friday showed that Germany’s factory orders stagnated in February compared to the previous month. Separately, data from the statistics agency Insee showed that France’s monthly industrial production rebounded more strongly than expected in February, indicating modestly improving conditions for the sector. In corporate news, Gerresheimer AG (GXI.D.DX) tumbled over -13% after Bloomberg reported that KKR had abandoned a private equity consortium discussing a takeover of the company.

Germany’s Factory Orders, France’s Industrial Production, and Italy’s Retail Sales data were released today.

The German February Factory Orders were unchanged m/m, weaker than expectations of +3.4% m/m.

The French February Industrial Production came in at +0.7% m/m, stronger than expectations of +0.5% m/m.

The Italian February Retail Sales stood at +0.1% m/m, weaker than expectations of +0.2% m/m.

Japan’s Nikkei 225 Stock Index (NIK) closed down -2.75%, while China’s financial markets were closed for a holiday.

Japan’s Nikkei 225 Stock Index closed sharply lower today, falling to its lowest level since last August as U.S. President Donald Trump’s new tariffs fueled uncertainty over the global growth outlook. President Trump on Wednesday slapped a steeper-than-expected 24% tariff on Japanese goods, while a previously announced 25% tariff on auto imports went into effect on Thursday. The tariffs have delivered a major setback to Japan’s export-reliant economy, with the automotive sector bearing the brunt. Bank stocks led the declines on Friday, extending yesterday’s drop as Trump’s sweeping tariffs fueled uncertainty over the Bank of Japan’s path to policy normalization. Export-oriented stocks also sank amid a rally in the safe-haven Japanese yen. The benchmark index posted its steepest weekly decline since March 2020. Meanwhile, BOJ Governor Kazuo Ueda said on Friday that the central bank will examine the effects of U.S. tariffs on Japan’s economy in its monetary policy setting, cautioning that the higher duties are expected to dampen both global and domestic growth. On the economic front, government data released on Friday showed that Japanese annual household spending dropped in February for the first time in three months, underscoring consumer caution amid high prices. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +14.66% to 35.58.

“The tariff was much higher than expected, so the damage to business performance is likely to be greater than initially thought. It’s difficult to take a positive position, so the risk-off mood prevails,” said Ikuo Mitsui, a fund manager at Aizawa Securities Co.

The Japanese February Household Spending came in at +3.5% m/m and -0.5% y/y, stronger than expectations of +0.5% m/m and -0.9% y/y.

China’s Shanghai Composite Index was closed today for the Ching Ming Festival (also known as Tomb-Sweeping Day). China’s financial markets will reopen on Monday, April 7th.

Pre-Market U.S. Stock Movers

The Magnificent Seven stocks are moving lower in pre-market trading, extending yesterday’s losses. Alphabet (GOOGL), Amazon.com (AMZN), Meta Platforms (META), Microsoft (MSFT), Tesla (TSLA), Apple (AAPL), and Nvidia (NVDA) are down more than -3%.

Progressive (PGR) slid more than -3% in pre-market trading after BofA downgraded the stock to Neutral from Buy.

Goldman Sachs (GS) fell over -2% in pre-market trading after Daiwa downgraded the stock to Neutral from Outperform.

GameStop (GME) gained more than +3% in pre-market trading after a regulatory filing revealed that CEO Ryan Cohen boosted his stake in the video game retailer.

Sangamo Therapeutics (SGMO) soared about +32% in pre-market trading after announcing a license agreement with Eli Lilly, allowing Lilly to leverage the company’s novel proprietary neurotropic adeno-associated virus capsid, STAC-BBB.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - April 4th

American Shared Hospital Srvcs (AMS).