Stock Rout Continues on Global Trade War Fears

The S&P 500 Index ($SPX) (SPY) today is down -4.56%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -3.79%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -4.76%.  June E-mini S&P futures (ESM25) are down -4.09%, and June E-mini Nasdaq futures (NQM25) are down -4.35%. 

Stock indexes today are sharply lower for the second session, with the S&P 500 dropping to an 11-month low and the Nasdaq 100 and the Dow Jones industrials falling to 7-3/4 month lows.  Stock losses deepened today after China retaliated against US tariffs by imposing a 34% tariff on all US imports starting April 10.  A supportive factor for stocks was today’s monthly US payroll report that showed March payrolls rose more than expected. 

US March nonfarm payrolls rose +228,000, stronger than expectations of +140,000.  However, the March unemployment rate unexpectedly rose +0.1 to 4.2%, showing a weaker labor market than expectations of no change at 4.1%.

US March average hourly earnings rose +3.8% y/y, weaker than expectations of +4.0% y/y and the smallest increase in 8 months.

Stocks were already on the defensive after President Trump announced reciprocal tariffs Wednesday that were worse than feared, raising concerns that US trade policies will push the US economy and perhaps the global economy into recession.  The plunge in global equity markets has prompted a risk-off mood in asset markets and has fueled a flight to safety into government bonds, with European government bond yields falling to 1-month lows and the 10-year T-note yield dropping to a 6-month low. 

President Trump said Wednesday the US will impose at least a 10% tariff on virtually all countries, with higher reciprocal rates on some 60 nations. The new tariffs will be implemented on imports from almost all countries starting on April 5, with the higher rates implemented on April 9.   Specific industries, including steel and automobiles, are exempt from the new rates, and Canada and Mexico are also exempt from the new tariffs and will be subject to the previously announced 25% tariffs.  However, China will be charged a 34% reciprocal tariff rate, bringing total tariffs on China up to 67%.  The EU will be charged a 20% reciprocal tariff, bringing total tariffs on the EU up to 39%.  Meanwhile, Japan will be charged a 24% reciprocal tariff, bringing total tariffs on Japan up to 46%.

Stocks have been under pressure over the past month 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%.  Last Wednesday, President Trump signed a proclamation to implement a 25% tariff on US auto imports, effective Thursday.  The tariffs will initially target vehicles fully assembled outside the US and, by May 3, will expand to include automobile parts made outside the US.  Mr. Trump said the tariffs were “permanent,” and he was not interested in negotiating any exceptions.

The markets are awaiting comments later this morning from Fed Chair Powell, who is scheduled to speak to the Society for Advancing Business Editing and Writing Conference on the economic outlook.

The markets are discounting the chances at 45% for a -25 bp rate cut after the May 6-7 FOMC meeting.

Overseas stock markets today are sharply lower.  The Euro Stoxx 50 fell to a 3-1/2 month low and is down -4.67%.  China’s Shanghai Composite Index was closed for the Tomb Sweeping Day holiday.  Japan’s Nikkei Stock 225 sank to a 7-3/4 month low and closed down by -2.75%.

Interest Rates

June 10-year T-notes (ZNM25) today are up +1-4/32 points.  The 10-year T-note yield is down -12.8 bp to 3.901%.  June T-notes today climbed to a 6-month high, and the 10-year T-note yield tumbled to a 6-month low of 3.856%.  T-notes today added to Thursday’s sharp gains on concerns a global trade war will drive the US and possibly the global economy into recession after China retaliated with 34% tariffs on US imports.  Also, today’s global equity market selloff has fueled safe-haven demand for government debt securities.  In addition, T-notes found support after crude oil prices today plunged to a 4-year low, reducing inflation expectations, as the 10-year breakeven inflation rate fell to a 6-month low of 2.165%.  T-notes fell back from their best levels after US March payrolls rose more than expected, a hawkish factor for Fed policy. 

European bond yields today are sharply lower.  The 10-year German bund yield tumbled to a 1-month low of 2.479% and is down -11.4 bp to 2.537%.  The 10-year UK gilt yield dropped to a 3-1/2 month low of 4.375% and is down -8.6 bp to 4.434%.

German Feb factory orders were unchanged m/m, weaker than expectations of +3.4% m/m.

Swaps are discounting the chances at 87% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

The Magnificent Seven stocks are falling today and are weighing on the overall market.  Tesla (TSLA) is down more than -7%, and Nvidia (NVDA) is down more than -5%.  Apple (AAPL) and Meta Platforms (META) are down more than -3%.  Amazon.com (AMZN) is down -0.85%, Microsoft (MSFT) is down -0.73%, and Alphabet (GOOGL) is down -0.50%.

Some big tech companies today were under particular pressure after China retaliated against US tariffs today, and Europe has threatened to retaliate for US tariffs with European tariffs and restrictions on US tech and service companies and possibly US banks.

Chip makers today are sharply lower.  Marvell Technology (MRVL) is down more than -13%, and Micron Technology (MU) is down more than -12%.  Also, Advanced Micro Devices (AMD) and Lam Research (LRCX) are down more than -9%, and KLA Corp (KLAC), Analog Devices (ADI), Intel (INTC), and Applied Materials (AMAT) are down more than -7%.  In addition, Microchip Technology (MCHP), NXP Semiconductors NV (NXPI), GlobalFoundries (GFS), and Broadcom (AVGO) are down more than -5%, and Texas Instruments (TXN) and Qualcomm (QCOM) are down more than -4%. 

Travel and leisure stocks are tumbling on concern that tariffs will raise prices for consumers and curb discretionary spending.  United Airlines Holdings (UAL) is down more than -10%, and Southwest Airlines (LUV) is down more than -9%.  Also, Las Vegas Sands (LVS), Norwegian Cruise Line Holdings (NCLH), Wynn Resorts Ltd (WYNN), Delta Air Lines (DAL), and Expedia Group (EXPE) are down more than -6%.  In addition, Caesars Entertainment (CZR) and MGM Resorts International (MGM) are down more than -5%.       

Energy stocks and energy service providers are selling off today, with the price of WTI crude down more than -7% at a 4-year low.  As a result, APA Corp (APA) is down more than -13%, and Haliburton (HAL) is down more than -10%.  Also, Diamondback Energy (FANG), Devon Energy (DVN), and Schlumberger (SLB) are down more than 9%, and Phillips 66 (PSX), Occidental Petroleum (OXY), and Baker Hughes (BKR) are down more than -7%.  In addition, Valero Energy (VLO) and ConocoPhillips (COP) are down more than -5%. 

US-listed Chinese stocks sank today after China announced 34% tariffs on all US imports.  Alibaba Group Holding Ltd (BABA), Baidu (BIDU), JD.com (JD), NetEase (NTES), and PDD Holdings (PDD) are down more than -7%.

DuPont de Nemours (DD) is down more than -15% after China’s State Administration for Market Regulation said it is probing the company over alleged breach of antitrust law.

Nordstrom (JWN) is down more than -2% after Citigroup downgraded the stock to sell from neutral with a price target of $22. 

Defensive food makers, beverage companies, and consumer durables are moving higher with the plunge in the broader market.  As a result, Conagra Brands (CAG) and Church & Dwight (CHD) are up more than +2%.  Also, PepsiCo (PEP) is up more than +1% to lead gainers in the Nasdaq 100.  In addition, Hormel Foods (HRL), Mondelez International (MDLZ), and General Mills (GIS) are up more than +1%, and Clorox (CLX) is up +0.89%. 

Defensive managed healthcare stocks are climbing today due to the selloff in the overall market.  UnitedHealth Group (UNH) is up more than +1% to lead gainers in the Dow Jones Industrials.  Also, 

Molina Healthcare (MOH), Humana (HUM), and Centene (CNC) are up more than +1%. 

MarketAxess Holdings (MKTX) is up more than +3% to lead gainers in the S&P 500 after reporting March total daily volume surged +46% y/y to a record $46.5 billion. 

Earnings Reports (4/4/2025)

Aldeyra Therapeutics Inc (ALDX), Gencor Industries Inc (GENC), and Radius Recycling Inc (RDUS).