Stock Index Futures Tumble as Tariff Turmoil Deepens, U.S. Inflation Data and Big Bank Earnings Awaited

June S&P 500 E-Mini futures (ESM25) are down -3.29%, and June Nasdaq 100 E-Mini futures (NQM25) are down -3.81% this morning as worries over the economic fallout of U.S. President Donald Trump’s sweeping tariffs continue to weigh on sentiment.

President Trump, speaking to reporters on Sunday aboard Air Force One following a weekend of golf in Florida, repeatedly stood by the sweeping tariffs announced last week. He said that “sometimes you have to take medicine to fix something.” Also, U.S. Treasury Secretary Scott Bessent on Sunday adopted a defiant stance amid the global stock market sell-off triggered by new U.S. tariffs, asserting that the measures are necessary and dismissing concerns that they will lead to a U.S. recession. “We get these short-term market reactions from time to time. The market consistently underestimates Donald Trump,” he said.

Investor focus this week is on key U.S. inflation data, the publication of the minutes of the Federal Reserve’s latest policy meeting, and the start of the first-quarter earnings season.

In Friday’s trading session, Wall Street’s major equity averages closed sharply lower, with the S&P 500 and Nasdaq 100 falling to 11-month lows and the Dow dropping to a 9-month low. The Magnificent Seven stocks slumped, with Tesla (TSLA) plunging over -10% and Nvidia (NVDA) sliding more than -7%. Also, chip stocks sold off, with Micron Technology (MU) tumbling more than -12% and Intel (INTC) sinking over -11%. In addition, GE HealthCare Technologies (GEHC) dropped nearly -16% and was the top percentage loser on the S&P 500 after China launched an anti-dumping probe into imports of a type of medical X-ray tube from the U.S. On the bullish side, retailers linked to tariffs on Southeast Asian imports advanced after Vietnam and Cambodia indicated a readiness to negotiate tariff levels, with Nike (NKE) climbing +3% to lead gainers in the Dow and Lululemon Athletica (LULU) rising over +3%.

The U.S. Labor Department’s report on Friday showed that nonfarm payrolls climbed 228K in March, stronger than expectations of 137K. At the same time, the U.S. March unemployment rate unexpectedly edged up to 4.2%, weaker than expectations of no change at 4.1%. In addition, U.S. average hourly earnings rose +0.3% m/m and +3.8% y/y in March, compared to expectations of +0.3% m/m and +3.9% y/y. 

Fed Chair Jerome Powell stated on Friday that the economic impact of new tariffs is likely to be significantly larger than anticipated, with potential effects such as slower growth and higher inflation, and noted that the central bank was in no rush to adjust interest rates. “While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent,” Powell said.

Meanwhile, U.S. rate futures have priced in a 51.6% chance of no rate change and a 48.4% chance of a 25 basis point rate cut at the conclusion of the Fed’s May meeting.

First-quarter earnings season kicks off this week, with big banks such as JPMorgan Chase (JPM), Wells Fargo (WFC), and Morgan Stanley (MS) set to release their earnings reports on Friday. BlackRock (BLK) and Delta Air Lines (DAL) are among other major names scheduled to deliver quarterly updates during the week.

On the economic data front, the U.S. consumer inflation report for March will be the main highlight this week. The reading could provide insights into the prospects of interest rate reductions as dark clouds gather over the U.S. economy following President Trump’s tariff announcements. Other noteworthy data releases include the U.S. PPI, the Core PPI, Initial Jobless Claims, Crude Oil Inventories, Wholesale Inventories, and the University of Michigan’s Consumer Sentiment Index (preliminary).

Also, investors will closely monitor the release of the Federal Reserve’s minutes from the March 18-19 meeting on Wednesday. With expectations mounting that the Fed will support the economy by cutting rates five times this year, starting in June, the minutes could shed light on how justified those expectations may be.

“While investors are hoping that the Federal Reserve comes to the rescue, it’s unclear how a few potential rate cuts this year will undo the economic damage that these tariffs are likely to cause, said Emily Bowersock Hill at Bowersock Capital Partners.

In addition, a slew of Fed officials will be making appearances throughout the week, including Kugler, Daly, Barkin, Logan, Bowman, Goolsbee, Harker, Musalem, and Williams. 

Today, investors will focus on U.S. Consumer Credit data, which is set to be released in a couple of hours. Economists expect this figure to be $15.20B in February, compared to the previous figure of $18.08B.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.953%, down -0.95%.

The Euro Stoxx 50 Index is down -5.78% this morning, falling to its lowest level since August as U.S. President Donald Trump’s tariff storm continued to weigh on sentiment. Defense stocks, one of this year’s top-performing industry groups, led the declines on Monday as investors locked in gains by selling winners. Bank, energy, and insurance stocks also sold off sharply. Investors will be watching the European Union’s response to the U.S. tariffs as the week gets underway. Data from Eurostat released on Monday showed that the Eurozone’s monthly retail sales rebounded in February following three consecutive months of stagnation, though the recovery came in weaker than anticipated. Separately, a survey revealed that investor morale in the Eurozone plunged in April to its weakest level in over a year as Trump’s tariffs dealt a heavy blow to sentiment across the bloc. In addition, data showed that Germany’s monthly industrial production slipped back into contraction in February, underscoring the ongoing weakness of the sector. Meanwhile, European Central Bank Governing Council member Yannis Stournaras said in an interview with the Financial Times published Monday that an impending trade war with the U.S. could severely impact the Eurozone economy. The Greek central bank governor cautioned that Trump’s tariffs could reduce euro area economic growth by between 0.5 and 1 percentage points.

“There’s just a general sense of panic. Everything is getting killed, even good companies that will likely fare relatively well,” said Daniel Murray, Zurich-based chief executive officer of EFG Asset Management. 

Germany’s Industrial Production, Eurozone’s Sentix Investor Confidence Index, and Eurozone’s Retail Sales data were released today.

The German February Industrial Production came in at -1.3% m/m, weaker than expectations of -0.9% m/m.

Eurozone April Sentix Investor Confidence Index stood at -19.5, weaker than expectations of -8.9.

Eurozone February Retail Sales arrived at +0.3% m/m and +2.3% y/y, compared to expectations of +0.5% m/m and +1.8% y/y.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -7.34%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -7.83%.

China’s Shanghai Composite Index closed sharply lower today, posting its biggest single-day drop since February 2020, as investors prepared for the repercussions of an escalating trade conflict between the world’s two largest economies. Solar and technology stocks led the declines on Monday. Last week, U.S. President Donald Trump imposed an additional 34% tariff on Chinese imports. China retaliated on Friday by imposing a 34% tariff on all U.S. imports beginning April 10th. Authorities in Beijing also unveiled various other countermeasures, including the immediate restriction of exports of seven types of rare earths. The escalating conflict between the world’s two largest economies threatens to disrupt trade flows and, in addition to denting Chinese corporate earnings, is also projected to trigger a slowdown in global demand amid already faltering growth in China. Meanwhile, exchange-traded funds favored by China’s so-called national team of state-backed investors experienced heavy trading, suggesting that authorities might be quietly intervening to contain the fallout. Also, China stated it has room to lower borrowing costs and adjust reserve requirements for banks if necessary to protect its economy from the latest tariffs, according to a front-page commentary in People’s Daily on Monday. In addition, Bloomberg News reported that China’s policymakers discussed measures over the weekend to stabilize the economy and markets in response to Trump’s tariff barrage, including whether to accelerate stimulus plans to boost consumption. In corporate news, major technology stocks experienced a sell-off due to the anticipated impact of tariffs, with BYD Electronic, a major Apple supplier, tumbling over -22% and Lenovo Group, the world's largest PC maker, plunging more than -22%.

Japan’s Nikkei 225 Stock Index closed sharply lower today, hitting its lowest level since October 2023, as concerns over an escalating trade war dampened sentiment. The benchmark index entered a bear market, dropping over 20% from its December high. Financial stocks led the declines on Monday as recession fears drove bond yields lower and pushed out expectations for additional interest rate hikes by the Bank of Japan. Data released on Monday showed that Japanese real wages fell for the second consecutive month in February as higher inflation added to broader concerns in Japan over the effects of U.S. tariffs. Separately, preliminary data from the Cabinet Office showed that Japan’s leading economic indicators index, which gauges the economic outlook for a few months ahead based on data such as job offers and consumer sentiment, declined in February. Meanwhile, Japanese Prime Minister Shigeru Ishiba told parliament on Monday that he would firmly urge U.S. President Donald Trump to abandon the proposed U.S. tariffs on Japanese imports, starting with a phone call to the president. Over the weekend, Ishiba said Japan’s strategy to address the crisis could involve proposals related to liquefied natural gas, automobiles, agriculture, and national security, according to local media. Also, Finance Minister Katsunobu Kato said on Sunday evening that Ishiba had directed him to closely monitor financial markets and investor behavior. In other news, local Japanese companies are increasingly worried about the impact of Trump’s higher tariffs, which have complicated efforts to formulate business plans for the new fiscal year, according to the BOJ’s regional economic report. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +64.11% to 58.39.

The Japanese February Leading Index stood at 107.9, stronger than expectations of 107.8.

Pre-Market U.S. Stock Movers

The Magnificent Seven stocks are sliding in pre-market trading, with Tesla (TSLA) slumping over -7% and Nvidia (NVDA) falling more than -5%.

Cryptocurrency-exposed stocks sank in pre-market trading after the price of Bitcoin dropped to the $76K level. MicroStrategy (MSTR) is down more than -11%. Also, MARA Holdings (MARA) is down over -11%, and Coinbase (COIN) is down more than -10%.

Bank stocks dropped in pre-market trading as fears of a global recession intensified. JPMorgan Chase (JPM), Wells Fargo (WFC), and Morgan Stanley (MS) are down over -4%.

Caterpillar (CAT) fell more than -3% in pre-market trading after UBS downgraded the stock to Sell from Neutral with a price target of $243.

Target (TGT) slid over -3% in pre-market trading after Baird downgraded the stock to Neutral from Outperform.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - April 7th

Levi Strauss (LEVI), Greenbrier (GBX), Dave & Buster’s Entertainment (PLAY).