Stocks Settle Mixed as Chip Makers Rebound

The S&P 500 Index ($SPX) (SPY) Monday closed down -0.23%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.91%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.19%.  June E-mini S&P futures (ESM25) are up +0.30%, and June E-mini Nasdaq futures (NQM25) are up +0.71%. 

Stock indexes on Monday settled mixed, with the S&P 500 falling to a 14-month low and the Dow Jones Industrials falling to a 15-month low. Equity markets worldwide sank on Monday because of concern that a trade war will push the global economy into recession.  Over the weekend, President Trump dismissed the ongoing selloff in equity markets when he said to “forget the markets for a second” and pledged to continue with his tariff policies.  Also, Treasury Secretary Bessent dismissed market concerns about slowing economic growth and inflation fears and insisted that an economic boom is on the horizon.

Stocks were volatile on Monday on several attempts to erase losses and move higher.  Recently beaten-down chip stocks recovered Monday to lend support to the overall market. Also, a rebound in some megacap technology stocks supported the market as Amazon.com and Meta Platforms rose more than +2%, and Alphabet rose more than +1%.  In addition, the hope that the tariff turmoil will prompt the Fed to cut interest rates is supporting stocks.  The markets are discounting the chances at 45% for a -25 bp rate cut after the May 6-7 FOMC meeting, up from 30% last week.

The broader market remained lower Monday after President Trump said, “We’re not looking at a tariff pause,” and “If China does not withdraw its 34% increase on tariffs to US goods by Tuesday, the US will impose additional tariffs on China of 50%, effective April 9.” 

US Feb consumer credit unexpectedly fell -$0.810 billion, weaker than expectations of an increase of +$15.000 billion. 

Fed Governor Kugler said, “Inflation is being more pressing as far as the effects of tariffs that we’re already seeing” than for economic growth.

The carnage in equity markets began last Wednesday when President Trump announced reciprocal tariffs that were worse than feared, raising concerns that US trade policies will push the US economy and perhaps the global economy into recession.  Stock losses deepened last Friday when China retaliated against US tariffs by imposing a 34% tariff on all imports from the US starting April 10.

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 and a plunge in commodity prices, with WTI crude oil falling to a 4-year low and COMEX copper prices dropping to a 3-month low. 

Last Wednesday, President Trump said the US will impose at least a 10% tariff on virtually all countries, with higher reciprocal rates on some 60 nations.  The new tariffs were implemented on imports from almost all countries on Saturday, 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.

Market attention this week will focus on US trade policies and if other nations retaliate against US tariffs.  On Wednesday, the March 18-19 FOMC meeting minutes will be released. On Thursday, Mar CPI is expected to ease to +2.6% y/y from 2.8% y/y in Feb, and Mar CPI ex-food and energy is expected to ease to +3.0% y/y from +3.1% y/y in Feb.  On Friday, Mar PPI final demand is expected to climb to +3.3% y/y from +3.2% y/y in Feb, and Mar PPI ex-food and energy is expected to rise to +3.6% y/y from +3.4% y/y in Feb.  Finally, the University of Michigan Apr US consumer sentiment index is expected to fall to 54.0 from 57.0 in March. 

Overseas stock markets today are sharply lower.  The Euro Stoxx 50 fell to an 8-month low and closed down -4.55%.  China’s Shanghai Composite Index sank to a 6-1/4 month low and closed down -7.34%.  Japan’s Nikkei Stock 225 sank to a 17-month low and closed down by -7.83%.

Interest Rates

June 10-year T-notes (ZNM25) Monday closed down -31.5 ticks.  The 10-year T-note yield rose +14.2 bp to 4.142%.  June T-notes today retreated from a 6 1/4 month high and are settled moderately lower.  The ongoing tariff turmoil is prompting foreign investors to liquidate their dollar assets on US recession concerns and a confidence crisis in the dollar, weighing on T-notes.  Hawkish comments from Fed Governor Kugler weighed on T-notes when she said she was more concerned about inflation implications from recent tariffs than economic growth.  T-notes also have a negative carryover from last Friday when Fed Chair Powell said the Fed was in no hurry to adjust monetary policy.  In addition, supply pressures are weighing on T-notes as the Treasury will auction $119 billion of T-notes and T-bonds this week, beginning with Tuesday’s $58 billion auction of 3-year T-notes.

T-notes still have support from concern that a global trade war will drive the US and possibly the global economy into recession.  Also, today’s global equity market selloff has fueled safe-haven demand for government debt securities.  In addition, T-notes found support Monday after crude oil prices fell to a 4-year low, reducing inflation expectations as the 10-year breakeven inflation rate dropped to a 6-1/2 month low of 2.131%.

European bond yields recovered from early losses on Monday and moved higher.  The 10-year German bund yield rebounded from a 1-month low of 2.430% and finished up +3.5 bp to 2.613%.  The 10-year UK gilt yield recovered from a 3-3/4 month low of 4.363% and finished up +16.7 bp to 4.615%.

Eurozone Feb retail sales rose +0.3% m/m, weaker than expectations of +0.5% m/m.

The Eurozone Apr Sentix investor confidence index fell -16.6 to a 1-1/2 year low of -19.5, weaker than expectations of -9.0. 

German Feb industrial production fell -1.3% m/m, weaker than expectations of -1.0% m/m.

Swaps are discounting the chances at 85% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

The Magnificent Seven stocks were mixed on Monday.  Apple (AAPL) closed down more than -3%, and Tesla (TSLA) closed down more than -2%.  Also, Microsoft (MSFT) closed down -0.66%.  Conversely,  Amazon.com (AMZN) and Meta Platforms (META) closed up more than +2%, and Alphabet (GOOGL) closed up more than +1%.

Energy stocks and energy service providers fell for a second day Monday after the price of WTI crude fell to a 4-year low.  As a result, Schlumberger (SLB) and Occidental Petroleum (OXY) closed down more than -4%, and Chevron (CVX), Phillips 66 (PSX), Devon Energy (DVN), and Hess Corp (HES) closed down more than -2%. 

US-listed Chinese stocks tumbled for a second session Monday after China announced 34% tariffs on all US imports.  Alibaba Group Holding Ltd (BABA), JD.com (JD), NetEase (NTES), and PDD Holdings (PDD) closed down more than -4%.

Travel and leisure stocks tumbled Thursday because of concerns that tariffs will raise prices for consumers and curb discretionary spending. Las Vegas Sands (LVS) and Wynn Resorts Ltd (WYNN) closed down more than -3%, and Hilton Worldwide Holdings (HLT) and MGM Resorts International (MGM) closed down more than -2%.  Also, Host Hotels & Resorts (HST), Expedia Group (EXPE), and Norwegian Cruise Line Holdings (NCLH) closed down more than -1%. 

Fox Corp (FOXA) closed down more than -2% after Wolfe Research downgraded the stock to underperform from peer perform with a price target of $48.

General Motors (GM) closed down more than -1% after Bernstein downgraded the stock to underperform from market perform with a price target of $35.

Vulcan Materials (VMC) closed down nearly -1% after UBS downgraded the stock to neutral from buy.   

Monday’s rebound in chipmakers limited losses in the broader market.  Broadcom (AVGO) and Micron Technology (MU) closed up more than +5%, and Lam Research (LRCX), Microchip Technology (MCHP), Applied Materials (AMAT), and KLA Corp (KLAC) closed up more than +4%.  Also, Nvidia (NVDA) closed up more than +3% to lead gainers in the Dow Jones Industrials, and ON Technology (ON) and Analog Devices (ADI) closed up more than +3%.  In addition, Marvell Technology (MRVL) and GlobalFoundries (GFS) closed up more than +2%. 

Dollar Tree (DLTR) closed up more than +7% after Citigroup upgraded the stock to buy from neutral with a price target of $103. 

Earnings Reports (4/8/2025)

Aehr Test Systems (AEHR), Cal-Maine Foods Inc (CALM), Dakota Gold Corp (DC), Kura Sushi USA Inc (KRUS), Mama’s Creations Inc (MAMA), PACS Group Inc (PACS), RPM International Inc (RPM), Walgreens Boots Alliance Inc (WBA), WD-40 Co (WDFC).