Stocks Stabilize After Early Surge

The S&P 500 Index ($SPX) (SPY) today is up +0.29%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.70%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.39%.  June E-mini S&P futures (ESM25) are up +0.26%, and June E-mini Nasdaq futures (NQM25) are up +0.38%. 

Stock indexes have pulled back from earlier sharp gains and are cautiously higher at midday, stabilizing after enormous losses over the past three sessions that sent the S&P 500 falling nearly 15% from last Wednesday’s close.  Hopes of a tariff deal with Japan sparked short covering in stocks after a call between President Trump and Prime Minister Ishiba late Monday spurred optimism that Japan might strike a trade deal with the US to reduce or avert a 24% levy on imports, set to come into effect Wednesday.

Stocks extended their gains today on comments from President Trump who said he spoke to South Korea and that the prospects for a trade deal with the country were “looking good.”  Also, Treasury Secretary Bessent said today that “I think you are going to see some very large countries with large trade deficits come forward very quickly” to make trade deals with the US.  

However, tariff concerns continue after President Trump rejected a European Union (EU) proposal to drop tariffs on all bilateral trade in industrial goods with the US, meaning the 20% tariff on all EU imports is set to kick in on Wednesday.  Also, China has pledged to retaliate against President Trump’s latest tariff threat, which is to add 50% tariffs on all Chinese goods if it refuses to remove its 34% tariff on US goods by Wednesday.  China’s Ministry of Commerce said today, “The US threat to escalate tariffs on China is a mistake on top of a mistake, and if the US insists on its own way, China will fight to the end.” 

Late Monday, Chicago Fed President Goolsbee said some business leaders expressed anxiety about the possibility that tariffs could send the economy back to the conditions of 2021 and 2022 when inflation was “raging out of control.”

Equity markets worldwide sank on Monday because of concern that a trade war will push the global economy into recession.  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.  On Monday, 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.”

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.

The markets are discounting the chances at 28% for a -25 bp rate cut after the May 6-7 FOMC meeting, down from 30% last week.

Market attention this week will focus on US trade policies and whether other nations retaliate against US tariffs.  On Wednesday, the March 18-19 FOMC meeting minutes will be released. On Thursday, the March CPI is expected to ease to +2.6% y/y from 2.8% y/y in Feb, and the March CPI ex-food and energy is expected to ease to +3.0% y/y from +3.1% y/y in Feb.  On Friday, the March final-demand PPI expected to climb to +3.3% y/y from +3.2% y/y in Feb, and the March 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. 

Q1 earnings reporting season will begin on Friday when big US banks report their results.  According to data compiled by Bloomberg Intelligence, the market consensus is for Q1 year-over-year earnings growth of +6.7% for the S&P 500, down from expectations of +11.1% in early November.  Full-year 2025 corporate profits for the S&P 500 are seen rising +9.4%, down from the forecast of +12.5% in early January. 

Overseas stock markets today are higher.  The Euro Stoxx 50 is up +3.55%.  China’s Shanghai Composite Index closed up +1.58%.  Japan’s Nikkei Stock 225 closed up sharply by +6.03%.

Interest Rates

June 10-year T-notes (ZNM25) today are down -13 ticks.  The 10-year T-note yield is up +2.5 to 4.208%.  June T-notes today are moderately lower, and the 10-year T-note yield rose to a 1-week high of 4.258% as a recovery in global equity markets reduced safe-haven demand for government debt.  Also, comments from Chicago Fed President Goolsbee weighed on T-notes when he said some business leaders expressed anxiety about the possibility that tariffs could send inflation “raging out of control.” 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 today’s $58 billion auction of 3-year T-notes.

European bond yields today are moving higher.  The 10-year German bund yield is up +5.7 bp to 2.670%.  The 10-year UK gilt yield is up +2.8 bp to 4.643%.

ECB Governing Council member Simkus said, “I still think the ECB should cut rates this month, and then, with a lot more information in June, including more clarity on tariffs and other things, we can think about whether we should wait and see or cut again.”

Swaps are discounting the chances at 90% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

The Magnificent Seven stocks today are sharply higher, a bullish factor for the broader market.  Nvidia (NVDA) is up more than +6%, and Tesla (TSLA) is up more than +4%.  Also, Meta Platforms (META) and Microsoft (MSFT) are up more than +3%, and Apple (AAPL), Amazon.com (AMZN), and Alphabet (GOOGL) are up more than +2%.

Health insurance stocks are soaring today after the Centers for Medicare & Medicaid Services finalized a 5.06% average increase in payments to Medicare Advantage plans from 2025 to 2026, higher than an earlier projection.  As a result, Humana (HUM) is up more than +11% to lead gainers in the S&P 500, and Alignment Healthcare (ALHC) is up more than +11%.  Also, CVS Health Corp (CVS) is up more than +9%, and UnitedHealth Group (UNH) is up more than +7% to lead gainers in the Dow Jones Industrials.  In addition, Universal Health Services (UHS) is up more than +5%, and Centene (CNC) is up more than +3%. 

Chip makers are climbing today to boost the overall market. ARM Holdings Plc (ARM) is up more than -7%, and Advanced Micro Devices (AMD), KLA Corp (KLAC), and Applied Materials (AMAT) are up more than +5%.  Also, Lam Research (LRCX) and Micron Technology (MU) are up more than +4%, and Intel (INTC), Analog Devices (ADI), and Qualcomm (QCOM) are up more than +2%. 

Marvell Technology (MRVL) is up more than +8% to lead gainers in the Nasdaq 100 after selling its automotive networking business to Infineon for $2.5 billion. 

Broadcom (AVGO) is up more than +8% after authorizing a new stock buyback program of up to $10 billion.

Eli Lilly & Co (LLY) is up more than +3% after Goldman Sachs upgraded the stock to buy from neutral with a price target of $888.

Teradata Corp (TDC) is up more than +4% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $26.   

Range Resources (RRC) is up more than +2% after Roth Capital Partners upgraded the stock to buy from neutral with a price target of $42. 

Walgreens Boots Alliance (WBA) is up more than +1% after reporting Q2 sales of $38.60 billion, better than the consensus of $38.03 billion.

RPM International (RPM) is down more than -4% after reporting Q3 net sales of $1.48 billion, weaker than the consensus of $1.51 billion.

PDD Holdings (PDD) is down more than -1% to lead losers in the Nasdaq 100 after President Trump threatened to increase tariffs on Chinese goods by 50% unless China rescinds the 34% tariff it placed on US goods 

Alcoa (AA) is down more than -2% after Bank of America Global Research downgraded the stock to underperform from neutral with a price target of $26.   

Virtu Financial (VIRT) is down more than -1% after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $26.

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).