Stocks Spike as Trump Announces 90-Day Tariff Pause

The S&P 500 Index ($SPX) (SPY) today is up +5.99%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +3.96%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +7.05%.  June E-mini S&P futures (ESM25) are up +7.02%, and June E-mini Nasdaq futures (NQM25) are up +8.46%. 

Stock indexes have erased early losses to trade sharply higher this afternoon, after President Trump said on Truth Social that he would raise duties on China to 125% but implement a 90-day pause on most other reciprocal tariffs. The increased tariffs on Beijing are due to “the lack of respect that China has shown to the World’s Markets,” said Trump.

Earlier in the session, stocks opened lower and bond yields rose, as the 10-year T-note yield today jumped to a 1-1/2 month high of 4.511%.  Stock index futures extended their losses early when China retaliated against the new US tariffs by imposing 84% tariffs on US goods.  The yuan sank to a 17-year low today against the dollar on the latest tariff news.  Europe today also announced retaliatory tariffs.

Ahead of the tariff pause announcement, stocks recovered from their worst levels on strength in megacap technology stocks and chip makers.  Also, airline stocks are climbing after Delta Air Lines reported better-than-expected quarterly earnings.  Stocks also found support today when Treasury Secretary Bessent said he envisioned reaching trade deals with US allies.  At the opening bell, President Trump tried to boost confidence in markets when he urged Americans to remain calm and that “this is a great time to buy” US stocks as “everything is going to work out well.” 

After the US today moved ahead with boosting tariffs on China by another 50%, bringing total tariffs on US imports from Chinese to 104%, China immediately retaliated and imposed 84% tariffs on US goods, effective on Thursday.   The EU also retaliated against US tariffs today by imposing 25% tariffs on 21 billion euros worth of US goods sent to Europe, including soybeans, agricultural products, poultry, and motorcycles.

US reciprocal tariffs kicked in today on 60 countries, with tariffs on European Union (EU) imports rising 20%, 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%. “I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately,” said Trump this afternoon, citing outreach from over 75 trade partners.

Hawkish comments today from Minneapolis Fed President Kashkari weighed on stocks and bonds when he said, “The hurdle to change the federal funds rate one way or the other has increased due to tariffs,” and that the Fed is less likely to lower interest rates in the face of tariffs given their inflationary impact, even if the economy begins to deteriorate.

US MBA mortgage applications rose +20.0% in the week ended April 4, with the purchase mortgage sub-index up +9.2% and the refinancing sub-index up +35.3%.  The average 30-year fixed rate mortgage fell -9 bp to a 5-1/2 month low of 6.61% from 6.70% in the prior week.

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.  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.  Last Saturday, a 10% baseline tariff for most US trading partners took effect.

The markets are discounting the chances at 47% for a -25 bp rate cut after the May 6-7 FOMC meeting, up from 30% last week.

Market attention this week will focus on US trade policies and whether other nations retaliate against US tariffs.  Later today, 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 mixed.  The Euro Stoxx 50 is down sharply by -2.61%.  China’s Shanghai Composite Index closed up +1.31%.  Japan’s Nikkei Stock 225 closed down sharply by -3.93%.

Interest Rates

June 10-year T-notes (ZNM25) today are down -25 ticks.  The 10-year T-note yield is up +7.9 bp to 4.372%.  June T-notes today tumbled to a 1-1/2 month low, and the 10-year T-note yield rose to a 1-1/2 month high of 4.511%.  Concerns that US tariffs will push the economy into stagflation and keep the Fed from cutting interest rates are weighing on T-notes. US trade policies have also caused a crisis of confidence in the dollar, prompting foreign investors to dump dollar assets, including Treasuries.  In addition, supply pressures are negative for T-notes as the Treasury will auction $39 billion 10-year T-notes later today as part of this week’s $119 billion auction package. 

European bond yields today are mixed.  The 10-year German bund yield is down -5.5 bp to 2.576%.  The 10-year UK gilt yield rose to a 1-1/2 week high of 4.797% and is up +12.1 bp to 4.726%.

ECB Governing Council member Villeroy de Galhau said the ECB should lower interest rates “soon” as US tariffs and the fallout on global markets favor such a move.

ECB Governing Council member Rehn said, “The grounds for continuing interest rate cuts in the April meeting have grown clearly stronger based on a holistic assessment of inflation and economic growth.”

ECB Governing Council member Holzmann said the ECB should allow uncertainty on global trade stoked by US tariffs to clear before considering any further interest rate cuts.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

The Magnificent Seven stocks today are moving higher, providing support for the broader market.  Tesla (TSLA) and Apple (AAPL) are up more than +3%.  Also, Nvidia (NVDA) is up more than +2%, and Microsoft (MSFT) is up more than +1%.  In addition, Amazon.com (AMZN) is up +0.91%, and Alphabet (GOOGL) is up +0.52%. 

Chip makers are climbing today, a supportive factor for the broader market.  Advanced Micro Devices (AMD) is up more than +4% to lead gainers in the Nasdaq 100, and ARM Holdings Plc (ARM) is up more than +3%.  Also, Intel (INTC) and ASML Holding NV (ASML) are up more than +2%.  In addition, ON Semiconductor (ON), GlobalFoundries (GFS), NXP Semiconductors NV (NXPI), and Broadcom (AVGO) are up more than +1%.

Airline stocks are rising today, led by a +6% jump in Delta Air Lines (DAL) to lead gainers in the S&P 500 after reporting Q1 adjusted EPS of 46 cents, stronger than the consensus of 39 cents.  Also, United Airlines Holdings (UAL), Southwest Airlines (LUV), and Alaskan Air Group (ALK) are up more than +2%.

Pharmaceutical stocks and drug makers are retreating today after President Trump said the US plans to announce “a major tariff” on the sector soon. As a result, Bristol-Myers Squibb (BMY) is down more than -5% to lead losers in the S&P 500, and AstraZeneca Plc (AZN) is down more than -4% to lead losers in the Nasdaq 100.  Also, Amgen (AMGN) is down more than -2% to lead losers in the Dow Jones Industrials.  In addition, Pfizer (PFE), Eli Lilly (LLY), AbbVie (ABBV), Merck & Co (MRK), Biogen (BIIB), Regeneron Pharmaceuticals (REGN), and Johnson & Johnson (JNJ) are down more than -2%. 

Homebuilders are falling today after the 10-year T-note yield jumped to a 1-1/2 month high, a negative factor for housing demand.  As a result, PulteGroup (PHM) is down more than -2%, and DR Horton (DHI), Lennar (LEN), and Toll Brothers (TOL) are down more than -1%.

Energy producers and energy service providers are sinking today as the price of WTI crude oil plummeted more than -5% to a 4-year low. APA Corp (APA), Exxon Mobil (XOM), Chevron (CVX), Devon Energy (DVN), Occidental Petroleum (OXY), and Valero Energy (VLO) are down more than -2%.  Also, Diamondback Energy (FANG), Phillips 66 (PSX), and Marathon Petroleum (MPC) are down more than -1%.

Walmart (WMT) is up more than +3% to lead gainers in the Dow Jones Industrials after reaffirming its Q1 sales forecast of up 3% to 4%. 

Gold mining stocks are climbing today, with the price of gold up by more than +3%.  AngloGold Ashanti Plc (AU) is up more than +6%, and Newmont (NEM) is up more than +1%.   

Cal-Maine Foods (CALM) is down more than -1% after reporting Q3 EPS of $10.38, well below the consensus of $10.91. 

Earnings Reports (4/9/2025)

Constellation Brands Inc (STZ), Delta Air Lines Inc (DAL), Movado Group Inc (MOV), Neogen Corp (NEOG), PriceSmart Inc (PSMT), Pure Cycle Corp (PCYO), Richardson Electronics Ltd/Uni (RELL), Simply Good Foods Co/The (SMPL).