Stocks Plunge Before the Open After Tariff Relief Rally, U.S. Inflation Data in Focus

June S&P 500 E-Mini futures (ESM25) are down -2.20%, and June Nasdaq 100 E-Mini futures (NQM25) are down -2.33% this morning, pointing to a sharp pullback on Wall Street after yesterday’s historic rally, while investors brace for the release of crucial U.S. inflation data.

After $10 trillion was erased from global equity markets, U.S. President Donald Trump announced a 90-day pause on most of his sweeping reciprocal tariffs. Countries affected by the higher reciprocal duties that took effect Wednesday will now be taxed at the earlier 10% baseline rate applied to other nations, except for China, which remains subject to a 125% tariff. This sparked a massive rally on Wall Street, with the benchmark S&P 500 notching its largest daily gain since 2008 and the tech-heavy Nasdaq 100 posting its biggest one-day surge since 2001. Still, numerous strategists cautioned investors against buying the dip in equities due to the risks that lie ahead.

“The damage has been done. They’ve opened Pandora’s box, and they can’t undo what’s been done in one statement. We would definitely be a bit more of a seller at this point,” said Colin Graham, head of multi-asset strategies at Robeco Groep.

The minutes of the Federal Open Market Committee’s March 18-19 meeting, released Wednesday, showed that officials were worried about tariffs. They referenced President Trump’s trade policy 18 times in the minutes, a sharp increase from just one mention in January’s minutes. “Participants assessed that uncertainty around the economic outlook had increased, with almost all participants viewing risks to inflation as tilted to the upside and risks to employment as tilted to the downside,” according to the FOMC minutes. Also, some officials outlined a possible “stagflation” scenario, in which inflation rises while the economy either stagnates or contracts. “Some participants observed, however, that the committee may face difficult tradeoffs if inflation proved to be more persistent while the outlook for growth and employment weakened,” the minutes said.

In yesterday’s trading session, Wall Street’s major indexes ended sharply higher. The Magnificent Seven stocks rallied, with Tesla (TSLA) soaring over +22% and Nvidia (NVDA) climbing more than +18%. Also, chip stocks spiked, with Microchip Technology (MCHP) soaring over +27% to lead gainers in the S&P 500 and Nasdaq 100 and Arm Holdings (ARM) rising more than +24%. In addition, Delta Air Lines (DAL) surged over +23% after the airline posted better-than-expected Q1 results.

Economic data released on Wednesday showed that U.S. wholesale inventories came in at +0.3% m/m in February, compared to expectations of +0.4% m/m.

Minneapolis Fed President Neel Kashkari stated on Wednesday that the central bank is less likely to cut interest rates in the face of tariffs due to their inflationary impact, even if the economy starts to weaken. “The hurdle to change the federal funds rate one way or the other has increased due to tariffs,” Kashkari wrote in an essay.

Meanwhile, U.S. rate futures have priced in an 81.2% probability of no rate change and an 18.8% chance of a 25 basis point rate cut at the May FOMC meeting.

Today, all eyes are focused on the U.S. consumer inflation report, which is set to be released in a couple of hours. Economists, on average, forecast that the U.S. March CPI will come in at +0.1% m/m and +2.5% y/y, compared to the previous numbers of +0.2% m/m and +2.8% y/y. Also, the U.S. core CPI is expected to be +0.3% m/m and +3.0% y/y in March, compared to February’s figures of +0.2% m/m and +3.1% y/y.

U.S. Initial Jobless Claims data will be released today as well. Economists estimate this figure will come in at 223K, compared to last week’s number of 219K.

In addition, market participants will be looking toward speeches from Fed officials Logan, Schmid, Goolsbee, and Harker.

First-quarter corporate earnings season begins in earnest on Friday, with major banks such as JPMorgan Chase (JPM), Wells Fargo (WFC), and Morgan Stanley (MS) set to report their quarterly results. According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +6.7% increase in quarterly earnings for Q1 compared to the previous year.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.283%, down -2.57%.

The Euro Stoxx 50 Index is up +5.41% this morning, tracking overnight gains on Wall Street after U.S. President Donald Trump paused most of his sweeping tariff increases. Bank, technology, and industrial stocks led the gains on Thursday. Data from the statistics agency Istat released on Thursday showed that Italy’s monthly industrial production fell in February. Meanwhile, European Commission President Ursula von der Leyen on Thursday welcomed Trump’s decision to pause the implementation of reciprocal tariffs. She added that tariffs are taxes that ultimately harm both businesses and consumers. This followed the European Union’s announcement that it would implement 25% tariffs on a variety of U.S. imports as part of its first round of countermeasures. Still, the 125% tariff on Chinese imports and the lack of clarity surrounding negotiations continue to make investors wary. In corporate news, Barry Callebaut AG (BARN.Z.EB) plunged over -20% after the Swiss chocolate maker cut its full-year volume guidance. Also, Tesco PLC (TSCO.LN) slumped more than -6% after Britain’s largest food retailer cautioned that its profit is likely to decline this year.

Italy’s Industrial Production data was released today.

The Italian February Industrial Production arrived at -0.9% m/m and -2.7% y/y, compared to expectations of -0.9% m/m and -1.9% y/y.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.16%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +9.13%.

China’s Shanghai Composite Index closed higher today, supported by ongoing investor expectations of additional stimulus measures from Beijing and hopes for a potential trade agreement with the U.S. Technology stocks outperformed on Thursday. The benchmark index rose for the third consecutive session, indicating that investors’ attention is turning toward possible pro-growth actions by Chinese policymakers after U.S. President Donald Trump increased tariffs on China to 125% from the 104% rate that took effect on Wednesday. The urgency for Beijing to boost consumption intensified after data from the National Bureau of Statistics released on Thursday showed that China’s consumer prices fell for the second consecutive month in March, while factory-gate deflation deepened. Meanwhile, Bloomberg News reported that China’s top leadership is set to convene on Thursday to discuss further economic stimulus following Trump’s escalation of tariffs. The ad-hoc meeting will focus on support initiatives for housing, consumer spending, and technological innovation. Other government bodies, such as financial regulators, are also gathering to discuss measures to boost the economy and stabilize the markets, the report said. In other news, Goldman Sachs lowered its 2025 GDP growth forecast for China to 4% from 4.5%, citing the adverse impact of tariffs. In corporate news, Yantai Jereh Oilfield Services surged +10% after the oilfield equipment manufacturer posted a 7% year-over-year increase in 2024 net profit.

The Chinese March CPI came in at -0.4% m/m and -0.1% y/y, weaker than expectations of -0.2% m/m and unchanged y/y.

The Chinese March PPI stood at -2.5% y/y, weaker than expectations of -2.3% y/y.

Japan’s Nikkei 225 Stock Index closed sharply higher today, notching its largest one-day percentage gain since August 2024, as sentiment got a boost after U.S. President Donald Trump paused most of his sweeping reciprocal tariffs. Electronics, automobile, and bank stocks outperformed on Thursday. Morgan Stanley analysts stated that Trump’s decision is positive for Asian equities and especially favorable for Japanese equities. That’s because Japan “has a strong underlying reflationary dynamic but came closest in our coverage to pricing in such a recession at the lows on Monday,” the analysts said in a note. Still, a sense of caution prevailed as investors continued to be uncertain about the chances of a long-term resolution to the crisis. Government data released on Thursday showed that Japan’s annual wholesale inflation hit 4.2% in March, accelerating from the prior month in a sign of lingering cost pressures that compound corporate strain amid uncertainty over U.S. tariff policy. Bank of Japan Governor Kazuo Ueda said on Wednesday that the central bank will proceed with interest rate hikes if the economy continues to recover. Meanwhile, data showed that Japanese investors purchased a record 1.8 trillion yen ($12.26 billion) in foreign equities during the week ending April 5th, seeking bargains in overseas markets following Trump’s announcement of sweeping tariffs. In other news, the Japanese government on Thursday nominated former Mitsubishi Corp. executive Kazuyuki Masu to join the Bank of Japan’s nine-member policy board. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -30.67% to 39.25.

The Japanese March PPI has been reported at +0.4% m/m and +4.2% y/y, stronger than expectations of +0.2% m/m and +3.9% y/y.

Pre-Market U.S. Stock Movers

The Magnificent Seven stocks retreated in pre-market trading, with Tesla (TSLA) and Nvidia (NVDA) sliding over -3%.

U.S. Steel (X) tumbled over -11% in pre-market trading after President Trump said on Wednesday that he opposes the company being acquired by Japan’s Nippon Steel.

General Motors (GM) fell about -3% in pre-market trading after UBS downgraded the stock to Neutral from Buy.

Constellation Brands (STZ) slid more than -3% in pre-market trading after the parent company of Corona beer issued below-consensus FY26 EPS guidance.

Enact Holdings (ACT) climbed over +4% in pre-market trading after S&P Dow Jones Indices announced that the stock would join the S&P SmallCap 600 Index, effective April 16th.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - April 10th

CarMax (KMX), Byrna Technologies (BYRN), Bank7 (BSVN), Lovesac (LOVE), Northern Technologies (NTIC).