Stocks Fall Sharply as Tariff Concerns Weigh on Growth Prospects

The S&P 500 Index ($SPX) (SPY) Thursday closed down -3.46%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -2.50%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -4.19%.  June E-mini S&P futures (ESM25) are down -3.51%, and June E-mini Nasdaq futures (NQM25) are down -4.23%. 

Stock indexes on Thursday fell sharply, giving back some of Wednesday’s massive rally.  Despite President Trump’s action on Wednesday to announce a 90-day pause on reciprocal tariffs to 56 countries, the markets are still concerned about the effects of US trade policies on the global economy since all the other Trump tariffs remain in place.  The tariffs have caused consumer confidence to plummet and have prompted many companies to suspend their capital spending plans, a negative factor for GDP growth.

Also, the US-China trade war escalated after China retaliated Wednesday and imposed 84% tariffs on US goods, and the US raised total tariffs on Chinese goods to 145% from 104%.  On the positive side, the EU on Thursday announced a 90-day pause in its retaliatory tariffs on US goods announced earlier this week.

Thursday’s US economic news was supportive of stocks, showing slowing inflation and a healthy labor market.  The March CPI ex-food and energy report rose less than expected at the slowest rate in 4 years.  Also, the US labor market so far remains buoyant after the weekly jobless claims report was in line with expectations.

US weekly initial unemployment claims rose +4,000 to 223,000, right on expectations.  Weekly continuing claims fell -43,000 to 1.850 million, showing a stronger labor market than expectations of 1.886 million.

The US March CPI report rose +2.4% y/y, weaker than expectations of +2.5% y/y and the smallest increase in 6 months.  The March CPI ex-food and energy report rose +2.8% y/y, weaker than expectations of +3.0% y/y and the smallest increase in 4 years.

Hawkish Fed comments Thursday were negative for stocks.  Kansas City Fed President Schmid said he would “prioritize reining in inflation” if the Fed is forced to balance its price stability goal against its mandate for full employment.  Also, Dallas Fed President Logan said, “To sustainably achieve both of our dual-mandate goals, it will be important to keep any tariff-related price increases from fostering more persistent inflation.”

Signs of deflation in China, the world’s second-largest economy, showed weak demand and were negative for global growth prospects.  China’s March CPI fell -0.1% y/y, weaker than expectations of unchanged y/y.  Also, Mar PPI fell -2.5% y/y, weaker than expectations of -2.3% y/y.

On Wednesday, President Trump announced a 90-day pause on higher reciprocal tariffs on 56 nations but left in place the new 10% baseline tariff on virtually all nations.  Meanwhile, the EU Thursday said it will delay for 90 days the implementation of 25% tariffs on 21 billion euros worth of US goods sent to Europe.

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 virtually all nations took effect.

The markets are discounting the chances at 32% 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.  On Friday, the March final-demand PPI is 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. Friday’s 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 on Thursday settled higher.  The Euro Stoxx 50 closed up sharply by +4.26%.  China’s Shanghai Composite Index closed up +1.16%.  Japan’s Nikkei Stock 225 closed up sharply by +9.13%.

Interest Rates

June 10-year T-notes (ZNM25) Thursday closed up +8.5 ticks.  The 10-year T-note yield rose +1.3 bp to 4.374%.  June T-notes Thursday posted moderate gains on speculation that Wednesday’s action by President Trump to pause reciprocal tariffs will reduce the urge among some foreign investors to dump dollars, stocks, and Treasury securities.  Also, Thursday’s slower-than-expected increase in US March consumer prices was bullish for T-notes.  In addition, Thursday’s stock slump boosted safe-haven demand for T-notes.  Strong demand for the Treasury’s $22 billion 30-year T-bond auction was positive for T-notes, with the bid-to-cover ratio for the auction at 2.43, better than the 10-auction average of 2.42. 

European bond yields on Thursday finished lower.  The 10-year German bund yield fell -1.1 bp to 2.580%. The 10-year UK gilt yield fell -13.6 bp to 4.643%.

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 slumped and weighed on the broader market Thursday.  Tesla (TSLA) closed down more than -7% and Meta Platforms (META) closed down more than -6%.  Also, Nvidia (NVDA) and Amazon.com (AMZN) closed down more than -5%, and Apple (AAPL) closed down more than -4%.  In addition, Alphabet (GOOGL) closed down more than -3%, and Microsoft (MSFT) closed down more than -2%. 

Chip makers retreated Thursday and pressured the overall market. As a result, Microchip Technology closed down more than -13% to lead losers in the Nasdaq 100, and Marvell Technology (MRVL) closed down more than -13%.  Also, ON Semiconductor (ON) and NXP Semiconductors NV (NXPI) closed down more than -10%, and Micron Technology (MU) and Analog Devices (ADI) closed down more than -9%.  In addition, Advanced Micro Devices (AMD) closed down more than -8%, and Intel (INTC), Texas Instruments (TXN), and Applied Materials closed down more than -7%.  Finally, GlobalFoundries (GFS),  Lam Research (LRCX), KLA Corp (KLAC), and Broadcom (AVGO) closed down more than -6%.

Economic concerns hammered travel and leisure stocks again on Thursday.  United Airlines Holdings (UAL) and Delta Air Lines (DAL) closed down more than -11%, and Carnival (CCL) closed down more than -10%.  Also, Southwest Airlines (LUV) and Norwegian Cruise Line Holdings (NCLH) closed down more than -9%, and Royal Caribbean Cruises Ltd (RCL), Caesars Entertainment (CZR), and Expedia Group (EXPE) closed down more than -7%.  In addition, Host Hotels & Resorts (HST) and Las Vegas Sands (LVS) closed down more than -5%, and Marriott International (MAR), Hilton Worldwide Holdings (HLT), and Wynn Resorts (WYNN) closed down more than -4%.

Energy producers and energy service providers fell Thursday after the price of WTI crude dropped more than -3%.  As a result, APA Corp closed down more than -12%, and Devon Energy (DVN) closed down more than -10%.  Also, Occidental Petroleum (OXY), Diamondback Energy (FANG), and Schlumberger (SLB) closed down more than -9%, and ConocoPhillips (COP) and Haliburton (HAL) closed down more than -8%.  In addition, Chevron (CVX), Marathon Petroleum (MPC), and Hess Corp (HES) closed down more than -7%, and Exxon Mobil (XOM), Valero Energy (VLO), Phillips 66 (PSX), and Baker Hughes (BKR) closed down more than -5%.

Charles River Laboratories (CRL) closed down more than -23% to lead losers in the S&P 500 after the US FDA said it plans to phase out animal testing requirements for monoclonal antibodies and other drugs and replace them with more effective human-relevant methods.

CarMax (KMX) closed down more than -16% after reporting Q4 EPS of 58 cents, below the consensus of 65 cents.   

US Steel (X) closed down more than -10% after President Trump said that while he loves Japan, he doesn’t want a Japanese company to own it, dampening the prospects for Nippon Steel to acquire US Steel.

Comcast Corp (CMCSA) closed down more than -5% after BNP Paribas Exane downgraded the stock to underperform from neutral with a price target of $31.

Eversource Energy (ES) closed down more than -2% after JPMorgan Chase downgraded the stock to underweight from neutral.

Defensive healthcare stocks are climbing today as the broader market sinks.  UnitedHealth Group (UNH) closed up more than +2% to lead gainers in the Dow Jones Industrials after Argus Research raised its price target on the stock to $620 from $560.  Also, Cigna Group (CI) closed up more than +2%, Humana (HUM) closed up more than +1%n, and Molina Healthcare (MOH) closed up +0.76%. 

Gold mining stocks rose Thursday after the price of gold jumped more than +3%.  As a result, AngloGold Ashanti Plc (AU) closed up more than +5%, and Newmont (NEM) closed up more than +4% to lead gainers in the S&P 500. 

Lovesac Co (LOVE) closed up more than +14% after reporting Q4 net sales of $241.5 million, stronger than expectations of $230.3 million.

Keros Therapeutics (KROS) closed up +17% after it said it is initiating a formal review to evaluate strategic alternatives for the company, including a potential sale.

Enact Holdings (ACT) closed up more than +3% after S&P Dow Jones Indices announced that the stock will replace SolarWinds in the S&P SmallCap 600 index before trading begins on April 16.

Earnings Reports (4/11/2025)

Bank of New York Mellon Corp (BK), Blackrock Inc (BLK), Fastenal Co (FAST), JPMorgan Chase & Co (JPM), Morgan Stanley (MS), and Wells Fargo & Co (WFC).