Stocks Plummet as Fed Independence is Challenged

The S&P 500 Index ($SPX) (SPY) today is down -2.36%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -2.32%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -2.52%.  June E-mini S&P futures (ESM25) are down -2.37%, and June E-mini Nasdaq futures (NQM25) are down -2.51%. 

Stock indexes today are plummeting, with the S&P 500 falling to a 1-week low and the Dow Jones Industrials and Nasdaq 100 sliding to 1-1/2 week lows.  Stocks and the dollar are retreating today as the Federal Reserve’s independence is challenged, with President Trump contemplating the possible firing of Fed Chair Powell. Selling in stocks intensified today based on remarks made last Friday by National Economic Council Director Hassett, who said President Trump has been asking about possibly removing Fed Chair Powell over his interest rate decisions.  The dollar sank to a 3-year low today, and gold rallied to a new record high as the prospect of firing Powell further reduces confidence in the dollar and may spark foreign investors to liquidate their dollar holdings, including stocks and Treasuries. 

Bitcoin (^BTCUSD) is up more than +4% to a 3-1/2 week high as today’s slump in the dollar to a 3-year low bolsters demand for cryptocurrencies as President Trump’s criticism of Fed Chair Powell and threats to fire him raises concerns about the Fed’s independence and weighs on the dollar and dollar assets.

The markets are discounting the chances at 14% for a -25 bp rate cut after the May 6-7 FOMC meeting.

This week’s market focus will be on Q1 corporate earnings results and any changes to US trade policies.  On Wednesday, March new home sales are expected to climb +0.7% m/m to 681,000.  The Fed Beige Book will also be released on Wednesday.  Thursday brings March capital goods new orders nondefense ex-aircraft and parts (expected +0.1% m/m).  Also, March existing home sales on Thursday are expected to fall -2.8% m/m to 4.14 million. Friday brings the revised University of Michigan April consumer sentiment index (expected no change at 50.8).

Q1 earnings reporting season is in full swing.  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 stocks, 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.  Friday brings the revised University of Michigan Apr consumer sentiment index (expected no change at 50.8).

Overseas stock markets today are mixed.  The Euro Stoxx 50 is closed today for the Easter Monday holiday.  China’s Shanghai Composite rose to a 2-week high and closed up +0.45%.  Japan’s Nikkei Stock 225 closed down -1.30%.

As a summary of recent tariff developments, President Trump said on April 4 that he would temporarily exempt consumer electronics from reciprocal tariffs and the baseline 10% global tariffs.  However, a 20% tariff still applies to electronics shipped from China. On April 9, President Trump announced a 90-day pause on higher reciprocal tariffs on 56 nations but left the new 10% baseline tariff on virtually all nations in place. Meanwhile, the EU on April 10 said it would delay for 90 days the implementation of 25% tariffs on 21 billion euros worth of US goods sent to Europe.

On March 4, President Trump imposed 25% tariffs on Canadian and Mexican goods and doubled the tariff on Chinese goods to 20% from 10%.  On April 2, 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.  On April 5, a 10% baseline tariff for virtually all nations took effect. 

On April 4, China raised tariffs on all US goods to 125% from 84% in retaliation for the US raising tariffs on Chinese goods to 145%. Tit-for-tat retaliation worsened US-China trade tensions after China last Tuesday ordered its airlines not to take any further deliveries of Boeing’s jets, and the US government barred Nvidia from selling its H20 chips to China last Wednesday.

Interest Rates

June 10-year T-notes (ZNM25) today are down -3 ticks.  The 10-year T-note yield is up +2.9 bp to 4.354%.  June T-notes are under pressure today because President Trump may move to seek the removal of Fed Chair Powell, which would question the Fed’s independence, erode confidence in the dollar, and spark foreign selling of dollar assets, including Treasuries.  Also, supply pressures are bearish for T-notes as the Treasury will auction $213 billion of T-note and floating-rate notes this week, beginning with Tuesday’s $69 billion auction of 2-year T-notes.  T-notes recovered from their worst level after a slump in stocks sparked safe-haven buying of Treasuries.

European bonds are not trading today, with markets closed for the Easter Monday holiday.  Last Thursday, the 10-year German bund yield fell to a 1-1/2 week low of 2.452% and finished down -3.7 bp to 2.472%.  Last Thursday, the 10-year UK gilt yield dropped to a 1-1/2 week low of 4.547% and finished down -3.7 bp to 4.566%.

ECB Governing Council member Muller warned that US trade tariffs and higher public spending in Germany could stoke inflation.

Swaps are discounting the chances at 92% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

US Stock Movers

Magnificent Seven stocks are under pressure today, weighing on the broader market.  Tesla (TSLA) is down more than -7% and Nvidia (NVDA) is down more than -5%.  Also, Amazon.com (AMZN) and Meta Platforms (META) are down more than -3%.  In addition, Apple (AAPL), Alphabet (GOOGL), and Microsoft (MSFT) are down more than -2%.

Chip stocks are sliding today to pressure the overall market.  Marvell Technology is down more than -5%, and Broadcom (AVGO), ASML Holding NV (ASML), and KLA Corp (KLAC) are down more than -3%.

Also, Advanced Micro Devices (AMD), ON Semiconductor (ON), Lam Research (LRCX), Intel (INTC), Applied Materials (AMAT), Micron Technology (MU), and GlobalFoundries (GFS) are down more than -2%. 

Energy producers are falling today, with the price of WTI crude down more than -2%.  As a result, APA Corp (APA) is down more than -5%, and Diamondback Energy (FANG) is down more than +3%.  Also, Devon Energy (DVN), Occidental Petroleum (OXY), Haliburton (HAL), Conoco Phillips (COP), Marathon Petroleum (MPC), Phillips 66 (PSX), Valero Energy (VLO), Chevron (CVX), Baker Hughes (BKR), and Schlumberger (SLB) are down more than -2%.

Health insurance stocks are falling for a second session today after UnitedHealth Group cut its full-year earnings outlook last Thursday.  As a result,  United Health Services (UHS) is down more than -8% to lead losers in the S&P 500, and Humana (HUM) is down more than -6%.  Also, UnitedHealth Group (UNH) is down more than -5% to lead losers in the Dow Jones industrials, and HCA Healthcare (HCA) is down more than -4%.  In addition, Elevance Health (ELV), Molina Healthcare (MOH), CVS Health (CVS), and Centene (CNC) are down more than -3%. 

Gold-mining stocks are climbing today, with the price of gold soaring to a new all-time high.  As a result, Anglogold (AU) is up more than +1%, and Newmont (NEM) is up +0.20%. 

Salesforce (CRM) is down more than -4% after D.A. Davidson downgraded the stock to underperform from neutral with a price target of $200.

DR Horton (DHI) is down more than -1% after CFRA downgraded the stock to sell from hold with a price target of $109. 

Fidelity National Information (FIS) is up more than +3% to lead gainers in the S&P 500 after TD Cowen upgraded the stock to buy from hold with a price target of $92. 

Discover Financial Services (DFS) is up more than +2% after US regulators approved Capital One Financials’ purchase of Discover. 

Netflix (NFLX) is up more than +2% to lead gainers in the Nasdaq 100 after reporting Q2 revenue of $11.04 billion, stronger than the consensus of $10.88 billion. 

Earnings Reports (4/21/2025)

AGNC Investment Corp (AGNC), BOK Financial Corp (BOKF), Comerica Inc (CMA), Equity LifeStyle Properties Inc (ELS), Hexcel Corp (HXL), Medpace Holdings Inc (MEDP), W R Berkley Corp (WRB), Western Alliance Bancorp (WAL), Wintrust Financial Corp (WTFC), Zions Bancorp NA (ZION).