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The stock market opened yesterday to much fanfare. The indices rose sharply on the idea that the Trump administration will be negotiating the reciprocal tariff rates that went into effect at midnight with countries looking to negotiate. The S&P 500 gained as much as 4.1%, yet it would end yesterday's session down 1.6%.
The stock market's relief turned back to dismay when it was announced that the 104% tariff rate the U.S. is placing on imported goods from China would also go into effect at midnight. There weren't going to be any negotiations on that one because China isn't coming to the table to negotiate.
The latter understanding was crystallized this morning when China's Finance Ministry announced China will be raising its tariff rate on imported U.S. goods from 34% to 84%. The equity futures market promptly tanked on that report, which screamed "trade war."
Currently, the S&P 500 futures are down 54 points and are trading 1.0% below fair value, the Nasdaq 100 futures are down 40 points and are trading 0.2% below fair value, and the Dow Jones Industrial Average futures are down 446 points and are trading 1.1% below fair value.
This trade issue isn't the only issue, though, weighing on the stock market. The other concerning issue is the behavior of the Treasury market.
Stock prices continue to sink; the recession narrative is full-bore, and Treasury yields are... rising? The safe-haven bid has seemingly flown the coop, and the reason why isn't entirely clear, which itself is a rattling factor for investor confidence. Inflation concerns, foreign selling interest, deficit angst, and a need for cash to cover margin calls are all on the list as possible reasons for the counter-intuitive action.
The 2-yr note yield is up six basis points today and 12 basis points for the week, to 3.80%. The 10-yr note yield is up 19 basis points today and 44 basis points for the week, to 4.45% (it hit 4.50% overnight).
Yesterday's 3-yr note auction was met with soft demand. Today will feature a $39 billion 10-yr note reopening, with results at 1:00 p.m. ET. Once again, the dynamics of that auction will hold some market-moving sway. Those results will be followed by the release of the FOMC Minutes for the March 18-19 meeting at 2:00 p.m. ET.
Earlier, Delta Air Lines (DAL) reported its first quarter results. They were better than expected, but that understanding got diluted by some mixed Q2 guidance and the airline's acknowledgment that business really started to slow in mid-February. Delta also expects to keep its capacity flat in the second half of 2025 versus a prior plan to increase its capacity by 3-4%.
The Q1 earnings reporting period is going to ramp up in the coming days and weeks, but it shouldn't surprise anyone if corporate America ramps down its willingness to provide full-year guidance given the maelstrom of uncertainty created by the tariff uncertainty and the fog of a trade war.
