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Some newfound volatility has been injected into the capital markets this morning after President Trump said in a Truth Social Post that he is recommending a straight 50% tariff for the EU, effective June 1, because "trade talks are going nowhere." That post came shortly after he warned Apple (AAPL), which is down 3.3%, that it will face a tariff of at least 25% if iPhones it intends to sell in the U.S. are not made in the U.S.
These twin posts triggered some singular flight-to-safety interest in the Treasury market, risk-off action in the equity futures market, and a spike in the CBOE Volatility Index, which is up 21.1% to 24.56.
This is not exactly the trade anyone was hoping for going into the extended Memorial Day weekend, unless someone is short the stock market.
Currently, the S&P 500 futures are down 85 points and are trading 1.5% below fair value, the Nasdaq 100 futures are down 396 points and are trading 1.9% below fair value, and the Dow Jones Industrial Average futures are down 535 points and are trading 1.3% below fair value.
The 10-yr note yield went from 4.54% to 4.45% and currently sits at 4.48%, down seven basis points from yesterday's settlement. The 30-yr bond yield went from 5.04% to 4.98% and currently sits at 5.02%, down four basis points from yesterday's settlement. Falling Treasury yields haven't helped equities much, largely because that is a safety trade rooted in growth concerns. The U.S. Dollar Index is down 0.7% to 99.24.
Disappointing quarterly guidance from Deckers Outdoor (DECK), which also held off on providing FY26 guidance, and Ross Stores (ROST), which withdrew its FY26 guidance, has compounded the worries about growth that had been brewing with the jump in market rates this month.
Notwithstanding some of the pullback in yields this morning, the 2-yr note yield, 10-yr note yield, and 30-yr bond yield are all up 33 basis points this month behind a swirl of concerns tied to higher inflation lurking on the near horizon with the tariff action, the Fed not cutting rates as much as expected because of the specter of tariff-induced inflation, and the reconciliation bill driving up the budget deficit and national debt.
The Treasury market will close early at 2:00 p.m. ET in front of the three-day weekend. The stock market is open for a full day of trading.
In a certain respect, it has already felt like a full day of trading, given the pre-open action that has been ignited by the president's posts. What remains to be seen is if the early losses will be regarded as another opportune development to buy the dip, which has been the repeated approach since the April 7 lows.
