Stock Market Update

[BRIEFING.COM] Capital markets had an excitable day following a few posts before the open from President Trump that fueled growth concerns and a heightened state of uncertainty about the tariff developments going into the holiday weekend.

The first post was a warning to Apple (AAPL 195.37, -5.99, -3.0%) that it will face tariffs of at least 25% on iPhones it intends to sell in the U.S. if they are not made in the U.S. The second post caused a bigger shock, as it conveyed the president's position that he will be recommending a straight 50% tariff on the EU, effective June 1, because "the trade talks are going nowhere."

The latter post, in particular, triggered a flight-to-safety to Treasuries that saw the yield on the 10-yr note drop from 4.54% to 4.45% in a hurry, and the yield on the 30-yr bond slide from 5.04% to 4.98%. Those moves, though, did not comfort the equity futures market, which took a risk-off turn at the same time the CBOE Volatility Index shot higher to 25.53 from yesterday's close of 20.28.

The Dow, Nasdaq, S&P 500, and Russell 2000 fell as much as 1.2%, 1.7%, 1.3%, and 1.7%, respectively, shortly after the open, pressured further by disappointing quarterly guidance and a lack of fiscal year guidance from retailers Deckers Outdoor (DECK 101.05, -25.04, -19.9%) and Ross Stores (ROST 136.99, -15.26, -10.0%).

Things took a calmer turn after CNBC reported that it was told by a White House official that the president's remarks should be viewed as negotiating leverage and that nothing has been implemented yet. The official also added that the stock market was overreacting to the news.

Separately, Treasury Secretary Bessent told Bloomberg TV that he is not worried about the rise in Treasury yields, observing that other countries' yields have increased further and that the move here could also be the bond market pricing in stronger growth because of the reconciliation bill.

The 10-yr note yield settled today's session at 4.51%, up seven basis points for the week, and the 30-yr bond yield settled at 5.04%, up 14 basis points for the week. The CBOE Volatility Index, meanwhile, backed down to 21.92 as of this writing.

The retreat in the stock market today was paced by Apple and the mega-cap stocks. Their relative underperformance manifested itself in the underperformance of the information technology (-1.3%), communication services (-1.0%), and consumer discretionary (-0.9%) sectors. The Vanguard Mega-Cap Growth ETF (MGK) declined 1.1%.

The rate-sensitive utilities sector (+1.2%) was the only sector to gain at least 1.0%.

Breadth figures showed decliners leading advancers by a 5-to-4 margin at the NYSE and by a roughly 13-to-9 margin at the Nasdaq.

U.S. markets will be closed Monday for Memorial Day.

• DJIA: -2.2% YTD
• S&P 500: -1.3% YTD
• Nasdaq: -3.0% YTD
• S&P 400: -4.6%
• Russell 2000: -8.5%

Reviewing today's economic data:

• New home sales surged 10.9% month-over-month in April to a seasonally adjusted annual rate of 743,000 units (Briefing.com consensus 679,000) from a downwardly revised 670,000 (from 724,000) in March. On a year-over-year basis, new home sales were up 3.3%.
  • The key takeaway from the report is that new home sales in April were bolstered by a decline in the median sales price; however, the excitement surrounding the headline beat was muted by the sharp downward revision to new home sales for March. Taking that revision into account, there wasn't a great deal of change in the March-April period compared to what economists knew and expected going into the April report.