Weekly Wrap

It was far from an ordinary, or boring, week on Wall Street. The trading action was frenetic, along with the tariff headlines, while the action across asset classes was confounding.

In a nutshell, stocks rallied, Treasuries languished, the dollar got pounded, and gold prices surged. It was all related to the tariff war that culminated with a stunning announcement by President Trump on Wednesday that he is pausing the reciprocal tariff for most countries, except China, for 90 days to allow time to negotiate new deals. In the meantime, a 10% baseline tariff rate will still apply for all countries.

As for China, the tariff sparring hit a fevered pitch this week. President Trump ramped up the tariff rate for imported Chinese goods to 145%. China came back on Friday and said it is implementing a 125% tariff rate on imported U.S. goods and will be ignoring any further tariff actions by the U.S. The respective tariff rates should effectively bring trade between the rivals to a standstill, which will have knock-on effects for supply chains and business inventories.

The latter point notwithstanding, the stock market was overjoyed Wednesday by the 90-day pause announcement and engineered a stunning relief rally that was exacerbated by short-covering activity. The S&P 500 logged a 9.5% gain, its third-largest single-day gain since World War II, while the Nasdaq Composite soared 12.2% for its biggest gain since 2001.

A sizable portion of those gains were given back in Thursday's session before some renewed buying interest helped cut the losses. The sticking point for many was the realization that a 90-day pause is still only a pause, and there is no certainty that a deal will be reached with all countries. Moreover, the baseline 10% tariff rate is still significantly higher than before, and the tariff rate for China is debilitating from a trade standpoint.

Other pressing issues included the losses in both the dollar and Treasuries, which were construed as an overarching sign of growth concerns, deficit concerns, and waning confidence/interest in U.S. assets on the part of foreign investors. The U.S. Dollar Index fell 3.1% this week to 99.78 and the 10-yr note yield jumped 48 basis points to 4.49% in spite of some otherwise friendly CPI and PPI reports for March.

The S&P 500, which saw a low of 4,835.04 on Monday, hit a high of 5,481.34 on Wednesday before settling the week at 5,363.36.

Nine of the 11 S&P 500 sectors scored gains this week, none bigger than the information technology sector (+9.7%). The two losers were energy (-0.4%) and real estate (-0.2%). The former was impacted by demand concerns, while the latter lagged on the spike in interest rates.

• Nasdaq Composite: +7.3% for the week / -13.4% YTD
• S&P 500: +5.7% for the week / -8.8% YTD
• Dow Jones Industrial Average: +5.0% for the week / -5.5% YTD
• S&P Midcap 400: +2.8% for the week / -12.8% YTD
• Russell 2000: +1.8% for the week / -16.6% YTD

Monday:

The stock market exhibited extreme turbulence on the first session of the week on above-average volume. The S&P 500 (-0.2%), which traded in bear market territory (i.e., 20% below its recent peak) near its worst level of the session, swung more than 400 points between its intraday high and low. The index was down 4.7% shortly after the open and surged 3.4% at its high.

The Nasdaq Composite, down more than 800 points at its low, closed 0.1% higher thanks to rebound action in mega caps and chipmakers.

The initial bounce off session lows coincided with an erroneous report that NEC Director Kevin Hassett said President Trump is considering a 90-day pause on the tariffs, except for China. The White House called the report fake news, and President Trump later indicated that the U.S. will impose an additional 50% tariff on imports from China, starting Wednesday, if China does not withdraw its 34% tariff on U.S. imports.

Selling increased in response, but major indices remained well above their worst levels of the session. One factor keeping equity indices elevated relative to session lows was the reversal in the Treasury market.

Market rates have been sinking on safe-haven interest of late, but the 10-yr yield jumped 17 basis points today to 4.16% and the 2-yr yield rose six basis points to 3.73%.

• Today's economic data was limited to consumer credit, which decreased by $0.8 billion in February (Briefing.com consensus $15.1 billion) after increasing by a downwardly revised $8.9 billion (from $18.1 billion) in January.
  • The key takeaway from the report is that February marked the third contraction in consumer credit in the last four months.

Tuesday:

It was another volatile session in the stock market. There was a strong rally right out of the gate, resulting in the S&P 500 and Nasdaq Composite trading up as much as 4.1% and 4.6%, respectively. The Dow Jones Industrial Average was more than 1,400 points higher than yesterday at its best level.

However, the major indices finished in negative territory and the S&P 500 (-1.6%) closed below 5,000. Catalysts being cited as reasons for the deterioration include a confirmation from the White House that 104% tariffs on imports from China go into effect at midnight tonight, and weak demand for today's $58 billion 3-yr note auction.

Stocks were already in a slow decline before those catalysts were in play, which suggests some selling into early strength as a driving factor for the turnaround.

Increased selling in mega caps and chipmakers was another driving factor. Apple (AAPL 172.42, -9.04, -5.0%), which had been up as much as 4.9% at its session high, and NVIDIA (NVDA 96.30, -1.34, -1.4%), which had surged as much as 8.4%, were influential losers from the space.

Every S&P 500 sector was higher in the early rally, and every sector rolled over. The materials (-3.0%) and consumer discretionary (-2.5%) sectors were the worst performers, while the financial sector saw the slimmest loss, down 0.4%.

The Treasury market also exhibited a sharp turnaround. The 10-yr yield, which settled 11 basis points higher at 4.26%, moved as low as 4.17% today.

Today's economic calendar was limited to the NFIB Small Business Optimism Survey, which dropped to 97.4 in March from 100.7.

Wednesday:

It was a huge day for stocks. The Nasdaq Composite soared nearly 12%, the S&P 500 spiked 9.3%, and the Dow Jones Industrial Average bounced nearly 3,000 points.

The monumental rally followed President Trump's announcement of a 90-day suspension on recently imposed tariffs, reducing them to 10% for countries that have not retaliated against the U.S. However, the rate on imports from China increased to 125% from 104%.

The massive upside moves were aided by short-covering activity after the sharp declines of late, along with a big surge in the mega cap space.

Many of the most influential stocks in the market logged double-digit percentage gains. NVIDIA (NVDA 114.33, +18.03, +18.7%), Apple (AAPL 198.85, +26.43, +15.3%), Tesla (TSLA 272.10, +50.24, +22.6%), Microsoft (MSFT 390.49, +35.93, +10.1%), and Amazon.com (AMZN 191.10, +20.44, +12.0%) were huge beneficiaries of the surge in buying.

All 11 S&P 500 sectors closed at least 3.9% higher. The technology sector led the upside charge, registering a 14.2% gain, followed by consumer discretionary (+11.4%) and communication services (+10.0%).

The huge move up today was helped in part by the understanding that the $39 billion 10-yr note auction was met with strong demand, particularly from foreign buyers. The 10-yr yield hit 4.50% and settled at 4.40%, which is still 14 basis points higher than yesterday.

Participants were also digesting the FOMC's Minutes from the March meeting which showed that members generally saw increased downside risks to employment and economic growth and upside risks to inflation while indicating that high uncertainty surrounded their economic outlooks. The minutes garnered a muted response.

Reviewing today's economic data:

• Weekly MBA Mortgage Applications Index 20.0%; Prior -1.6%
• February Wholesale Inventories 0.3% (Briefing.com consensus 0.3%); Prior 0.8%

Thursday:

The jaw-dropping rally seen Wednesday after President Trump announced a 90-day pause on reciprocal tariffs for most countries did not have legs today. The major indices started the session lower and remained in negative territory into the closing bell, yet they did pare their losses in the afternoon trade.

At their worst levels, the Dow, Nasdaq, S&P 500, S&P 400, and Russell 2000 were down 5.4%, 7.2%, 6.3%, 6.5%, and 6.5%, respectively, but they finished the day down 2.5%, 4.3%, 3.5%, 4.1%, and 4.3%, respectively.

The impetus for today's pullback was rooted in the following dynamics:

• The realization that the U.S. economy is not out of the woods. It is still only a "pause" on the reciprocal tariff action, and a baseline 10% tariff rate still applies. Meanwhile, there is still the draconian tariff rate for China, which was clarified by the White House today as 145% (125% reciprocal tariff + existing 20% tariff related to fentanyl).
• Renewed selling by skittish participants who saw yesterday's rally as a gift to sell at higher prices and minimize the pain of losses that followed the April 2 reciprocal tariff announcement.
• Comments from various Fed officials making it clear the Fed is worried about tariffs driving up inflation and isn't inclined to cut rates soon.
• Disappointing earnings results from CarMax (KMX 66.43, -15.62, -19.5%).
• Deficit angst as the House passed a reconciliation resolution that includes tax cuts, which some fear will not be offset with enough spending cuts to avoid adding to the budget deficit.
• Sharp losses for the dollar against other major currencies, which presumably stemmed from concerns about U.S. growth prospects, worries about the U.S. budget deficit, and waning confidence in U.S. investments on the part of foreign investors due to the policy volatility. The U.S. Dollar Index declined 1.9% to 100.98.

Notably, the March CPI report today brought good inflation news, but that didn't help sentiment because market participants are anticipating higher prices in coming months as tariff actions take root across supply chains.

Ten of the 11 S&P 500 sectors finished lower. The sole winner was the defensive-oriented consumer staples sector (+0.2%). The biggest loser was the energy sector (-6.4%), followed by information technology (-4.6%), consumer discretionary (-4.1%), communication services (-4.1%), and materials (-3.0%). The Philadelphia Semiconductor Index, up 18.7% yesterday, declined 8.0% today. The Vanguard Mega-Cap Growth ETF (MGK), up 12.2% yesterday, declined 4.1% today.

Decliners outpaced advancers by a better than 8-to-1 margin at the NYSE and by a better than 4-to-1 margin at the Nasdaq.

Reviewing today's economic data:

• Total CPI decreased 0.1% month-over-month in March (Briefing.com consensus 0.1%) and was up 2.4% year-over-year versus 2.8% in February. Core CPI increased 0.1% month-over-month (Briefing.com consensus 0.3%) and was up 2.8% year-over-year versus 3.1% in February.
  • The key takeaway from the report is that, while better than expected, it will be discounted as a lasting improvement given the tariff actions that are now taking root across supply chains.
• Initial jobless claims for the week ending April 5 increased by 4,000 to 223,000 (Briefing.com consensus 225,000). Continuing jobless claims for the week ending March 29 decreased by 43,000 to 1.850 million.
  • The key takeaway from the report is that the relatively low level of initial jobless claims remains consistent with an otherwise solid labor market and an economy still in expansion mode.
• The Treasury Budget for March showed a deficit of $160.5 billion compared to a deficit of $236.6 billion in the same period a year ago. The March deficit resulted from outlays ($528.2 billion) exceeding receipts ($367.6 billion). The Treasury Budget data are not seasonally adjusted, so the March deficit cannot be compared to the February deficit of $307.0 billion.
  • The key takeaway from the report is that the deficit so far in fiscal 2025 is 23% greater than the deficit seen at the same time in fiscal 2024.

Friday:

It took a little bit, but the stock market finally found some footing and managed to put together a nice rebound effort on the heels of Thursday's broad-based losses, wrapping up what can best be described as a frenetic week of trading.

Today's action began on a soft note despite some better-than-expected Q1 earnings results from JPMorgan Chase (JPM 236.20, +7.78, +3.4%), Wells Fargo (WFC 62.51, -2.85, -4.5%), Morgan Stanley (MS 108.12, -1.49, -1.4%), BlackRock (BLK 878.78, +7.16, +0.8%), and Bank of New York Mellon (BK 77.67, +1.06, +1.4%). Market participants were pre-occupied with the ongoing weakness in the dollar, rising Treasury yields, a dour consumer sentiment reading for the month of April that saw the highest year-ahead inflation expectations (6.7%) since November 1981, and China countering the U.S's 145% tariff rate on imports from China with a 125% tariff rate on imports from the U.S.

For good measure, China added that it will be ignoring any further tariff actions by the U.S.

Those issues notwithstanding, stocks regrouped around mid-morning and continued on a higher path into the close. That regrouping coincided with the 10-yr note yield backing down from a high of 4.58% to 4.45%. It settled the session up 10 basis points at 4.49%.

Other supportive influences included the leadership of the mega-cap stocks, a reiteration by the White House Press Secretary that the president hopes to make a deal with China, and an FT report that suggested the Fed stands ready to stabilize financial markets if conditions become disorderly. The latter two items, while largely known, were market-friendly reminders that the "Trump put" and the "Fed put" are still on the table.

The major indices settled the session at, or near, their highs for the day. Notably, the Russell 2000 overcame an early 1.6% decline to finish with a 1.6% gain. That trailed the market cap-weighted S&P 500 (+1.8%) but was slightly ahead of the 1.5% gain logged by the equal-weighted S&P 500.

While the mega-cap stocks were an influential source of support throughout the session, buying interest turned into a broad-based affair as the session carried on. All 11 S&P 500 sectors finished with a gain of at least 1.1%. The biggest winners were the materials (+3.0%), information technology (+2.6%), and energy (+2.5%) sectors.

Market breadth reflected the positive turn. Advancers led decliners by a better than 2-to-1 margin at the NYSE and by a 2-to-1 margin at the Nasdaq.

Reviewing today's economic data:

• The Producer Price Index for final demand decreased 0.4% month-over-month in March (Briefing.com consensus 0.1%) following an upwardly revised 0.1% increase (from 0.0%) in February. The Core Producer Price Index for final demand, which excludes food and energy, decreased 0.1% month-over-month (Briefing.com consensus 0.3%) following an upwardly revised 0.1% increase (from -0.1%) in February. On a year-over-year basis, the index for final demand was up 2.7% versus 3.2% in February, and the index for final demand, less food and energy, was up 3.3% versus 3.5% in February.
  • The key takeaway from the report is that inflation for wholesalers was suppressed in March; however, that good news is being discounted as temporary (like yesterday's CPI report was) given that tariff actions are taking root in supply chains and are expected to lead to higher prices at least in the short term.
• The preliminary April Univ. of Michigan Index of Consumer Sentiment checked in at 50.8 (Briefing.com consensus 54.8) versus the final reading of 57.0 for March. In the same period a year ago, the index stood at 77.2.
  • The key takeaway from the report is manifold: the decline in consumer sentiment is broad-based; expectations for unemployment to rise are at their highest since 2009; and inflation expectations are surging. This is a terrible mix that will foment concerns about future consumer spending strength.