The S&P 500 Index ($SPX) (SPY) Thursday closed down -4.84%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -3.98%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -5.41%.  June E-mini S&P futures (ESM25) are down -4.86%, and June E-mini Nasdaq futures (NQM25) are down -5.36%. 

Stock indexes sold off sharply on Thursday, with the S&P 500, Nasdaq 100, and the Dow Jones industrials sliding to 6-1/2 month lows. Stocks plunged Thursday because of concerns that President Trump’s trade policies will push the US economy and perhaps the global economy into recession. 

Late Wednesday, President Trump announced reciprocal tariffs that were worse than feared, hammering stocks, commodities, and the dollar and prompting a risk-off mood in asset markets.  The plunge in stocks fueled a flight to safety into government bonds, with European government bond yields falling to 4-week lows and the 10-year T-note yield dropping to a 5-1/2 month low.  Stocks extended their losses Thursday after the US Mar ISM services index fell more than expected to a 9-month low.

President Trump said Wednesday the US will impose at least a 10% tariff on virtually all countries, with higher reciprocal rates on some 60 nations. The new tariffs will be implemented on imports from almost all countries starting on April 5, with the higher rates implemented on April 9.   Also, Treasury Secretary Bessent said there is no room for negotiations.  Specific industries, including steel and automobiles, are exempt from the new rates, and Canada and Mexico are also exempt from the new tariffs and will be subject to the previously announced 25% tariffs. However, China will be charged a 34% reciprocal tariff rate, bringing total tariffs on China up to 67%.  The EU will be charged a 20% reciprocal tariff, bringing total tariffs on the EU up to 39%.  Meanwhile, Japan will be charged a 24% reciprocal tariff, bringing total tariffs on Japan up to 46%.

Weekly US labor market news on Thursday was mixed.  Weekly initial unemployment claims unexpectedly fell -6,000 to a 7-week low of 219,000, showing a stronger labor market than expectations of an increase to 225,000.  However, continuing claims rose +56,000 to a 3-1/3 year high of 1.903 million, above expectations of 1.870 million, showing it has become more difficult for out-of-work people to reenter the workforce.

The US Feb trade deficit eased to -$122.7 billion from -$130.7 billion in Jan, narrower than expectations of -$123.5 billion.

The US Mar ISM services index fell -2.7 to a 9-month low of 50.8, weaker than expectations of 52.9.

Fed comments on Thursday were slightly hawkish and negative for stocks and bonds.  Fed Vice Chair Jefferson said, “There is no need to be in a hurry to make further policy rate adjustments,” as Fed officials wait for more information on how US trade policies will affect the economy.  Also, Fed Governor Cook said the Fed should hold interest rates steady for now as she sees slower economic growth this year and stalled progress on lowering inflation amid tariffs and other policy changes.

Stocks have been under pressure over the past month due to fears that US tariffs will weaken economic growth and corporate earnings.  On March 4, President Trump imposed 25% tariffs on Canadian and Mexican goods and doubled the tariff on Chinese goods to 20% from 10%.  Last Wednesday, President Trump signed a proclamation to implement a 25% tariff on US auto imports, effective today.  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.  Mr. Trump said the tariffs were “permanent,” and he was not interested in negotiating any exceptions.

Market attention this week will include reaction to President Trump’s tariff plans and any retaliation from other countries.  On Friday, March nonfarm payrolls are expected to increase by +138,000, and the March unemployment rate is expected unchanged at 4.1%.  Also, March average hourly earnings are expected +0.3% m/m and +4.0% y/y, unchanged from February.  Finally, on Friday, Fed Chair Powell is scheduled to speak to the Society for Advancing Business Editing and Writing Conference on the economic outlook.

The markets are discounting the chances at 28% for a -25 bp rate cut after the May 6-7 FOMC meeting.

Overseas stock markets on Thursday settled sharply lower.  The Euro Stoxx 50 dropped to a 2-1/2 month low and closed down -3.59%.  China’s Shanghai Composite Index closed down -0.24%.  Japan’s Nikkei Stock 225 sank to a 7-3/4 month low and closed down sharply by -2.77%.

Interest Rates

June 10-year T-notes (ZNM25) Thursday closed up +1-4.5/32 points.  The 10-year T-note yield fell -8.0 bp to 4.055%.  June T-notes Thursday soared to a 5-3/4 month high, and the 10-year T-note yield tumbled to a 5-1/2 month low of 3.997%.  T-notes rallied sharply Thursday on concerns President Trump’s reciprocal tariffs will drive the US economy into recession, prompting the Fed to continue cutting interest rates.  Also, Thursday’s global equity market selloff has fueled safe-haven demand for government debt securities.  In addition, T-notes found support after Thursday’s -6% plunge in crude oil prices lowered inflation expectations, as the 10-year breakeven inflation rate fell to a 3-week low 2.280%.

T-notes fell back from their highs Thursday on hawkish comments from Fed Vice Chair Jefferson and Fed Governor Cook, who said the Fed should be in no hurry to adjust monetary policy and should hold interest rates steady for now.

European bond yields on Thursday fell sharply.  The 10-year German bund yield dropped to a 4-week low of 2.625% and finished down -6.9 bp to 2.651%.  The 10-year UK gilt yield fell to a 4-week low of 4.504% and finished down -12.1 bp to 4.520%.

The Eurozone Mar S&P composite PMI was revised upward by +0.5 to a 7-month high of 50.9 from the previously reported 50.4.

The Eurozone Feb PPI rose +3.0% y/y, right on expectations and the fastest pace of increase in almost 2 years.

The account of the ECB’s March 6 meeting stated that policymakers are considering both a rate cut and a pause possible for their April meeting, depending on incoming data.

Swaps are discounting the chances at 69% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

Thursday’s selloff in the Magnificent Seven stocks weighed on the overall market.  Apple (AAPL) closed down more than -9% as it is one of the companies most exposed to tariff risks.  Also, Amazon.com (AMZN) and Meta Platforms (META) closed down more than -8%.  In addition, Nvidia (NVDA) closed down more than -7%, Tesla (TSLA) closed more than -5%, Alphabet (GOOGL) closed down more than -3%, and Microsoft (MSFT) closed down more than -2%.

Some big tech companies Thursday were under particular pressure since Europe has threatened to retaliate for US tariffs with European tariffs and restrictions on US tech and service companies and possibly US banks.

Chip makers fell sharply on Thursday.  Microchip Technology (MCHP) closed down more than -16% to lead losers in the Nasdaq 100, and Micron Technology (MU) closed down more than -15%.  Also, Marvell Technology (MRVL), NXP Semiconductors NV (NXPI), Lam Research (LRCX), and ON Semiconductor (ON) closed down more than -11%.  In addition, Broadcom (AVGO), Analog Devices (ADI), Qualcomm (QCOM), and KLA Corp (KLAC) closed down more than -9%, and Applied Materials (AMAT) and Advanced Micro Devices (AMD) closed down more than -8%. 

Consumer stocks, retailers, and apparel makers, which source most of their goods from Asia, sank Thursday.  Ralph Lauren (RL) and Deckers Outdoors (DECK) closed down more than -16%.  Also, Nike (NKE) is down more than -13% to lead losers in the Dow Jones Industrials.  In addition, Skechers (SKX) closed down more than -18%, Dollar Tree (DLTR) closed down more than -14%, Target (TGT) closed down more than -12%, Lululemon Athletica (LULU) closed down more than -9%, and Walmart (WMT) closed down more than -4%.

Travel and leisure stocks tumbled Thursday because of concerns that tariffs will raise prices for consumers and curb discretionary spending. Norwegian Cruise Line Holdings (NCLH) closed down more than -16%, and United Airlines Holdings (UAL) closed down more than -15%.  Also, Carnival (CCL) closed down more than -13%, and Royal Caribbean Cruises Ltd (RCL) closed down more than -11%.  In addition, Wynn Resorts Ltd (WYNN) and Delta Air Lines (DAL) closed down more than -10%, and Caesars Entertainment (CZR) and Southwest Airlines (LUV) closed down more than -9%.     

Energy stocks and energy service providers retreated Thursday, with the price of WTI crude down more than -6% to a 3-week low.  As a result, APA Corp (APA) closed down more than -16%, and Valero Energy (VLO) closed down more than -14%.  Also, Marathon Petroleum (MPC) and Phillips 66 (PSX) closed down more than -13%, and Devon Energy (DVN), Haliburton (HAL), and Diamondback Energy (FANG) closed down more than 12%.

RH (RH) closed down more than -41% after reporting Q4 revenue of $812.4 million, weaker than the consensus of $831.7 million, and forecast full-year revenue will climb 10% to 13%, below the consensus of +14.6%. 

Lyft (LYFT) closed down more than -12% after Bank of America double-downgraded the stock to underperform from buy with a price target of $10.50. 

Defensive managed healthcare stocks rose Thursday due to the selloff in the overall market.  Molina Healthcare (MOH) closed up more than +7%, and Centene (CNC) and Elevance Health (ELV) closed up more than +5%.  Also, UnitedHealth Group (UNH) closed up more than +3% to lead gainers in the Dow Jones Industrials.

Defensive food makers and beverage companies are moving higher with the plunge in the broader market.  As a result, General Mills (GIS) closed up more than +3%, and Mondelez International (MDLZ), Coca-Cola (KO), Kraft Heinz (KHC), and Hormel Foods (HRL) closed up more than +2%.  In addition, PepsiCo (PEP), Hershey (HSY), Tyson Foods (TSN), Conagra Brands (CAG), the Campbell’s Company (CPB), and Keurig Dr Pepper (KDP) closed up more than +1%.  

Lamb Weston Holdings (LW) closed up more than +10% to lead gainers in the S&P 500 after reporting Q3 adjusted EPS of $1.10, stronger than the consensus of 87 cents, and forecasting full-year adjusted EPS of $3.05-$3.20, the midpoint above the consensus of $3.08.

Earnings Reports (4/4/2025)

Aldeyra Therapeutics Inc (ALDX), Gencor Industries Inc (GENC), and Radius Recycling Inc (RDUS).