Bumpy Ride Not Over as Growth, Trade Fears Flare

(Thursday market close) The tariff vice tightened again on Wall Street after Wednesday's historic rally, sending stocks to sharp losses that wiped out a good portion of yesterday's gains. The "uncertainty" trade returned despite encouraging inflation data as investors nervously watched elevated Treasury yields and contemplated a potential long U.S. trade stand-off with China.

As if those 125% tariffs on all Chinese imports announced Wednesday weren't enough, the Trump administration upped the ante today, saying they're actually 145%, including cumulative tariffs since this all began. U.S. tariffs globally haven't gone away either, as 10% duties now affect almost all countries despite yesterday's 90-day delay on the full house of reciprocal tariffs Trump announced last week.

The fact that each of those will be negotiated separately with a three-month clock ticking left companies and investors nervous and kept the virtual "sword of Damocles" hanging over stocks and bonds.

Tremors continued in the Treasury market after a spike in yields earlier this week suggested investors might be less willing to buy U.S. Treasuries for their perceived safety. Treasury weakness Monday and Tuesday could also have reflected inflation concerns associated with tariffs, the need for liquidity, and investors heading to cash amid uncertainty.

Decent demand for yesterday's 10-year note auction and today's 30-year bond auction calmed nerves slightly, as did today's benign March Consumer Price Index (CPI) data showing headline CPI falling –0.1% when analysts had expected a 0.2% rise. Worries aren't over, as additional auctions start next Monday.

"The concern going forward is that prices will rise and the economy will slow," said Cooper Howard, director, fixed income strategy at the Schwab Center for Financial Research. "This will put the Fed in a difficult place."

Reflecting recessionary concerns, the U.S. dollar index ($DXY) fell to new six-month lows today, and crude oil (/CL) crumbled another 3% back toward $60 a barrel. Crude can be an early indicator of recessionary winds blowing.

Despite signs of slowing growth, the 10-year Treasury note yield hit 4.40% late Thursday, up from around 4% a week ago and raising more concern about the Treasury market's health. Yields rise when Treasuries fall, so today's relatively solid yield performance likely reflects little in the way of "safe haven" Treasury buying that's often seen in turbulent times.

Crude's weakness helped send the energy sector to 6% losses Thursday, by far the worst performance of any S&P 500 sector. But investors also fled from communication services, consumer discretionary, and info tech, the three leading sectors Wednesday but all in the bottom rung today as risk appetite waned.

Travel stocks also fell sharply, with Delta Air Lines (DAL), Norwegian Cruise Line (NCLH), and Carnival (CL) down double digits late in the session. Apparel companies like Nike (NKE), Under Armour (UAA), and Foot Locker (FL) got stomped, and semiconductors lost about half of their Wednesday gains. Tesla (TSLA), which enjoyed a meteoric rally Wednesday, was back in investors' doghouse Thursday down about 8%.

Tomorrow brings the March Producer Price Index (PPI) and the preliminary April University of Michigan Consumer Sentiment report. The final March headline consumer sentiment reading fell to 57 from 79.4 a year earlier, and analysts expect Friday's headline to fall to 54.8. Investors will likely keep close watch on the inner workings of the report, especially year-ahead inflation expectations.

Consumption data could outweigh earnings reports in importance on concerns the tariff tug-of-war might spook consumers into pulling back spending. The March CPI report showed airfare and hotel prices down in March, potentially an early sign of tourism being hit and also a general slowing in demand for services, said Kevin Gordon, director, senior investment strategist at Schwab.

Following yesterday's decision to delay tariffs as the market tumbled and Treasury yields popped, there's now talk of a new "Trump put," meaning a chance the president would blink again and loosen policy if the market again fell out of bed. Though there's no guarantee of that, Wednesday's decision, which an administration official said was influenced by the weak Treasury market, suggests there may be a lack of willingness at the White House to let things get out of hand on Wall Street.

But the market does seem to have carved solid technical support near this week's lows of around 4,900 for the SPX. That's a level that represents a roughly 20% drop from the all-time high close of 6,144 in February and also is close to the 50% Fibonacci retracement level of its rally that ended that same month.

That's not to say stocks can't go lower if the trade situation worsens or the economy skids. Bank earnings begin tomorrow morning with JPMorgan Chase (JPM), Wells Fargo (WFC) and Morgan Stanley (MS). Earlier this week, JPM CEO Jamie Dimon warned of possible recession due to the trade tension but hasn't spoken publicly since the tariff delay. Tomorrow likely brings more observations from him and other bank executives, who tend to have their fingers on the pulse of the economy.

Earnings accelerate next week with airline, health care, Netflix (NFLX), and additional large and regional bank earnings on tap. Focus won't be on what happened last quarter, but rather what companies say about the near future. Companies may use earnings season to announce decisions like layoffs and other cost-cutting measures, supply chain adjustments, stock buybacks, dividend cuts, and other strategies forced on them by current circumstances.

The Dow Jones Industrial Average^® ($DJI) fell 1,014.79 points (2.5%) to 39,593.66; the SPX dropped 188.85 points (3.46%) to 5,268.05, and the Nasdaq Composite^® ($COMP) sank 737.66 points (4.31%) to 16,387.31.

While some talk of the Trump put, the "Fed put" is a longer-term phenomenon that often soothes markets but seems absent for now. Several Fed speakers this week counseled against preemptive rate cuts, citing the need to keep long-run inflation expectations "anchored," to use a word popular with Fed Chairman Jerome Powell.

Possible tariff-related price pressure comes only a couple of years after the 2022–2023 inflation surge, and memories of the central bank's slow inflation response then could keep the Fed hesitant to loosen policy now. The Fed is also responsible for promoting maximum employment, but Powell and other policy makers have argued that stamping out inflation can outweigh other economic concerns.

"For those waiting for the Fed to cut rates, it looks like it will take more time and data," said Kathy Jones, chief fixed income strategist at Schwab. "Besides, the Fed could cut short-term rates and bond yields could move higher."

The latest Atlanta Fed GDPNow model for first quarter gross domestic product (GDP) growth eased to –2.4% yesterday from –2.8%, and is just –0.3% adjusting for imports and exports of gold. Most analysts expect slight first quarter GDP growth, but some question if that can continue later this year.

Technically, the SPX is rapidly approaching a so-called "death cross" on the charts. The 50-day moving average was just 20 points above the 200-day moving average as of late Thursday, and if it falls below the 200-day it would be a death cross. The last time a death cross formed on the daily SPX chart was in early 2022, though such occurrences don't typically provide a reliable signal of short-term market performance.

It was a disappointing day from a technical standpoint considering major indexes lost ground in the final hour, though the SPX did finish well off its earlier lows.

- Tesla fell more than 7%, hurt like many other stocks with heavy exposure to China. There's concern that Chinese consumers may turn away from U.S. products if the trade war continues.

- Apple (AAPL), another company with huge exposure to China, where it sells around 20% of its iPhones, fell 4.24%. Apple makes the vast majority of its iPhones in China, and moving production would be very costly.

- Freeport McMoRan (FCX) dropped 7% as recession fears percolated. Slower growth would likely ease demand for industrial materials. Alcoa (AA) and U.S Steel (X) were other materials sector laggards.

- Shares of crypto-associated names MicroStrategy (MSTR, down 8.26%) and Coinbase (COIN, down 4.22%) struggled Thursday as risk appetite sagged. Bitcoin (/BTC) itself fell more than 3% to back below $80,000.

- Financial stocks  continued to face pressure on concerns about the economy. Shares of Wells Fargo, Goldman Sachs (GS), and Morgan Stanley all lost ground. The KBW Nasdaq Bank Index (BKX) dropped 5% today.

- Nvidia (NVDA), already under pressure much of the year amid worries about AI demand and U.S. trade barriers against China, dropped almost 6%.

- United Airlines (UAL) and Delta Air Lines each lost over 11%. Worries that travelers might boycott the U.S. are now hurting these stocks, as well. So is fear of a recession. United reports next Tuesday. Airline stocks had soared Wednesday, but came back to earth today despite no fresh news.

- Staples stocks like Kroger (KR) and health care companies like UnitedHealth (UNH) were among the handful of S&P 500 names in the green late Thursday.

- Technology stocks fell sharply amid risk-off sentiment. Some of the companies falling most Thursday included Marvell Technology (MRVL), Super Micro Computer (SMCI), and Qualcomm (QCOM).

Sector view: Given the uncertain economic environment, the Schwab Center for Financial Research neutralized its sector ratings, giving all sectors "market perform" ratings.

Turbulent market conditions can make anyone worried about their portfolio, and Schwab offers several perspectives that provide ideas to keep in mind at such times:

Market Volatility: What to Do During Turbulence
Bear Market: Now What?
Market Volatility in Retirement: Are You Prepared? 
Navigating the Markets: Tariffs and Trade

Check out the Investors' Calendar for a summary of the top economic events and earnings reports on tap this week.

April 11: University of Michigan preliminary sentiment and expected earnings from JPMorgan Chase (JPM), Morgan Stanley (MS), Wells Fargo (WFC), and BlackRock (BLK).
April 14: Earnings from Goldman Sachs (GS).
April 15: Earnings from Bank of America (BAC), Johnson & Johnson (JNJ), and United Airlines (UAL). 
April 16: March retail sales, March industrial production, and earnings from ASML (ASML), Travelers (TRV), and Alcoa (AA).
April 17: March housing starts and building permits and earnings from Taiwan Semiconductor Manufacturing (TSM), UnitedHealth (UNH), D.R. Horton (DHI), and Netflix (NFLX).