Here is Schwab's early look at the markets for Monday, April 14:
After one of the wildest Wall Street weeks in history, investors return today with eyes firmly on Treasuries and the dollar. Weakness in both last week - unexpected after the Trump administration's tariffs - raised concerns about these two cornerstones of the global economy and about possible higher borrowing costs and prices for U.S. businesses and consumers.
The yield spike suggested investors might be less willing to buy U.S. Treasuries for their perceived safety. The dollar index ($DXY) fell to three-year lows Friday, a sign that the dollar wasn't achieving its usual "safe haven" status, either.
The 10-year Treasury note yield climbed 10 basis points Friday to close at 4.49%, up about 50 basis points for the week. That sort of dramatic rise isn't common.
"We expect volatility to continue," said Collin Martin, director, fixed income strategy, at the Schwab Center for Financial Research, in a note on Friday.
Treasury Secretary Scott Bessent said in an interview Wednesday that there is "nothing systemic" happening in the fixed income market, Barron's reported. But many in the financial community see heightened risk for financial instability.
Last week's Treasury auctions saw mixed demand, and this week's will be under close scrutiny to see if investors flock back to U.S. markets. The U.S. Treasury plans to auction off 3-month and 6-month notes today.
Over on Wall Street, major indexes rebounded Friday on hopes the administration could make progress getting China to the table after imposing 145% tariffs on imports from the country. China's tariffs on U.S. imports are now 125%. Though President Trump delayed so-called "reciprocal" tariffs on other countries, all face a 10% U.S. tariff on their goods, and U.S. tariffs are now the highest in roughly a century.
"The whipsaw effect around the president’s implementing tariffs then pausing some then escalating the tariffs against China has been hard for the markets to digest," said Michael Townsend, managing director, legislative and regulatory affairs at Schwab.
"And even with a 90-day pause in place, it’s not clear what the policy will be at the end of those 90 days, or even if the policy could change between now and then. That’s driving the uncertainty from companies and investors."
Data late last week were mixed. The March Producer Price Index (PPI), which tracks wholesale price trends, dove 0.4% in March, well below analysts' expectations for a 0.1% increase. Core PPI, which excludes energy and food prices, fell 0.1% last month versus analysts' expectation for a 0.3% rise.
Components of PPI that play into Personal Consumption Expenditures (PCE) prices, a report closely watched by the Fed, were mild and "point to a soft PCE print for March," according to Kevin Gordon, director, senior investment strategist at Schwab. This includes what Gordon called a "huge decline" in airfare.
On a less pleasant note, the preliminary April University of Michigan consumer sentiment headline reading fell to 50.8, well below expectations of 54.8. Year-ahead inflation expectations jumped to 6.7% from 5%, the highest since 1981, and the gauge for measuring expectations fell to 47.2, the lowest since 1980. Those were gloomy times, economically, and a repeat would be troubling.
Though some analysts downplay the importance of sentiment data, it's moved markets recently and increasingly shows a "stagflationary" outlook of lower growth and higher price expectations. Poor sentiment can sometimes become self-fulfilling if it doesn't quickly get addressed.
Key data this week include March retail sales on Wednesday and March housing starts and building permits Thursday. These, along with earnings from companies like United Airlines (UAL), could give investors hints at how consumers are handling the economic turbulence.
Turning to earnings, JPMorgan Chase (JPM), Wells Fargo (WFC), and Morgan Stanley (MS) all exceeded Wall Street's earnings expectations Friday, and more big bank results loom early this week including Goldman Sachs (GS), Citigroup (C), and Bank of America (BAC). Investors might want to keep an eye on earnings calls as analysts probe bank executives for their thoughts on how current economic shakiness and trade worries might affect the credit market and future growth of the economy.
Other key earnings to watch this week include semiconductor equipment maker ASML (ASML) and fabricator Taiwan Semiconductor Manufacturing (TSM). Though the semiconductor sector bounced back Friday on word that that U.S. chipmakers that outsource their manufacturing will be exempt from China's retaliatory tariffs, Texas Instruments (TXN) and Intel (INTC) both plummeted, as they make their products mostly in the United States and will be affected by China's tariffs, Briefing.com noted.
Odds of a rate cut at the Federal Reserve's May meeting fell to around 20% on the CME FedWatch tool late Friday after a week packed with Fed speakers urging caution on policy moves. Rate cut odds are close to 75% for June. Several Fed speakers are scheduled today but there's little on the calendar in the way of data.
"Despite economic growth concerns, most Fed officials are pushing back against the need for rate cuts anytime soon, with Minneapolis Fed President Neel Kashkari saying Friday that the inflation fight isn’t over," Schwab's Martin said. "We still expect the Fed to cut rates later this year, but, unless the labor market weakens significantly we expect fewer cuts than the markets are currently expecting."
Though the Fed doesn't meet until next month, the European Central Bank (ECB) gathers this week and will announce its rate decision early Thursday, U.S. time. Analysts expect a rate cut, which would follow the ECB's policy easing last month as worries mount that tariffs could lead to a recession.
The Cboe Volatility Index® (VIX) hovered near 37 late Friday, signaling strong chances of more sharp moves in the SPX. Still, it was down from mid-week peaks above 60.
Sector-wise Friday, materials and energy led the way on a day that saw the S&P 500 index bounce back but not to highs reached earlier in the week above 5,400. Info tech, financials, and industrials also performed well Friday. All of Friday's leading sectors tend to do better in a growing economy, so it appears at least for the day, investors were more enthusiastic than the sentiment survey indicated for the country as a whole.
Still, the S&P 500 index remains down nearly 13% from February's all-time highs, keeping it in correction territory after it narrowly avoided sinking into a bear market last week, which kicks in with 20% declines. Weak stock performance can sometimes be another confidence sapper, with investors pulling back spending as the "wealth effect" sags.
The Dow Jones Industrial Average® ($DJI) rose 619.05 points Friday (+1.56%) to 40,212.71; the S&P 500 index added 95.31points +1.81) to 5,363.36, and the Nasdaq Composite® ($COMP) gained 337.14 points (+2.06%) to 16,724.46. For the week, the $DJI rose 4.95%, the SPX rose 5.7%, and the $COMP rose 7.29%.