Closing Recap

Friday, April 04, 2025

U.S. stock markets plummet into the close (close at lows), with major averages posting their worst two-day rout since March 2020 (Covid pandemic), crushed to start the new month and falling for the 7^th time in last 8-weeks after China’s decision to match U.S. duties escalated the worst trade war in decades. For the week, big losses racked up in the U.S. with the S&P 500 falling -9.08%, the Dow Jones Industrials fell -7.86% the Nasdaq -10% and the Russell 2000 -9.7%. The biggest weekly sector declines came from Energy (XLE), Technology (XLK) and Financials (XLF) all down -10% or more in the week (every other sector was down -4% or more on week outside of Consumer Staples). Jobs data for March was stronger than economist views and wages in-line but markets right now only care about one thing…TARIFFS…and the potential impact it will have on the global economy. There were a few feeble attempts at a market bounce today, but as has been the case for 7 weeks now, every bounce is met with more aggressive selling!

European stock markets were also under fire the last few days as the Stoxx 600 declined -5.01%, confirming correction, down over 10% from record closing high while Britain’s FTSE 100 down -4.86% (its biggest daily drop since the start of the Covid-19 pandemic); Germany’s DAX down -4.66%, France’s CAC 40 down -4.01%; Spain’s IBEX down -5.77%, and Euro Stoxx index down -4.56%. Markets attempted a rebound around 11:00 AM following a series of social media posts from President Trump just ahead of the European close.

Around 11:00 AM, unconfirmed reports were out that Treasury Secretary Scott Bessent was urging a tempering of Trump’s overly negative tariff stances (a little pop in stocks). Then after 11:00 AM, consumer stocks (footwear companies that manufacture in Vietnam like NKE, DECK, AEO, LULU, ONON W, RH and many others) saw a bounce after Donald Trump said on his Truth Social platform, “Just had a very productive call with To Lam, General Secretary of the Communist Party of Vietnam, who told me that Vietnam wants to cut their Tariffs down to ZERO if they are able to make an agreement with the U.S. I thanked him on behalf of our Country, and said I look forward to a meeting in the near future.” That gave markets a nice spike shortly after, paring losses.

President Trump then followed up with another tweet on social media saying, “This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates. He is always “late,” but he could now change his image, and quickly. Energy prices are down, Interest Rates are down, Inflation is down, even Eggs are down 69%, and Jobs are UP, all within two months – A BIG WIN for America. CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”

The timing was likely not coincidental as it led into a speech by none other than, Fed Chairman Powell at 11:25 AM. Powell unfortunately was not “dovish” in his statements, throwing some “cold water” on the rally saying that tariffs are to push inflation higher, possibly longer than expected and that the economic impact larger than anticipated. He said Fed’s next move is uncertain. Powell did note most measures of long-term inflation remain well-anchored. Powell also said the Fed does not have a probability forecast of recession, but outside forecasts have raised that probability. Powell said “it feels like the Fed does not need to be in a hurry. We have time”. These comments came as Fed fund futures markets are now forecasting 50% chance of five cuts this year (up from 4 yesterday)! Stocks pulled back after that and never recovered, even making new lows in the final hour.

With today’s market pullbacks, the Nasdaq at its lows around 15,600 is down more than 22% from Dec 16th highs of 20,204 (defined as “bear mkt” territory with more than 20% drawdown) while the Smallcap Russell 2000 at its lows today was down -27% from its 11/25/24 highs. The S&P 500 Energy sector was down by 14% in the past two days … largest decline since March 2020. The massive sell-off in the stock market early Thursday sent investors fleeing to the bond market. That caused bond yields to drop. Mortgage rates loosely follow the yield on the 10-year U.S. Treasury.

Details of the China tariffs against the US in retaliation for the big jump in tariffs from the US vs. countries announced on Wednesday China announces extra 34% tariffs on US goods, imposed from April 10th and adds 11 US companies to the unreliable list. China also announces rare metal controls, imposing export controls on samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium. China has suspended chicken products imports from two American producers, part of retaliatory measures against the US after President Donald Trump announced new tariffs. China probes DuPont (DD) China on alleged anti-monopoly violation per Bloomberg

• March average hourly earnings all private workers +0.3% from the prior month (est. +0.3%); the U.S. March labor force participation rate 62.5%; U.S. March average hourly earnings +3.8% from year earlier (est. +3.9%) and March unemployment rate 4.2% (consensus 4.1%).

• June gold prices tumbled -$86.30 or 2.76% to settle at $3,035.40 an ounce, pulling back from record highs this week around $3,177 an ounce, as the dollar also rebounded off early weakness, with the euro paring weekly gains. Treasury yields were all over the place today as the benchmark 10-yr yield fell to 6-month lows of 3.86% this morning after China reciprocal tariffs vs. the US (down as much as 16bps), before rebounding late day back to 3.99% after Fed Chairman Powell cooled talk on any rate cuts in the near-term. The 2-year Treasury yield hit its lowest level since September 2022, falling as much as 20 bps to 3.5205% before paring losses. For the week the 10-yr yield fell 26.2 bps (down 8 of last 10 weeks) and 2-yr down -23.6bps on week to 3.672%.

• –RBC Capital cut its S&P 500 PT and EPS forecast to $5550 (from $6200). First, the US equity market crossed an important threshold on Thursday, when the index broke below its previous mid-March-2025 low at the close and ended the day more than 12% below its February high. RBC thinks a growth scare similar to 2010, 2011, 2015-2016, and 2018 drawdowns is underway. Second, RBC has officially lowered its year-end 2025 S&P 500 price target to 5,550 from 6,200, which is its second cut this year. With this move, RBC’s old bear case for the index this year has become its new base case.
• — JPMorgan cautions that Trump’s new tariffs could heighten the risk of both a U.S. and global recession. Economist Bruce Kasman now estimates a 60% chance of a U.S. recession, up from 40%. While a global downturn appears likely, it remains uncertain. The tariffs are set to take effect next week, adding to uncertainty around negotiations and potential global responses. China has already announced a 34% retaliatory tariff, escalating trade tensions. Although the U.S. economy showed signs of slowing in late 2024, unemployment remains relatively low at 4.1%.

• Homebuilders a different story, with a big bounce for BZH, DHI, KBH, LEN, MTH, PHM and TOL among others as the benchmark U.S. Treasury 10-year yield tumbled below 4%-to-six-month lows as China tariffs retaliation stoking recession jitters US. The decline in rates can potentially lead to lower mortgage rates, which could benefit homebuilders and increase demand, which has struggled this past year as home prices remain high along with inventory.

• In Lodging/Lodging/Online Travel: Amid the spike in tariffs globally and uncertainty on the US economy fears of dramatic consumer spending slowing is impact travel and leisure sectors including casinos (WYNN, MGM, CZR), cruise lines (CCL, NCLH, RCL), hotels (HLT, MAR, H), leisure products (HOG, PII, CWH), and online travel (BKNG, ABNB, EXPE). In research, BKNG was upgraded to Buy from Neutral at BTIG with a $5,500 price target saying tracking points to a Q1 beat, who notes that the firm’s estimates are above the Street view.

• In Utilities: Power stocks (nuclear names that benefitted from the AI craze on needs for more power to run it) have been crushed along with the AI trade with shares of CEG, NRG, OKLO, VST and others having been crushed this year after massive outperformance in 2024. Goldman Sachs initiated coverage of Texas-levered independent power producers (IPPs), NRG (Buy) and VST (Neutral) saying they are constructive on the outlook for power demand growth, which we believe should support power prices in ERCOT and benefit power producers. We are mindful of valuation after outperformance over the LTM.

• In Asset Managers: shares fall (APO, BLK, TROW, IVZ, AB) on potential tariff impact as asset managers could see a drop in fees, which is often tied to the value of assets under management, if trade war fears, economic uncertainty and inflationary pressures from tariffs cause a prolonged downturn in the markets. BEN prelim month-end assets under management (AUM) of $1.53 trillion at March 31, 2025, compared to $1.57 trillion at February 28, 2025. This month’s AUM reflected the impact of negative markets and preliminary long-term net outflows of $4 billion, inclusive of $7 billion of long-term net outflows at Western Asset Management.
• Financial Services: in credit bureaus/rating agencies, Barclays downgraded EFX to EW from Overweight (alongside TRU) while saying they prefer SPGI over MCO in credit bureaus/rating agencies while prefer FICO and TRI. With new tariffs likely to boost inflation and risk a recession, Barclays said they see Credit Bureaus, followed by Rating Agencies, most at risk of negative number revisions for the year…but recommend subscription/idiosyncratic names like FICO (standout pick, special pricing power) and TRI (defensive, with a multifaceted growth story); and also slightly more contrarian picks in IT and MSCI (defensive, relatively cheap, good ex-US exposure in AUMs).

• BIIB was downgraded to Hold from Buy at Argus saying while the company has been at the forefront of the development of treatments for Alzheimer’s Disease (AD), with its drug Leqembi (lecanemab-irmb) now approved for the treatment of early Alzheimer’s Disease in a number of key markets, it has also experienced setbacks, with other countries denying their approvals for Leqembi due to safety concerns
• Healthcare suppliers and medical device names falter: GEHC and MTD among those weak on China headlines as their additional tariffs on U.S products will increase prices of MTD’s equipment exported to China, potentially reducing demand. China accounted for 16% of MTD’s sales in 2024, according to a regulatory filing. For GEHC, Beijing announces controls that will restrict exports of some medium and heavy rare-earth metals including gadolinium. Gadolinium is used as a contrast agent that helps improve clarity of MRI scans
• SGMO signs a capsid license agreement with LLY for STAC-BBB as receives $18 million as an upfront license fee and is eligible to receive up to $1.4 billion in additional license fees, milestone payments, and tiered royalties, the companies said. Lilly receives rights to employ its proprietary capsid for up to five potential disease targets.

• In Chemicals: DD shares tumbled after China’s State Administration for Market Regulation said it is probing DuPont China over alleged breach of antitrust law (as part of retaliation against the U.S. for tariff hikes). IN research, DOW and LYB were both downgraded to Neutral from Overweight at JP Morgan given higher economic risks saying their operating cash flows are solid, but do not entirely cover CAPEX and dividends, making investors uneasy. EMN was upgraded to Buy at Citigroup, moving off the sidelines with potential for more stable growth profile despite the backdrop of consumer & industrial uncertainty. In fertilizers (MOS, NTR, CF), Senator Joni Ernst tweeted: "I’m working with @SecretaryBurgum to reinstate potash and add phosphate—both critical fertilizer ingredients—to the U.S. Critical Minerals List. Bringing production home will cut costs for farmers, strengthen domestic supply chains, and help safeguard America’s food security."
• In Metals & Mining: precious metals gold and silver rebound (AEM, NEM, GOLD, AUY) early amid the market uncertainty and increased global tensions between nations following the tit-for-tat tariff moves by the US and China. However, industrial metals such as copper tumbles on fears a possible global economic downturn will hit demand for raw materials as shares of FCX, TECK, RIO, BHP declined after China, huge source of demand from commodities, said it would hit all U.S. goods with a new 34% retaliatory tariff.

• Semiconductor sector (SOX) absolutely crushed again, falling over 7% to 3,600 after tumbling 9.88% or 427 points on Thursday to its lowest level since early January 2024 as the SOX is down -20% YTD! NVDA, AMD, MU, AVGO, many of the AI levered names have come crashing down to earth after surging 2023 and 2024, leading the markets higher. Tariffs creating uncertainty for the group increased overnight as China retaliated with their own tariffs against the USA.
• President Trump signed an executive order giving TikTok an additional 75 days as the deal to save the platform continue being worked out.