Closing Recap

Monday, April 07, 2025

What a roller coaster ride for U.S. stocks on Monday after global stock markets dumped again overnight on tariffs, recession fears and economic concerns. President Trump imposed baseline levies of 10% on almost all countries’ exports to the U.S./higher tariffs on many countries last Wednesday. The hardest hit were Asian countries, with China now facing total tariffs of more than 50% while Vietnam was hit with a 46% levy. The news last week sunk global stock markets with the S&P posting a 10% decline on Thursday/Friday as all major US averages hit 52-week lows. Today though, volatility was off the charts with massive swings lower overnight, then ripped higher (on unconfirmed reports), then lower again on several macro-related headlines. CNBC said it aired unconfirmed information Monday morning when it reported the Trump administration was considering placing a 90-day pause on tariffs. The information, which appeared on CNBC‘s news chyron, was also amplified by several other outlets, including Reuters. White House Press Secretary Karoline Leavitt later said soon after the initial headlines appeared that reports of a pause were “fake news.” That pushed markets lower after a massive rise on the report.

Overall, the S&P 500 had declined -4.7% overnight, rallied 8.4% off lows following headlines about tariff delays (that proved to be inaccurate by various news agencies), only to plunge -5.5% off those levels as President Trump fired back at China’s retaliatory tariffs of 34% along with other trade abuses, promising to implement an additional 50% tariff on China on April 9th if they do not withdraw their retaliation. Treasury market moved like “meme” stocks as the 10-yr yield hit overnight lows of 3.88% before ending near 4.21% at highs in a 33bps move from lows to highs. The CBOE Volatility index (VIX) also big swings but held around 50 most of the day (high was 60.13), rising over 5%.

Donald Trump tweeted on Trust Social this morning: “Oil prices are down, interest rates are down (the slow-moving Fed should cut rates!), food prices are down, there is NO INFLATION, and the long-time abused USA is bringing in Billions of Dollars a week from the abusing countries on Tariffs that are already in place. This is despite the fact that the biggest abuser of them all, China, whose markets are crashing, just raised its Tariffs by 34%, on top of its long term ridiculously high Tariffs (Plus!), not acknowledging my warning for abusing countries not to retaliate. They’ve made enough, for decades, taking advantage of the Good OL’ USA! Our past “leaders” are to blame for allowing this, and so much else, to happen to our Country. MAKE AMERICA GREAT AGAIN!”

At 11:15 AM EST: Trump again tweeted: “Yesterday, China issued Retaliatory Tariffs of 34%, on top of their already record setting Tariffs, Non-Monetary Tariffs, Illegal Subsidization of companies, and massive long term Currency Manipulation, despite my warning that any country that Retaliates against the U.S. by issuing additional Tariffs, above and beyond their already existing long term Tariff abuse of our Nation, will be immediately met with new and substantially higher Tariffs, over and above those initially set. Therefore, if China does not withdraw its 34% increase above their already long-term trading abuses by tomorrow, April 8th, 2025, the United States will impose ADDITIONAL Tariffs on China of 50%, effective April 9th. Additionally, all talks with China concerning their requested meetings with US will be terminated! Negotiations with other countries, which have also requested meetings, will begin taking place immediately. Thank you for your attention to this matter!”

Big losses overseas as Europe’s Stoxx 600 declined -4.54%, Britain’s FTSE 100 was down -4.64%; Germany’s DAX tumbled -4.26%, France’s CAC 40 dropped -4.91%; and Spain’s IBEX plunged -5.14%. Asia was even worse as The Nikkei Index plunged -2,644 points or 7.83% to 31,136, the Shanghai Index dropped -245 points or 7.34% to 3,096, and the Hang Seng Index tumbled -3,021 points or 13.22% to 19,828. The European Commission proposed counter-tariffs of 25% on a range of U.S. goods in response to President Trump’s tariffs on steel and aluminum, a document seen by Reuters showed. The tariffs on some goods will come into effect May 16 and others on December 1.

Concerns over a deteriorating economy in the wake of the market selloff have pushed some on Wall Street to lower their year-end index forecasts recently. Today alone, 1) Goldman Sachs raised its 12-month US recession probability to 45% from 35% while cut its 2025 GDP forecast to +0.5%; the firm forecasts 130bps of rate cuts in 2025 vs 105bps prior view saying if the US economy falls into recession, the Fed could slash rates by ~200bps over the next year. 2) Bank America said tariffs could cut 2025 S&P 500 earnings by ~10%; said U.S.-China tariffs and retaliation alone may hit earnings by ~9%, with Canada adding ~1%. The EU also plans countermeasures. Assuming flat growth, 2025 EPS is expected to be around $250. The S&P 500 target is lowered to 5,600 (range: 4,000–7,000) with a higher discount rate. 3) JPMorgan cut S&P 500 target to 5,200 from 6,500, putting the worst case at 4,000. 4) Evercore reduces their S&P 500 Price Target to 5,600 (from 6,800) and reduces 2025 EPSe to $255 (from $263).

Interesting market stats: 1) LizAnn Sonders tweets: “70% of Russell 2000 members are at a 3-month low … highest % since COVID bear market” 2) the S&P 500 (SPX) is now down 13.7% in the first 64 trading days of 2025, the 6th worst start to a year in history; 3) WTI crude oil plunged below 60 for the first time in 4 years; 4) Not a single stock in the S&P 500 was up on both Thursday and Friday of last week as per @Bespoke; 5) Hong Kong’s stock market officially closes down over -13% and posts its worst day since 1997; 6) China’s stock market just posted its worst day since the 2008 Financial Crisis.

• Treasury yields with a crazy day of a move, as selling momentum picked up this afternoon in the bond market, pushing the yield on the 10-year note almost back up to where it was before President Trump’s April 2nd tariff announcement (up around 4.18% and well-off morning lows of 3.88%). Some pointed to looming auctions of 10-year notes and 30-year bonds this week, which could pose a test to the market given the general state of uncertainty on Wall Street. Bitcoin and Ethereum dropped over the weekend but held steady today at lower prices with Bitcoin hitting lows below $75K before rebounding above $78K.

• In Discount Stores: DLTR was upgraded from Neutral to Buy at Citigroup and DG to Neutral from Sell. For DLTR, says with ~50% of its product subject to significantly higher tariffs, the market reaction and investor instinct was extremely and unsurprisingly negative…but believes this higher-tariff-across-the-board environment is going to be positive for DLTR. For DG, in the near-term DG does not have the same tariff risk as most others in retail universe and may benefit from consumers trading down. JP Morgan upgraded FIVE to Neutral from Underweight with shares down -45% since September and models ests above the Street.
• In Food & Beverages: Piper covers weekly Scanner data saying FRPT momentum slows even more than expected; HSY sales declines accelerated as pricing falls; KDP has best sales, volume gains in soda; CELH Retail sales and volume momentum inflects up after Scanner data. Piper’s covered food companies had -3.1% (unweighted) average US measured retail sales declines in the latest four weeks ending 3/23/25, vs -1.2% declines in the prior four weeks. TSN and MDLZ sales decline accelerated to -2.4% and -2.6%, respectively; CPB sales momentum decelerated -375bps and turned negative to -2.5%.

• In Home Improvement Retail/furnishing (HD, LOW, TGT, WMT, DG, DLTR): Keybanc said its Hardlines Traffic Index increased 2.3% (vs. the six-week average of +1.2%) for the week ending March 30, but decelerated compared to +3.9% in the prior week. This week, +2.3% represents an acceleration from -4.5% in February and compared to +3.6% in January and -1.2% in December. It is important to note that this week’s data was softer due to the Easter shift (from March 31st last year to April 20th this year). Wayfair (W) was downgraded to Neutral at Citigroup after Wednesday’s tariff announcement created significant exposure to Wayfair’s supplier base saying the uncertainty and risk to Wayfair’s revenue is significantly greater now.

• In Autos: Volkswagen’s (VWAGY) said its Audi unit is holding back cars that arrived in U.S. ports after April 2 (about 37K) because of the newly imposed 25% autos tariff, a spokesperson said on Tuesday, confirming the contents of a memo sent to dealers and reported on by U.S. trade publication Automotive News. TSLA price tgt was cut to $315 from $550 at Wedbush (Bull Dan Ives) saying they “remain bullish on Tesla, but this is a critical moment for Musk; notes brand is weakening as a political symbol, and the situation is unsustainable. GM was downgraded to Underperform from Market Perform at Bernstein (tgt to $35 from $50) saying vehicle tariffs have commenced, and parts tariffs are likely to follow within a month.
• In Lodging & Online travel sector: Wells Fargo lower ests and tgts on ABNB to $100 from $134, BKNG to $4,567 from $5,248 and EXPE to $143 from $199 on the weaker consumer demand outlook, and notes that alternative accommodations thesis is that the lower global penetration vs hotels should enable modestly better trends for alternatives.

• In the Chemicals sector: UBS upgraded AXTA to Buy from Neutral (tgt to $40 from $42) as Axalta shares near pricing in its downside scenario already. About 35% of the company’s sales are linked with light and commercial vehicle production, but only half of this is for North America, which on an EBITDA basis is only 10% of total Axalta sales. LYB was downgraded to Sell from Neutral at UBS (tgt to $51 from $76) saying while demand has been weak for nearly two years, the company’s earnings are now getting more pressured by higher costs and continued new global supply. Piper downgraded shares of ASIX and MEOH and cut tgts and ests on nine chemical names (ASIX, CE, DOW, EMN, KWR, LYB, MEOH, OLN, WLK) saying tariffs instituted by the US and the likely retaliation and peripheral economic fallout from those tariffs have the potential to create long-lasting complications for the US chemical industry. SMG was upgraded to Buy post mgmt meetings as have confidence in >12% F’25E EBITDA growth & view ~10x C’25 EV/EBITDA attractive.
• In the Machinery sector: CAT, CMI, PCAR, URI and TEX are all downgraded to Sell at UBS, and in Building Materials coverage (MLM and VMC) cut to Neutral saying there’s more earnings downside for Machinery companies related to macroeconomic headwinds that are not priced in, despite the pullbacks in the stocks.
• In Metals & Mining: U.S. Steel (X) shares jumped after President Trump ordered a review of Nippon Steel’s (NPSCY) proposed acquisition by Committee on Foreign Investment in the United States. "CFIUS shall submit a recommendation to me describing whether any measures proposed by the parties are sufficient to mitigate any national security risks identified by CFIUS. This recommendation shall include a statement describing each member agency’s position, including the reasons for such position," the White House said.
• In Aerospace & Defense: HWM shares slipped after the airplane supplier said it may halt some shipments if they are impacted by tariffs announced by U.S. President Donald Trump.
• In Paper & Packaging: SEE was upgraded to Buy from Neutral at UBS saying with the shares off 30% from mid-January, current levels present a good opportunity to buy Sealed Air, noting the company has $90M of cost savings targeted for 2025.

• Mid Cap banks: Morgan Stanley downgraded EWBC to EW from OW (tgt to $90 from $118) as the firm moved its midcap bank industry view from Attractive to In-line, saying higher and faster than expected tariffs raise recession risks, will weigh on loan growth and in-turn, forward earnings and multiples. The group is cheap, but weaker for longer loan growth and inverted yield curve limit upside catalysts. Morga Stanley also cut CMA to Underweight from EW (tgt to $55 from $63), CBSH upgraded to EW from UW.
• In Credit Cards: Credit card firms fall again early (AXP, MA, V, COF, DFS), extending losses to a third session after President Donald Trump last week said he would impose a 10% baseline tariff on all imports and higher duties on dozens of other countries. Shares of payment firms face the risk of weak credit card spending, as consumer confidence is expected to take a hit from economic uncertainties stoked by the trade war.
• In Consumer Finance: Morgan Stanley downgraded SYF to Equal weight and BHF to Underweight as recession risks put low-income consumers/discretionary spend at risk, while upgraded UWMC to Overweight given optionality to lower interest rates benefiting refi mortgage volumes. Overall downgraded industry view from Attractive to Cautious noting Hardline view on tariffs drives up recession risks. Stocks are already down 27% vs peak, but without a meaningful de-escalation in trade talks, prospects of higher inflation/slower growth make it hard to own the space. Lowering estimates on higher consumer defaults & slower growth.
• In REITs: EGP and TRNO downgraded to Neutral from Overweight at Piper saying while industrials were hit hard since April 2’s tariff rollout 12% versus REITs -8%), the group was outperforming YTD pre-April 2 (+5% versus REITs +1%). EGP was +9% pre-April 2 and -9% since, with TRNO +8% and -13%, respectively. Thus, Piper’s downgrade acknowledges the market has quickly repriced the outlook for both.
• In Crypto: Bitcoin prices fell as low as $74,500 overnight (lowest since November elections) and Ethereum (ETH) lows around $1,450 on general stock market “risk-off”; MSTR shares tumbled after saying they expect to report a loss for Q1 and warned of more losses to come as the value of its cryptocurrency holdings falls; noted it notched $5.91 billion in unrealized losses on its digital assets for the quarter that ended March 31; said it hasn’t bought any more bitcoin since the quarter ended.

• RYTM announces pivotal phase 3 TRANSCEND trial meets primary endpoint with -19.8% placebo-adjusted BMI reduction in patients (n=120) with acquired hypothalamic obesity.
• Obesity drug makers (LLY, NVO, ALT, VKTX) shares slipped early after late Friday, the Trump administration decided against allowing Medicare to pay for obesity drugs.
• In Life Sciences & Tools: Citigroup upgrade MTD to Buy saying it is well positioned in being able to pass along a bulk of tariff impact through pricing; names Agilent (A), DHR top picks, while sees the most risk for ILMN under coverage.  Citi said tools have had an eventful few months following the election while diagnostics, CROs, and Labs have fared better than Tools but certainly not immune (with CRO sentiment negative).
• In Medical Research: QGEN guides Q1 2025 preliminary net sales rise 7% CER and adjusted diluted EPS results of at least $0.55 CER both above outlook despite challenging macro environment; FY25 adj diluted EPS outlook raised to about $2.35 CER (vs. prior outlook about $2.28 CER.

• In Hardware: the Wall Street Journal reported that AAPL plans to send more iPhones to the U.S. from India to offset the high cost of China tariffs, people familiar with the matter said. The adjustments are a short-term stopgap while Apple attempts to win an exemption from President Trump’s tariffs, which CEO Tim Cook obtained during the first Trump administration. The company sees the situation as too uncertain to upend long-term investments in its supply chain, the people said. Trump’s tariff package raises levies on Chinese goods to at least 54% while imposing a 26% rate on Indian goods.
• In Internet: PINS was downgraded from Outperform to Market Perform at Raymond James saying coming off ad checks last week pre-Tariff announcement agency executives noted an in-line Q1 though softening consumer sentiment and pockets of weakness within CPG in particular during March that contributed to a ~2-3% budget forecast reduction for Q2.
• In Software: Jefferies said amid rising tariff uncertainty, we have preemptively cut forecasts across 29 covered cos. Our analysis suggests a ~15% avg stock downside across our group, with most multiple compression at PLTR & least at META. We est. greater downside risks for PLTR, IBM, U , while CRM, ADBE, ORCL appear as defensive large caps w/ favorable risk/reward.
• In semiconductors: one of the few bright spots in technology (or markets overall) with the Philly semi-index (SOX) rising over 1%, but remains down -27% YTD on slowing spending, tariff impact weighing on some of the biggest names like NVDA, AMD, AVGO, ARM and equipment stocks.