Mid-Morning Look

Friday, April 04, 2025

U.S. stocks on track for its second consecutive bloodbath type day as headlines this/yesterday morning on single stocks do not matter…it’s all about tariffs and its impact on global economies and valuation; fundamentals all secondary (despite earnings kicking off next Friday with bank earnings). At one point this morning we had 97% down volume as per some market stats, all eleven S&P sectors firmly lower (energy, materials, financials, and tech the hardest hit) with zero signs of a bounce the last 2 days heading into the weekend. The CBOE Volatility index (VIX) hit highest levels since August at 45.56 this morning (after rising nearly 40% to 29.96 Thursday). Lots of fear after the US main trading partner, China, said it will respond to President Donald Trump’s tariffs with additional tariffs of 34% on all U.S. goods from April 10 and adds 11 US companies to the unreliable list. China also: 1) announces rare metal controls, imposing export controls on samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium; 2) suspended chicken products imports from two American producers, part of retaliatory measures against the US after President Donald Trump announced new tariffs; 3) probes DuPont (DD) China on alleged anti-monopoly violation. China the first of possibly others retaliating, but the US not backing down this morning as President Trump commented on Truth Social “China played it wrong; they panicked – the one thing they cannot afford to do!”

So far in the first hour of trading, few asset classes free of the carnage this morning (outside of Bitcoin and bonds) with massive declines in global stocks, oil prices and many commodity prices on China’s move. We didn’t even mention the March non-farm payroll report, which is normally a massive market catalyst which came in strong on the month (with downward revisions) but hasn’t mattered. Fed fund futures markets are now forecasting 50% chance of five cuts this year (up from 4 yesterday)! Coming into today, the S&P 500 has lost ~$6.7tn in mkt cap since its peak on Feb 19^th. We do get Fed Chair Powell speaking at 11:25am EST and we shall see if he can help alleviate market fears.

The flight to safety continues, pushing the 10-year Treasury yield below 4%, falling another 15bps to 3.9% (16-month low). The 2-year Treasury yield continues to fall to lowest since September 2022, last down 19 bps to 3.53%. Oil prices plunged by as much as -8% on Friday, heading for their lowest close since the midst of the coronavirus pandemic in 2021, as China hit back in an escalating global trade war with the U.S. after President Donald Trump’s barrage of levies this week (WTI crude near premarket lows -8.2% to $61.44). Also, OPEC+ members caught the market off guard when announcing that the group would accelerate the planned unwinding of years-long output cuts.

• 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%).

• 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.
• 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 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.

• DHI +3%; as homebuilders rally behind the sharp decline in Treasury yields/mortgage rates.
• MKTX +5%; shares jumped on record trading results in March (total average daily volume in March 2025 and Q125 of $46.5B and $42.9B, respectively).

• BABA -10%; as US listed China stocks (BILI, BIDU, PDD, JD, XPEV, etc.) after China announced 34% responsive tariffs on all imports from the US, ramping tensions between the two trading partners.
• DD -14%; % after China’s State Administration for Market Regulation said it is probing DuPont China over alleged breach of antitrust law.
• FCX -11%; 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.
• GEHC -13%; as 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.
• KKR -11%; amid weakness in asset managers on potential tariff impact as asset managers could see a drop in fees, which is often tied to the value of assets under management.