Market Recap – Thursday, April 10, 2025
US Equities Sharply Lower Amid Ongoing Trade Volatility
US equities saw a sharp decline on Thursday, reversing some of the strong gains from Wednesday's rally. The S&P 500 dropped 3.46%, while the Nasdaq plunged 4.31%. Despite today's losses, both indices are still on track for a positive weekly performance after Wednesday's significant rebounds. The rally had been largely attributed to the pause in higher reciprocal tariffs, though market volatility remains a major concern. The VIX climbed back above 50 during the session, reflecting ongoing investor anxiety. The major laggards included big tech stocks such as TSLA-US and META-US, as well as sectors like energy, airlines, and industrial metals. Conversely, defensive sectors such as precious metals miners, managed care, and staples retailers saw positive movement.
Trade Policy and Economic Uncertainty
A key driver of the market's recent fluctuations continues to be trade policy. The White House confirmed that reciprocal tariffs on 90 countries would be paused for 90 days, but tariffs on China would increase to 145%. While the tariff pause provided temporary relief, the underlying concerns about the prolonged uncertainty in trade policy, particularly with the US-China trade relationship, have left investors uneasy. The volatility in tariffs is compounded by concerns about rising inflation and the Fed's limited ability to ease further in the face of tariff-induced price hikes. Meanwhile, the House passed a budget bill, but disagreements over spending and tax cuts raise questions about the effectiveness of this fiscal strategy.
CPI Data and Inflation Concerns
The latest CPI report for March showed a cooler-than-expected reading, with headline CPI down 0.1% m/m. The core CPI, which excludes volatile food and energy prices, rose just 0.1%, below expectations. While inflation appears to have moderated slightly, the report was released before the recent surge in tariffs, which is expected to drive up inflation in the coming months. Rising costs from tariffs may place further pressure on consumer spending and business costs, potentially limiting the Fed's ability to respond with additional rate cuts.
Corporate Earnings and Market Sentiment
Corporate news remained relatively quiet today, with a few notable reports. CarMax (KMX-US) missed earnings expectations, while Amazon (AMZN-US) CEO noted that sellers would likely pass on higher tariff costs to consumers. Walmart (WMT-US) reaffirmed its guidance, citing strong e-commerce growth, while Peabody Energy (BTU-US) announced it was reviewing options related to its acquisition of steelmaking coal assets. However, concerns around trade and tariff impacts continue to overshadow earnings season, with tariffs expected to weigh on margins for many companies, particularly in the automotive and tech sectors.
Here’s Our Take
While the market has experienced strong volatility this week, fueled by trade policy uncertainty, investors should remain cautious. The ongoing uncertainty regarding the US-China trade relationship and the potential for further tariff increases presents a significant risk to both growth and inflation. The trade policy volatility continues to be a key overhang on corporate sentiment, and earnings expectations may need to be revised downward as tariffs continue to have a meaningful impact on cost structures. The pullback in certain stocks, especially in sectors like tech and energy, could present buying opportunities for long-term investors, but caution is advised given the persistent uncertainties in the global trade environment. Investors should focus on stocks with strong fundamentals and resilience to external shocks, particularly those in defensive sectors like healthcare, managed care, and precious metals.