Art of the deal or strategy reversal? An economist’s take.
An economist from Oxford University explains how the trade war has injected uncertainty into the market.
U.S. stocks bounced back in early afternoon, helped by some dip-buying after a brief decline earlier on a weaker-than-expected consumer sentiment reading in the University of Michigan’s preliminary April survey.
The mid-month reading on sentiment fell to 50.8 from 57.0 in March and below the Dow Jones consensus estimate for 54.6. Inflation is becoming a major concern, according to the report, with expectation for inflation a year from now jumping to 6.7%, the highest level since November 1981 and up from 5% in March. Expectations for economic conditions also dropped 10.3% to 47.2, the lowest since May 1980.
The drop in consumer sentiment has been alarming to some economists who say when consumers feel nervous and gloomy about the economy, they tend to close their wallets. Consumers make up about 70% of the economy, so a slowdown in consumer spending will take a toll on economic growth.
That pressured stocks around mid-morning, but buyers emerged to buy the dip and pushed all three major indexes back in the green.
Despite stocks’ violent swings, all three major stock indexes are on pace for gains this week. The S&P 500 and Nasdaq are on pace for their best weekly performance since November.
“It’s been a challenging week, but also a moment to seek opportunities and not succumb to fear,” said Mark Dowding, BlueBay chief investment officer at RBC Global Asset Management.
Indeed, individual investors have been buying the dips throughout the downturn. On April 9, the day Trump announced a 90-day tariff pause, investing platform Wealthfront said it saw most money flowing into accounts in the early morning hours before the tariff pause was announced.
Additionally, on April 8 when markets tanked, Wealthfront saw a significant increase in deposits into bond ladders, making it the highest single day for bond ladder deposits this year and signaling that some investors are taking advantage of rising Treasury yields.
Bond ladders are created by buying bonds at varying maturities. Investors use them to provide a more predictable income stream and potentially reduce interest rate risk if rates move. If rates rise, investors won’t be locked into a single bond with a lower rate.
The blue-chip Dow rose 1.56%, or 618.99 points to 40,212.65; the S&P 500 added 1.81%, or 95.31 points, to 5,363.36; and the tech-heavy Nasdaq rose 2.06%, or 337.14 points, to 16,724.46. The benchmark 10-year yield rose to 4.478%.
Gold, seen as a safe asset during tumultuous times, rallied past $3,200 per ounce to set another record high early in the day. It was last up 2.23%.
Tariff relief?
Overnight, China increased its tariff on U.S imports to 125% but signaled it wouldn’t match anymore increases by the U.S.
“Even if the U.S. continues to impose higher tariffs, it would be economically meaningless and would become a joke in the history of the world economy,” China’s finance ministry said.
Despite those comments, the White House said Trump is “optimistic” China will seek a deal with the U.S.
Meanwhile, the European Union said its trade representative would fly to Washington on Sunday to “try and sign deals,” a sign a full-out global trade war may be averted. That sentiment helped stocks shortly after the open reverse a small part of Thursday’s freefall, but money managers warn investors should remain cautious.
Stocks swooned Thursday on fears President Donald Trump‘s triple-digit tariff on China would significantly damage the U.S. economy and corporate profits.
Trump kept his 10% tariff on all countries but put reciprocal tariffs on hold for 90 days for all countries except China. Because China retaliated, Trump raised his tariff on Chinese goods to a total 145%.
“While it was positive that most tariffs were lowered to 10%, the 145% tariff on China will still impair corporate profits,” said Mike O’Rourke, chief market strategist at JonesTrading.
“The $440 billion of goods the U.S. imported from China last year was second only to Mexico,” he said. “Those low production-cost goods, whether they are technology, apparel, or materials, are important to corporate earnings. The auto and metals tariffs remain in place, and pharma and semiconductor tariffs are on deck. Exemptions may be coming, but they are not here yet.”
Inflation eases
Wholesale prices in March unexpectedly fell 0.4%, posting the first decline since October 2023. The drop compares with February’s 0.1% gain and economists’ forecasts for a 0.2% rise. Excluding the volatile food and energy sectors, so-called core wholesale fell 0.1% against the estimate for a 0.3% increase.
Wholesale prices are what businesses pay for their goods and services and sometimes seen as the first line for inflation to show up.
This comes on the heesl of annual consumer inflation on Thursday showing a 2.4% rise in March, below economists’ forecasts and February’s 2.8%. It was the lowest annual increase since September.
Still, some economists pointed out the inflation data are old, and “if tariffs stay in place, they will push inflation considerably higher in coming months,” said Bill Adams, chief economist at Comerica Bank.
Comforting words, though, came from New York Federal Reserve President John Williams. Williams said the U.S. economy is not entering a period of high inflation and low growth, and the U.S. Federal Reserve will act to keep so-called “stagflation” at bay.
Corporate news
JP Morgan, Wells Fargo, Morgan Stanley and BlackRock kicked off earnings season. They provided the first glimpse into how businesses and consumers may be handling tariff volatility and how they see tariffs unfolding this year.
- Wells Fargo, JP Morgan, Blackrock and Morgan Stanley all beat quarterly earnings and revenue estimates. Chief executives of those banks warned of uncertainty ahead due to tariffs.
Wells Fargo CEO Charlie Scharf said his bank is “prepared for a slower economic environment in 2025, but the actual outcome will be dependent on the results and timing of the policy changes.”
JP Morgan and Wells Fargo said they haven’t seen a surge in companies tapping their credit lines. During times of stress and anxiety, companies grab cash from these credit lines to shore up financials, just in case.
JP Morgan CEO Jamie Dimon said consumers also contninued to spend, though he said some may have been buying ahead of tariffs.
Shares of JP Morgan closed up 4%; Wells Fargo fell almost 1 % after it lowered its full-year net interest income expectations; BlackRock rose 2.33%; and Morgan Stanley added 1.43%.
- Novartis said Thursday it will spend $23 billion over the next five years to expand in the U.S. The drugmaker expects this will create about 1,000 new jobs at Novartis, and lead to around 4,000 other jobs in the U.S. outside of Novartis. The company will be able to make domestically all of its medicines for the U.S., it added. Shares gained almost 4%.
- Frontier Group cut its outlook for the first three months of the year and pulled its full-year outlook, citing weaker-than-expected demand and economic uncertainty. Shares of the discount airline tumbled 5.6%.
- Stellantis said its global shipments fell to 1.2 million vehicles in the first three months of the year. That’s down 9% from a year ago. The drop was primarily due to lower North American production, extended holiday downtime in January, product transitions and lower van sales in Europe, it said in a press release. Shares of the carmaker shed about 0.5%.
Cryptocurrency
Bitcoin rose back above the key $80,000 level, last up 5.23% at $83,756.51.
Investors may watch to see if insiders sell any Trump digital tokens on April 17. Forty million of the tokens, recently worth more than $300 million, will be unlocked that day, meaning the owners of those tokens will be able to sell them for the first time since the Trump coin launched in January, according to the Trump cryptocurrency’s website.
A company controlled by the Donald J. Trump Revocable Trust is among the owners that will be able to sell, according to Trump’s 2024 public financial disclosure required for federal candidates.
The story was updated with new information.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
