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Today, we explore market turbulence from new tariffs, Powell’s rate stance, China’s retaliation, and a major energy shift in Pennsylvania. Keep reading for more details.

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🌍 The Big Picture

Economy

U.S. Markets Drop as New Tariff Round Shakes Global Supply Chains

U.S. equity markets posted steep declines following President Donald Trump's announcement of sweeping new tariffs. The S&P 500 lost approximately $2 trillion in market value, with over 80% of companies in the index trading lower.

New tariff levels include a 10% baseline on all imports, with significantly higher rates targeting key trade partners. China now faces a 54% cumulative tariff rate on certain goods, while Vietnam and Indonesia face 46% and 32%, respectively.

Industries most reliant on international manufacturing reported the heaviest declines. Several consumer goods and technology companies with significant exposure to Asian production centers saw double-digit percentage drops. The broader market registered its most significant one-day selloff since 2022.

Companies across the S&P 500 experienced immediate declines following the announcement, with nearly two-thirds of components down more than 2%. Technology, retail, and industrial sectors recorded sharp pullbacks in early trading.

According to updated estimates from major research institutions, the new trade measures may affect the Federal Reserve's preferred inflation metric. Pricing pressure and reduced consumer purchasing power remain key themes under review.

Market participants are closely watching the response from major trading partners and looking for potential clarification on the scope and duration of these tariffs. As implementation dates approach, businesses and investors continue assessing potential operational and cost-side impacts.

Major indexes remain volatile as firms across sectors review sourcing strategies, pricing models, and global supply chain planning in response to the new trade environment.

Trade Policy

Global Crude Benchmarks Drop Following Trade Measures and Supply Plans

Global oil prices fell sharply following new tariff announcements and updated supply guidance from major producing countries. Brent crude dropped by over 6%, and U.S. West Texas Intermediate declined by more than 7%, placing both benchmarks on pace for their largest weekly losses in over two years.

China confirmed additional 34% tariffs on U.S. goods, set to begin April 10. The move follows the United States’ recently expanded tariff measures and reflects growing global trade tensions. While oil imports remain exempt from these policies, broader economic concerns and demand forecasts influenced trading sentiment.

OPEC and its allies, collectively known as OPEC+, announced plans to accelerate production increases. In May, the group intends to add 411,000 barrels per day to the global supply, revising its earlier target of 135,000 barrels per day. The update contributed to downward pressure on prices.

Major financial institutions adjusted their outlooks following the developments. Goldman Sachs reduced its year-end price targets for Brent and WTI by $5 each, while HSBC lowered its global oil demand growth forecast for 2025 to 0.9 million barrels per day.

Market participants continue to assess the potential impact of prolonged trade measures on global growth and commodity consumption. As policy shifts take effect, analysts monitor changes in production strategy, demand trends, and regional price movements.

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Bond Market

U.S. Treasury Yields Decline as Investors Respond to Trade Tensions

U.S. Treasury yields sharply decreased as global trade tensions intensified and investors shifted to safer assets. The 10-year yield fell below 4% for the first time since October, reflecting increased demand for government bonds.

Yields on the 2-year and 30-year Treasury notes also declined, with movement concentrated across the curve. Bond yields typically fall when investor demand rises, and market participants moved capital into fixed income as a precautionary measure.

JPMorgan raised its estimate of a potential U.S. recession this year to 60%, citing the combined effect of trade policy and economic indicators. BMO and Barclays also noted growing market sensitivity to geopolitical developments.

The U.S. Department of Labor reported an increase of 228,000 in nonfarm payrolls for March. The unemployment rate rose slightly to 4.2%. Revisions to prior months’ figures showed a downward adjustment, and labor market data contributed to the continued assessment of the Federal Reserve’s policy path.

Yields pared some losses after the employment data was released but remained near session lows. Investors remain focused on both domestic indicators and global policy shifts when evaluating interest rate expectations and overall risk sentiment.

📊 Metrics to Watch

• Interest Rates: President Trump took to Truth Social today to pressure the Fed into dropping rates, saying that “[this] would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates.”

• Inflation: Jerome Powell quickly responded, saying he expects tariffs to increase inflation, reducing the likelihood of rate drops. Remember that core inflation came in at 2.8% for February, still well above the Fed’s 2% goal.

• Unemployment: The unemployment rate spiked to 4.2% for February, higher than forecast.

• Tariffs: Trump’s 10% flat tariff for all trading partners and variable scale for trade deficit nations triggered reactions after China announced a 34% US tariff beginning next week.

🚀 Market Movers

• 💰Tariffs: Far and away the week’s biggest news, tariffs went into effect this week, sending markets into a tailspin as the S&P 500 dropped 3.7% in a single Thursday session. Risk assets, particularly, saw massive outflows, while 10-Year Treasury Notes enjoyed a fresh cash infusion as rates fell to 3.9%, the lowest since September 2024. 

• ✂️ Rate Cuts: In a Friday morning presser, Jerome Powell said that he was surprised by how high tariffs were following Trump’s announcement and was pessimistic about near-term effects on raising inflation and slowing economic growth. He further implied “no cuts ahead,” saying, "We are well positioned to wait for greater clarity before considering any adjustments to our policy stance."

• ⚔️ Retaliatory Tariffs: China promised a 34% retaliatory tariff, planned to go into effect on April 10th. Retaliatory tariffs of this sort could escalate rapidly and create further economic unease - not to mention stock struggles. Still, it isn’t all bad news, as Trump said he had a “very productive call” with Vietnamese leadership, which wanted to “cut their tariffs down to zero.” The news sent shares of Nike (NYSE:NKE) and Lululemon (NASDAQ:LULU), who rely heavily on the nation for production, climbing even as wider markets fell. 

• ⚡️ Energy: Pennsylvania’s largest coal plant shuttered its doors this week to make way for a massive, AI-centric data center project. The site will also host the nation’s largest gas-fired power plant, which will, in turn, fuel the data center. This development points to a sea change in energy planning, though widespread nuclear adoption isn’t yet on the table.

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⚡ Market Impacts

• 📈 Equities: Some analysts are projecting a net negative GDP for 2025’s first half, particularly since tariff numbers exceeded even Wall Street’s most bearish estimates. This is, in part, what triggered the sudden market drop despite knowing (roughly) what to expect - though we knew tariffs were coming (and when), the higher-than-expected number could spell trouble for equities moving forward. To that end, Goldman’s research department cut its S&P 500 projection for the next three months to -5%, from “no change” prior.

• 💵 Bonds: Junk bond spreads as bond traders saw tariffs strongly affecting corporate capital costs. High-yield corporate bonds and Treasury spreads hit 401 basis points this week, and the spread between junk and investment-grade bonds hit 106 basis points, up from 96.    

• 💱 Currencies: Global foreign exchange traders warn of illiquidity issues facing currency exchange markets. Worldwide cash markets mark $7.5 trillion in transactions daily - that’s right - and the analysts believe that institutional players backing away from the table while automation’s proliferation is making the current market seem deeper than it is. This could, of course, spell trouble if the market’s lack of depth ends up being a true illiquidity crisis.  

• 🌽 Commodities:  Oil prices fell to their lowest point since 2021, while natural gas and soybeans struggled as China announced retaliatory tariffs. Importantly, U.S. tariffs excluded trade taxes on energy commodities - but China’s 34% tariff has no such exclusion. China’s new policy also curbs some rare earth exports, which could substantially affect U.S. manufacturing.

🗓️ Key Indicators to Watch

• 📅 Consumer Credit Report – April 7th: Spiking consumer debt could point to economic woes moving forward as household debts climb.

• 📅 NFIB Optimism Index – April 8th: The index measures small businesses’ sentiment regarding current and future business conditions - don’t expect much optimism in this report, though. 

• 📅 March FOMC Minutes – April 9th: The first FOMC minutes following Trump’s tariffs could be revealing. 

🧩 Everything Else

• Worried about retirement? The New York Times offers some thoughts on protecting your long-term portfolio amid market drops. 

• China restricted companies from U.S. investment as part of its wider trade strategy, which could further bolster its negotiating position.

• European stocks could see a surge in popularity as investors flee U.S. equities. 

• Multifamily housing shortages across the Midwest offer expansion opportunities for some builders.

• Business groups are firing back at plans to reduce or eliminate SALT deductions, which let corporate entities deduct state and local taxes.