If I were a cynic (heaven forbid!), I might suggest that Apple chairman Tim Cook’s large donation to Trump’s inauguration fund may be starting to pay off. The president blunted his Chinese tariffs over the weekend by temporarily diluting levies on smartphones and other consumer electronics and brought overdue relief to the likes of Apple who saw its range of products benefit from the latest climbdown.
Asian and European stock markets moved cautiously higher in reaction to the news on Monday. By the time New York opened, there had been some walk-back blather from both Trump and Commerce Secretary Lutnick who contradicted each other about the dilution in yet another example of the administration’s constant bungled messaging of its whole tariff strategy which continues to baffle financial markets.
Wall Street decided to guardedly take the dilution at least semi-seriously and stocks rose somewhat, but without a lot of conviction, buoyed by more positive early Q1 earnings reports and interest rates turned south. After the closing bell, Trump unnerved markets by floating with little detail some kind of a so-called “trade probe” into semiconductors and pharmaceuticals which could be viewed as a potential precursor to sector-specific tariff impositions.
Stocks had a choppy Tax Day Tuesday but stayed within a relatively narrow band and finished a touch lower. Interest rates continued to pull back moderately. Both stock and bond markets were clearly mindful that things could turn nasty on a dime (or a tweet) at any moment and traders did not want to get caught offside.
Positive Retail Sales data for March came in pre-market on Wednesday, driven by a (likely short-lived) rush in panic purchases, especially autos, from consumers trying to get ahead of tariffs. However, that prospect of US levies and international trade restrictions broadening specifically into semiconductors, pharmaceuticals and even critical minerals weighed heavily on the indexes from the start, especially those with a high weighting to Nvidia (now down by 25% this year), AMD and Tesla which all got absolutely hammered.
After lunch, Fed chairman Powell sent markets into a tizzy simply by stating in a major speech in Chicago what is obvious to everyone, that tariffs will definitely drive up US inflation and he also acknowledged the risk of stagflation. He reiterated that the central bank is not going to be rushed into an interest rate decision by the chaotic environment and was continuing with its “wait and see” approach.
The tone of his message was a stern reminder (as if one was needed) that it is not the Fed’s job to shield investors from short term losses. The S&P 500 big names dived again and it ended up being a really, really ugly day for the indexes.
With financial markets around the world closed the following day including in the US, Thursday was a synthetic Friday. Before the opening bell in New York, the European Central Bank (ECB) cut local interest rates by a quarter point for a seventh time in the past year.
Trump lashed out at Powell for not cutting US rates in an extraordinary onslaught, bellowing that“termination cannot come fast enough” for the Fed chairman, whose term runs through May 2026. Aware that the president does not have the legal authority to fire the Fed chairman or interfere in interest rate decisions, Wall Street mostly brushed off the attack as just another posturing hissy fit and stocks were steady at the open and remained rangebound for the rest of the day.
The major indexes were down over the course of the holiday-shortened week, but mostly as a result of Wednesday’s shocker and the generally horrible performance from the so-called Magnificent Seven (see LAST WEEK BY THE NUMBERS below). The “S&P 493” actually turned in quite a decent show, all things considered.
Largely under-reported by US media, the “American brand” is getting severely damaged overseas at the moment and the US Dollar is crumbling in response in the kind of conditions in which it usually strengthens as a “safe haven”.
This is being reflected in the bond market where foreign bondholders dominate. Keep a close eye on the 10 year Treasury rate (see INTEREST RATES below). If it moves above, say, 4.85%, that will be a flashing red light for stock markets.
The tariffs themselves are no longer even the biggest problem for stocks, it’s the amateur chaos, uncertainty and brazen misrepresentation surrounding them that is now the main driver of lower prices.
A turbulent market with the S&P 500 bouncing around in the high-4,000s to mid-5,000s range (it closed last week at a little under 5,300) is a reasonable expectation until some kind of policy clarity begins to replace the perpetual communication incompetence and the untrustworthiness of the information provided by the administration and its people.
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ARTICLE OF THE WEEK ..
Whether you realize it or not, there are a host of behavioral biases that impact how you approach saving and investing. Here are the main ones, including “the most important concept in finance”.
.. AND I QUOTE ..
“Economic uncertainty has never felt this uncertain”
Justin Fox, Bloomberg.
LAST WEEK BY THE NUMBERS:
Last week’s market color courtesy of finviz.com
Last week’s best performing US sector: Real Estate (Prologis, American Tower) ⬆︎ 3.6% for the week
Last week’s worst performing US sector: Technology (two biggest holdings: Apple, Microsoft) ⬇︎ 2.3% for the week
SPY, the S&P 500 Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest U.S. companies. Its price fell 1.3% last week, is down 10.2% so far this year and ended the week 14.1% below its all-time record closing high (02/19/2025).
IWM, the Russell 2000 Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest U.S. stocks. Its price rose 1.3% last week, is down 15.6% so far this year and ended the week 23.1% below its all-time record closing high (11/08/2021).
INTEREST RATES:
FED FUNDS * ⬌ 4.33% (unchanged)
PRIME RATE ** ⬌ 7.50% (unchanged)
3 MONTH TREASURY ⬌ 4.34% (4.34% a week ago)
2 YEAR TREASURY ⬇︎ 3.81% (3.96% a week ago)
5 YEAR TREASURY ⬇︎ 3.95% (4.15% a week ago)
10 YEAR TREASURY *** ⬆︎ 4.34% (4.32% a week ago)
20 YEAR TREASURY ⬇︎ 4.82% (4.91% a week ago)
30 YEAR TREASURY ⬇︎ 4.80% (4.85% a week ago)
Treasury data courtesy of ustreasuryyieldcurve.com as of the market close on Friday.
* Decided upon by the Federal Reserve. Used as a basis for interbank loans and for determining high yield savings rates.
** Used as a basis for determining many consumer loan rates such as credit cards, home equity and auto.
*** Used as a basis for determining mortgage rates.
AVERAGE 30-YEAR FIXED MORTGAGE RATE:
⬆︎ 6.83%
One week ago: 6.62%, one month ago: 6.66%, one year ago: 7.10%
Data courtesy of: FRED Economic Data, St. Louis Fed as of last Thursday.
FEDWATCH INTEREST RATE TOOL:
Where will the Fed Funds interest rate be after the next rate-setting meeting on May 7th?
Unchanged from now .. ⬆︎ 86% probability (79% a week ago)
0.25% lower than now .. ⬇︎ 14% probability (21% a week ago)
What is the most commonly-expected number of remaining 0.25% Fed interest rate cuts in 2025?
⬆︎ 4 (up by one from a week ago)
All data based on the Fed Funds interest rate (currently 4.33%). Calculated from Federal Funds futures prices as of the market close on Friday. Data courtesy of CME FedWatch Tool.
FEAR & GREED INDEX:
“Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffet.
The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand.
Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment.
Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal at some point.
A “sweet spot” is considered to be in the lower-to-mid “Greed” zone.
Data courtesy of CNN Business as of Friday’s market close.
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