April 7th Market Overview

Happy Monday.

What a session. Stocks took another dive today, though buyers stepped in off the lows after a record Dow swing. Trump ramped up the tariff heat, targeting China with a 50% threat and confirming no pause is coming. We're now three days deep into this tariff-driven sell-off, and recession worries are front and center.

If you're feeling a little uneasy, check out yesterday's article I put out.

I wrote it with the nervous investor in mind. Article can be read here.

Let's dig in...

Executive Summary

• Markets recorded their third consecutive day of losses amid extreme volatility, briefly pushing the S&P 500 into bear market territory before recovering
  

• The Dow posted its largest intraday swing in history as traders tried to process trade policy implications
  

• Major financial institutions including Goldman Sachs and JPMorgan Chase now predict potential recession in 2025
  

• The White House confirmed April 9th tariff implementation remains unchanged, dismissing speculation about delays
  

• Tech nd Communication Services sectors demonstrated relative strength, outperforming the broader market
  

Market Overview

Key Market Drivers

1. US-China trade escalation: President Trump threatened 50% additional tariffs on China unless they withdraw their 34% retaliatory measures by April 8th, also stating he would terminate requested meetings
   

2. Global market contagion: Asian markets suffered severe losses with Hong Kong plunging 13.22% and Japan falling 7.83%, triggering circuit breakers in Japanese futures trading
   

3. Deteriorating economic outlook: JPMorgan Chase now forecasts -0.3% GDP contraction for 2025, while Goldman Sachs raised recession probability to 45% and slashed Q4 growth projections to 0.5%
   

4. Shifting rate expectations: Bond markets now price in five Federal Reserve cuts through 2025, with similar expectations for ECB and BoE easing
   

5. Extreme market measures: Trading volumes hit record levels while the VIX fear gauge surged to 50, historically seen only during bear markets
   

Stock Spotlight

Apple ($AAPL ( ▲ 2.21% ) ) shares declined as Bloomberg reported the company could be forced to raise iPhone prices in the US due to tariff impacts, with some reports suggesting prices could reach $2,300

Tesla ($TSLA ( ▲ 0.02% ) ) dropped after Wedbush maintained an outperform rating but lowered its price target to $315 from $550, calling this a “pivotal moment of truth for Musk” and noting the brand faces challenges as “a political symbol”

U.S. Steel ($X ( ▲ 2.12% ) ) bucked the trend and advanced nearly 9% after President Trump ordered a review of Japan’s Nippon Steel’s proposed takeover, instructing the Committee on Foreign Investment to determine “whether further action may be appropriate”

Dollar General ($DG ( ▲ 1.43% ) ) gained following Citi’s upgrade to neutral from sell with a raised price target to $101 from $69, highlighting its low tariff exposure and positioning as a value proposition that could benefit during economic uncertainty

Big Name Updates

Bank of America ($BAC ( ▲ 2.0% ) ) received an upgrade to Overweight from Equal Weight at Morgan Stanley

Goldman Sachs ($GS ( ▲ 1.93% ) ) was downgraded to Equal Weight from Overweight at Morgan Stanley

Meta, Google, and Amazon ($META ( ▼ 2.22% ) , $GOOGL ( ▲ 1.23% ) , $AMZN ( ▼ 1.49% ) ) demonstrated resilience in Raymond James’ digital ad checks for Q1, compared to mixed results for Snap, Pinterest, and Reddit ($SNAP ( ▼ 0.63% ) , $PINS ( ▼ 1.97% ) , $RDDT ( ▼ 2.86% ) )

Nvidia ($NVDA ( ▼ 0.2% ) ) and select tech names attracted buyers during volatile trading, highlighting sector rotation dynamics as investors reassessed portfolio positioning

Starbucks ($SBUX ( ▲ 0.07% ) ) was downgraded to Neutral from Outperform at Baird, which reduced its price target to $85 from $114 despite expressing confidence in CEO Brian Niccol’s leadership

Other Notable Company News

General Motors ($GM ( ▲ 3.46% ) ) was downgraded to underperform from market perform at Bernstein, which lowered its price target to $35 from $50, noting that vehicle tariffs have commenced with parts tariffs likely following, potentially reducing free cash flow by more than 20%

JetBlue Airways ($JBLU ( ▼ 0.27% ) ) earned an upgrade to outperform at Raymond James, which cited “low bankruptcy risk and an M&A floor” despite market pressures

Walmart ($WMT ( ▲ 2.08% ) ) received a buy rating with a $112 price target from UBS, which highlighted its advertising business as a significant potential tailwind

United, Delta, and American Airlines ($UAL ( ▲ 0.14% ) , $DAL, $AAL) maintained buy ratings at Citi, which anticipates positive fundamentals once tariff issues stabilize

Dollar Tree ($DLTR ( ▲ 2.22% ) ) rose after Citi upgraded it to Buy, describing it as a potential “dark horse winner” in a trade war scenario

Caterpillar ($CAT ( ▲ 1.59% ) ) declined following UBS downgrades on machinery stocks, citing risks from potential trade escalation

Sector Watch

Bond Market

• 10-year Treasury yield rebounded above 4.15%, erasing last week's declines

• Markets shrugged off the yield spike, remaining focused on trade developments

• Bond traders now price in five Fed rate cuts through 2025

• HSBC strategists suggest markets have entered oversold territory, potentially setting up for a short-term bounce

Policy Watch

US Stance:

• White House confirmed April 9th tariff implementation remains unchanged

• Commerce Secretary Lutnick: "The tariffs are coming" and won't be postponed

• Trump called for Fed rate cuts, claiming "NO INFLATION" exists

• Acting SEC Chair Uyeda assured markets functioned "exactly as designed" during record volume trading

International Responses:

• Taiwan and Vietnam offered zero tariffs to US with pledges not to retaliate

• Italy's Foreign Minister suggested EU might delay counter-tariffs until April 30th

• Japan's Prime Minister seeking discussions for potential tariff deal with Trump
  
  

What to Watch

1. China's response to Trump's ultimatum:

   • Beijing faces an April 8th deadline to withdraw its 34% tariff increase or face additional 50% US tariffs

   • Any signals about China's promised "front-loaded" domestic stimulus package

   • Potential diplomatic channels opening despite public rhetoric
     

2. Market technical indicators:

   • The S&P 500's behavior around bear market territory (20% from peak)

   • VIX movement after reaching the psychologically important 50 level

   • Trading volumes and market internals for signs of capitulation or stabilization
     

3. Central bank communications:

   • Federal Reserve officials' comments on how trade developments might influence monetary policy

   • Market reactions to shifting rate cut expectations

   • ECB and Bank of England officials' perspectives on global trade tensions
     

4. Earnings guidance and corporate commentary:

   • Early indications from company executives about supply chain adjustments

   • Sector-specific vulnerability assessments

   • Statements about potential price changes or margin impacts
     

5. Potential negotiations with trading partners:

   • Developments between the US and countries offering zero tariffs like Vietnam and Taiwan

   • Progress in talks with Japan following their PM's outreach

   • EU decisions regarding the timing and scope of counter-measures

Thanks for reading 🙂

- John