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Is this as good as it gets on inflation?
CPIS inflation cooled in March. The all-items or headline inflation rate fell by 0.1% in March from February. That was the first monthly decrease in nearly five years. The core Consumer Price Index, which excludes more volatile food and energy prices, increased by just 0.1% from February, the least in nine months, according to Bureau of Labor Statistics data on Thursday.
The slowdown in the all-items rate reflected a drop in prices for energy, used vehicles, hotel stays and airfares. The cost of motor vehicle insurance — a main source of inflation in recent years — also retreated. But, and this is an important caveat, the numbers were too early capture much of the effect of higher tariffs.
Still to come? Drug tariffs
President Donald Trump has pledged tariffs on drugs exported to the United States. Besides the threat to supply chains that could disrupt the supply of drugs to U.S. consumers, the potential tariffs threaten a clash between drugmakers and insurers over who will pay the higher prices.
What’s it all mean? My thoughts on the meaning of today’s tariff chaos for investors
We started off the day with the stock and bond markets headed for another retreat on news that the European Union and China were both slapping higher tariffs on U.S. exports and the United States was raising tariffs on China to 125% We ended the day with a 10%–or better–rally as President Donald Trump paused last week’s Liberation Day tariffs for 90 days–and replaced them with a 10% across the board rate–for everyone but China.The 125% tariff rate for China would remain intact. So what’s it all mean? It’s too early for definitive conclusions but here are my initial thoughts.
Treasury auction today better than expected
Today’s U.S. Treasury auction of $39 billion in 10-year notes went better than expected despite recent volatility in the bond market. That lessened my worry about a potential tightening of liquidity in the critical Treasury market.
Please watch my new YouTube video: No Powell Put…Yet
Today’s Video: No Powell Put…Yet. The market is betting on the Fed riding to the rescue with rate cuts, but I don’t see it happening anytime soon. The Fed’s job is controlling inflation and employment—not propping up stocks. Even with recent market jitters, the economy still looks too strong for the Fed to panic. Jobs numbers are holding up, and we haven’t even felt the full drag from tariffs or the potential stimulus of looming Trump tax cuts. The Fed won’t move until the data screams weakness—and right now, it’s just whispering. Meanwhile, traders are pricing in three cuts this year, with some even hoping for an emergency cut before May. That’s wishful thinking. The Fed knows premature easing could backfire, especially with tariffs threatening inflation. Technically, the S&P 500 could drop another 5% to 10% before hitting key support levels. Bottom line: Don’t get suckered by bear market rallies. The Fed isn’t bailing anyone out yet, and betting otherwise is a dangerous game.
President Trump pauses all tariffs for 90 days–except for those on China
Just in case you were getting bored with the lack of volatility in today’s market: On Wednesday afternoon, President Donald Trump announced he would raise the tariff charged on Chinese exports to the United States to 125%, effective immediately. And that he would pause for 90 days most of the tariffs he announced just last Wednesday on Liberation Day and instead implement a 10% global tariff. Here’s what President Trump wrote on social media
China retaliates with 50% tariff on U.S. goods, bringing total to 84%
Two and half hours before the opening of the U.S. stock markets Wednesday morning, China announced its response to President Donald Trump’s hike of tariffs on all Chinese imports. China imposed a 50% retaliatory tariff on all U.S. goods, bringing the total counter-tariff to 84%.
Safe haven no more–U.S. Treasuries sell off
The yield on the 10-year U.S. Treasury is up 13 basis points to 4.43% as of noon New York time today as bond prices fell on strong selling. That’s extraordinary–usually Treasuries rise in price and yields fall when fear stalks Wall Street–and cause for worry. Just a few days ago, the 10-year Treasury had traded below 4%. Yields on the 30-year bond rose significantly today as well, at one point on Wednesday topping 5%.
“The global safe-haven status is in question,” Priya Misra, a portfolio manager at JPMorgan Asset Management, told Bloomberg.
Europe imposes 25% tariff–but the big one is still to come
The European Union retaliated to President Donald Trump’s steel tariffs Wednesday, April 9, with tariffs of up to 25% on a broad list of U.S. products. This is old news, however-a belated response to tariffs President Trump imposed on EU exports of steel and aluminum last month. Still to come is another round of retaliatory tariffs in response to the 20% tariff imposed by Trump last week on all EU exports to the United States.
Another sign of consumer stress: a rise in 401(k) hardship withdrawals
More Americans than average are turning to their retirement accounts for emergency cash, according to Empower. Hardship withdrawals from 401(k)s are running about 15% to 20% above the historical norm
You can kiss today’s rally effort good-bye
So much for this morning’s rally. And so much for an end to the selling. The Standard & Poor’s 500 closed down 1.57% and the NASDAQ Composite ended the day off 2.15%. The small cap Russell 2000 was lower by 2.73%. The CBOE S&P 500 Volatility Index, the VIX “fear index,” closed up 11.09% to a very high 52.20.
Glad that Bear market is over–based on nothing stocks rally
Stocks saw their biggest rally since November 2022. As of 10:30 a.m. New York time Tuesday morning, the Standard & Poor’s 500 was up 3.80%. The NASDAQ Composite was higher by 4.32%. The CBOE S&P 500 Volatile Index, the VIX “fear index” had dropped 19.6% to a still very elevated 37.6. So what has fueled today’s rally and the turn around from last week’s panic selling?
Please watch my new YouTube video: Hot Money Moves Now–The Volatility of the VIX
Today’s Hot Money Move is The Volatility of the VIX. I’ve been playing the VIX (the CBOE S&P 500 Volatility Index) as a hedge against market fear, and right now, it’s showing a clear pattern tied to tariff anxiety. Back in January, I bought VIX options when the index was sitting between 14 and 16—near its long-term average of 15 to 17—with strike prices at 20 to 25. Lately, these options have been swinging hard, jumping 30–40% in value before pulling back and then rallying again. The reason? Investors panic ahead of tariff announcements, driving the VIX up as they hedge. But here’s the pattern: once the tariffs are actually announced, the VIX drops as relief sets in. For active traders, this is a short-term play—buy into the fear, sell into the relief. Just remember: these patterns hold until they don’t, so keep a close eye on it if you’re going to make these plays.
President threatens new 50% tariff on China on Wednesday
Today, April 7, President Donald Trump threatened additional 50% tariffs on China if it did not rescind its retaliatory trade measures–a 34% tariff, restrictions on exports of rare earth minerals and other measures, designed to match the 34% tariff President Trump announced on Chinese good last week
In a post on Truth Social Trump said the U.S. would impose even higher tariffs on China if Beijing did not back down. “If China does not withdraw its 34% increase above their already long term trading abuses by tomorrow, April 8th, 2025, the United States will impose ADDITIONAL Tariffs on China of 50%, effective April 9th,” the president posted on Truth Social. “Additionally, all talks with China concerning their requested meetings with us will be terminated!”
Futures markets signal nasty Monday open
The futures contracts for the S&P 500 Index and the Nasdaq 100 Index each fell as much as 5% in the early Asian trading. U.S. equity futures plunged, putting the Standard & Poor’s 500 on track for a bear market as the Trump administration dug in on a trade war economists warn will tip the world’s largest economy into recession. Contracts on the S&P 500 Index plunged 3.6% at 6:27 p.m. Sunday in New York, after the underlying index had fallen 10% in the past two days. The rout in futures would leave the index on a pace to fall more than 20% from its February record. Nasdaq 100 Index futures sank 4.4%, after the tech-heavy gauge entered a bear market Friday. Russell 2000 futures lost almost 5%. A big reason for the rout in futures was the failure of the Trump officials speaking on the Sunday talk shows to say anything to demonstrate any re-thinking of the tariffs after the financial markets said, “Hell no” on Thursday and Friday.
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