Daily market snapshot

• Stocks modestly lower as tariff headlines continue – U.S. markets closed modestly lower on Tuesday, as tariff headlines continue to drive markets. This week, the U.S. administration temporarily paused tariffs on consumer electronics, including smartphones and semiconductors, although it indicated that these will soon be added back to a new category of sector tariffs. In response, China also halted purchases and deliveries of Boeing jets and aircraft equipment from the United States. President Trump also is considering a potential pause on auto tariffs, which boosted the sector yesterday. But again, the administration noted this would be temporary to give carmakers some time to adjust supply chains. Overall, the tariff backdrop remains fluid, and the uncertainty has weighed on financial markets. While stocks had moved higher the past two days, the S&P 500 is down about 8% this year, while the tech-heavy Nasdaq is lower by about 13%*. We would expect volatility to continue, in our view, until a more definitive tariff regime is established, although perhaps peak tariff rates are behind us. 
   
• A reset in stock valuations – While market returns have been negative this year, the upside is that valuations are now looking more compelling and are no longer stretched, which was a concern coming into this year. All major indexes are trading at or below their 10-year historical forward price-to-earnings multiples, potentially setting the stage for improved long-term returns. The S&P 500 forward multiple is now around 18 times next year's earnings forecast, down from a recent high of 22.7 times, while the Nasdaq forward multiple is about 21 times, down from its recent high of 30 times*. In our view, the spike in volatility, a reset in valuations, and signs that the worst-case scenario in the trade war appears to be averted suggest that stocks may find some support and try to carve out a bottom. Risks have risen, but a recession is not inevitable in our view, and stocks appear to have already priced in a significant degree of bad outcomes.
   
• Bank earnings surpass expectations – The first-quarter earnings season officially kicked off last Friday, with bank earnings in focus. Companies like J.P. Morgan, Goldman Sachs, Morgan Stanley and Citibank have all reported earnings thus far. Overall, the big banks have surpassed earnings expectations, primarily driven by higher trading revenue in equities and fixed income*. While the consumer has been resilient in the first quarter, and credit quality remains healthy, bank executives are pointing to uncertainty in the quarter ahead, given tariff volatility and the potential for higher inflation and slower growth. Capital-markets activity, including IPOs and mergers and acquisitions, has been particularly soft. Overall, we would expect corporate earnings to continue to be revised lower from the current forecasts of around 10% S&P 500 earnings growth. Earnings growth, however, should still be positive this year in our view, especially if the tariff backdrop stabilizes and the administration shifts its focus to tax reform and deregulation.

Mona Mahajan
Investment Strategist

Source: *FactSet

• Stocks rise on tariff exemption for electronics - U.S. and global equities finished broadly higher after the Trump administration exempted smartphones, computers, semiconductors, and other electronics from "reciprocal" tariffs. That includes the 125% tariff on China and the 10% baseline tariffs on other countries. President Donald Trump also said he is exploring possible temporary exemptions on imported vehicles and parts to give auto companies more time to set up domestic manufacturing. Small- and mid-caps outperformed, while the tech-heavy Nasdaq also rose on the news. However, optimism was contained by Commerce Secretary Lutnick's comments that the exemptions are temporary, as electronics will be covered by a separate sectoral tariff framework on semiconductors, which is expected to be announced in the next one to two months. Nonetheless, the news offered a welcomed reprieve to the escalating trade war. Additional support today came from signs of stabilization in the bond market, with the 10-year Treasury yield falling to 4.38% after an unexpected rise to 4.50% last week*. 
   
• Tariff pause may help ease volatility - With U.S. stocks on the verge of entering a bear market, the U.S. administration softened its approach last week, announcing a 90-day delay on the implementation of the "reciprocal" tariffs, with the exception of China. The pause provides time for negotiations, potentially allowing countries to strike deals. Perhaps peak trade uncertainty is now behind us, even though businesses and investors are unlikely to get the clarity they seek right away. Negotiations will kick into high gear, but that process may take a while, and, in the meantime, there will likely be a mix of positive and negative headlines keeping volatility elevated. However, with volatility jumping last week to near historic extremes, there is more room for it to fall than rise. History also shows that fear creates opportunities for those that follow a disciplined and patient approach. Once the VIX, also known as the fear index, has exceeded 43 (it reached a high of 52 on 4/8/25), forward six- and 12-month equity-market returns have been strong*. 
   
• Earnings next in focus - In a holiday-shortened week in honor of Good Friday, investors will be paying close attention to corporate updates, as the first-quarter earnings season kicks into higher gear. With tariff risks looming, analysts have started to revise earnings estimates lower, but positive growth is still expected. The estimated earnings growth rate for the quarter is 7.3%, down from 18.2% in the fourth quarter of 2024, with seven of the 11 sectors expected to deliver positive earnings growth*. Health care and technology are expected to experience the fastest earnings growth, while energy and materials are likely to see the largest earnings decline. For the full year, analysts are looking for S&P 500 earnings to grow 10%*. As economic growth slows this year, we think that further downward revisions are likely. However, the upside of this down market is that valuations are now looking more compelling and are no longer stretched, which was a concern coming into this year. All major indexes are trading at or below their 10-year historical averages, potentially setting the stage for improved long-term returns*.

Angelo Kourkafas, CFA
Investment Strategist

Source: *FactSet

• Stocks rise on Friday to close out a volatile week – Equity markets were up on Friday, as earnings season kicks off, with materials and technology stocks posting the largest gains. The University of Michigan's preliminary consumer sentiment index, released this morning, fell for the fourth consecutive month in April to 50.8, missing forecasts of a smaller drop to 54.0.* The survey shows the impact of tariffs on consumer confidence, with expectations for inflation over the next 12 months rising to 6.7%, up from 5.0% in March.** While these readings could begin to affect consumer spending, they do not reflect the 90-day pause in new tariffs by President Trump, which could have a positive impact on surveys over the coming months. In international markets, Asia was mixed, as China raised its tariffs on imports from the U.S. to 125%, while Europe was down modestly.* Bond yields rose, with the 10-year Treasury yield at 4.49%. The U.S. dollar declined against major international currencies. In commodity markets, WTI oil traded higher following its steep decline in recent weeks*.
   
• Corporate earnings season off to a solid start – First-quarter earnings season kicked off this week, with the largest banks leading the way. J.P. Morgan Chase, Wells Fargo and Morgan Stanley each reported earnings that exceeded estimates. While forecasts for first-quarter earnings growth of S&P 500 companies have been revised lower to 6.4%, performance is expected to be broad, with seven of the 11 sectors forecast to report higher earnings year-over-year*. Wider earnings growth should drive more balanced market performance across sectors, strengthening the case for portfolio diversification, in our view. In addition, earnings growth is expected to accelerate over the quarters ahead to 10.5% for 2025,* which should provide solid fundamentals to support stock prices over time, in our view.
   
• Producer price inflation lower than expected – Producer price index (PPI) inflation fell to 2.7% annualized in March, well below estimates calling for a modest increase to 3.3%*. Energy prices were a key contributor to the drop in headline wholesale inflation, down 4.0% month-over-month***. Core PPI inflation, which excludes more-volatile food and energy prices, declined to 3.3% on a year-over-year basis, compared with forecasts for 3.6%*. We believe these readings, though likely not meaningfully impacted by tariffs, indicate that inflation continues to moderate. We expect tariffs to put some upward pressure on inflation, as higher import costs are at least partially passed along to consumers. However, most of this impact should be near-term price hikes that aren't an ongoing driver of inflation, in our view.

Brian Therien, CFA
Investment Strategy

Source: *FactSet **University of Michigan ***U.S. Bureau of Labor Statistics

• Stocks pull back following historic rally yesterday – Equity markets closed lower today, as energy and technology stocks led to the downside. President Trump has announced a pause on the new tariffs for 90 days to allow for negotiations to potentially reduce tariffs and other trade barriers. Tariff rates for nearly all countries will move lower to 10%, except for China, for which they will rise to 145%.* Sectoral duties of 25% on steel, aluminum and autos remain in effect as well. In international markets, Asia rose sharply, led by Japan's Nikkei, which was up 9.1%. Europe was up 3% - 4% as well, as the European Union announced it will also pause its countermeasures to U.S. tariffs for 90 days.* Bond yields were up modestly, with the 10-year Treasury yield at 4.40%, but remain below yesterday's peak of 4.5%. The U.S. dollar declined against major international currencies. In commodity markets, WTI oil traded lower on demand concerns, as trade tensions between the U.S. and China remain high*.
   
• CPI inflation falls more than expected – Consumer price index (CPI) inflation fell to 2.4% annualized in March, below forecasts calling for 2.6%*. The energy component was down 3.3%** from a year ago, as lower crude oil prices flow through to gasoline and other energy commodities. Core CPI, which excludes more-volatile food and energy prices, dropped to 2.8%, compared with estimates for 3.0%. Shelter inflation slowed to a 4.0% pace, down from 5.6% a year earlier, providing a key driver in moderating inflation.* These readings, though likely not meaningfully impacted by tariffs, indicate that inflation continues to moderate. We expect tariffs to put some upward pressure on inflation, as higher import costs are at least partially passed along to consumers. However, most of this impact should be near-term price hikes that aren't an ongoing driver of inflation, in our view. Bond markets are pricing in inflation of about 2.27% over the next 10 years, indicating that long-term inflation expectations remain well anchored.***
   
• Jobless claims edge higher – Weekly jobless claims rose to 223,000 this past week, slightly below estimates calling for 225,000*. Jobless claims have averaged about 223,000 over the past four weeks, which is about in line with the average for 2024*. While federal government layoffs will likely drive jobless claims higher in the months ahead, we believe these readings, combined with other recent data, indicate that the labor market remains healthy. The unemployment rate is still low at 4.2%, and 7.6 million job openings exceed unemployment of 7.1 million. Wage gains should remain above inflation, providing positive real wages to support consumer spending and the economy, in our view.

Brian Therien, CFA
Investment Strategy

Source: *FactSet **U.S. Bureau of Labor Statistics ***Federal Reserve Bank of St. Louis

• Stocks rebound to close sharply higher as tariff rates are on hold for 90 days – Equity markets rallied across the board this afternoon, as President Trump announced a pause on the new tariff rates for 90 days. President Trump announced tariff rates on all countries would move lower to 10%, except for China, whose tariff rate would move higher to 125%*. The administration also clarified that the pause would not apply to sector tariffs, which are currently in place for autos and steel and aluminum. Stock markets rallied 8% to 12% across major indexes, with the tech-heavy Nasdaq leading the way higher*. Meanwhile, Treasury yields also were higher, although lower than recent peak levels. The 10-year Treasury yield has climbed to around 4.34%, after reaching its low of the year of around 4% last week*. The 10-year Treasury auction today was well-received, supported by strong demand***. In our view, the news on the tariff pause is a welcome de-escalation of the recent global trade tensions. While a 10% average rate (or perhaps higher given Chinese and sector tariffs) will still weigh on economic growth and inflation, this is a scenario we believe where economic and earnings growth can still be positive for the year.
   
• Keep in mind that market volatility can be an opportunity – Historically, when the VIX volatility index reaches extreme highs, like this week when it went up to levels above 50, the 12-month forward return tends to be positive by around 20%*. And it can take time for volatility to return to average levels, about eight months on average*. Nonetheless, remember that historically bear markets do occur once every three years and typically are followed by bull-market periods, which tend to be longer and have higher returns. With stocks down close to bear-market levels earlier this week, keep in mind that markets have priced a lot of negative news in already. If, for example, a recession does not materialize, stocks may recover. We continue to recommend portfolio diversification as a key strategy for the year ahead, and remember that time in the market is a better long-term strategy than trying to time yourself in and out of the market. Read our Don't Fear the Bear report for more insights here too: Don’t fear the bear.
   
• Inflation data is up next: Consumer price index (CPI) inflation for the month of March is scheduled to be released on Thursday morning. Expectations are for headline CPI to rise by 2.6% year-over-year, below last month's 2.8% rate. Core CPI is expected to rise by 3%, also lower than last month's 3.1% reading.* Keep in mind that Thursday's CPI reading is unlikely to yet reflect any impact from tariffs, which did move higher on April 9. In our view, the proposed tariffs will likely put upward pressure on inflation in the near term. U.S. importers will face higher costs and are likely to pass on part of this to consumers. However, we don't believe that tariffs represent an ongoing source of inflation that would cause long-run inflation expectations to become unanchored. In fact, the 10-year breakeven inflation rate, which is a market-based measure of inflation expectations over the next 10 years, has declined to below 2.3%, near the average of its three-year range.* We believe this signals that longer-term inflation expectations remain anchored and that the downside risks to economic growth from the proposed tariffs are potentially more acute than the upside risks to inflation. In our view, this will give the Fed flexibility to lower rates if economic growth shows meaningful signs of slowing.

S&P 500 Forward Returns Following a 20% Decline**

Mona Mahajan
Investment Strategy

Source: *FactSet **FactSet, Edward Jones. S&P 500 Price Index. ***U.S. Treasury