Stock Market Cools After a Stunning, but Short-Lived Recovery Rally

The stock market had a stunning reversal yesterday and rallied massively after reports of tariffs being paused for 90 days (minus China) hit headlines, and this time, it was real. Several stocks posted record gains not seen in decades, and the broader market surged. The S&P 500 gained 9.52%, and the Nasdaq gained 12.16% on Wednesday’s news. Jim Cramer said the market went through a short squeeze as many traders were confident that the president was going to remain unwavering on tariffs.

Regardless, the stock market is still volatile. Hump Day’s rally could end up being a hump on the chart as well since the rally is cooling off early today. Many investors are pricing in a more focused but brutal trade war with China. It is not going to bring as much pain as a broader trade war with the rest of the world, but companies are still going to get hit. Moreover, tariffs are only paused, not canceled. Earlier tariff pauses on Mexico and Canada still caused pain for markets once the pause expired. But if China and the U.S. start negotiating, the recovery rally could last.

Here’s a market update as of 10:00 A.M (ET) today.

• The S&P 500 is down 144.82 points, or 2.66%.
• The Nasdaq Composite is down 536.73 points, or 3.13%.
• The Dow Jones Industrial Average is down 806.36 points, or 1.99%.

U.S. Inflation Report

The inflation report for March came in cooler than expected this morning.

• US CPI month-over-month declined by 0.1% vs. the 0.1% expected increase.
• US CPI year-over-year came in at 2.4% vs. the 2.5% forecast. It is down from the previous 2.8% print.
• US Core CPI month-over-month came in at 0.1% vs the 0.3% forecast.

This cooler inflation print is looked at more favorably by many, since this would give the Federal Reserve more leeway for cutting interest rates as expected this year. That said, inflation was mainly driven down by a fall in energy prices. Food prices increased by 0.5% from February, and the CPI egg index rose by 5.9%.

The impact of tariffs is expected to become more noticeable down the line since companies have been stockpiling more inventory ahead of tariffs. Once that inventory runs out, they may be forced to increase prices more.

U.S.-China Trade War: Round 2.

The trade war has narrowed, but it is still ongoing between the U.S. and China. The U.S. imposed higher tariffs at a rate of 125% on Chinese goods. It also has a 10% baseline tariff on all other countries that it is unlikely to withdraw regardless of negotiations, at least according to Scott Bessent. The EU has paused its retaliatory tariffs after the U.S. did.

China retaliated earlier to tariffs by the U.S. by imposing an 84% tariff on U.S. imports. It has yet to retaliate against the newly increased tariffs. According to the White House’s Senior Advisor Hassett, there has been no talk between Trump and Xi so far.

Comments From the Fed’s Logan

Dallas Fed’s Lorie Logan made the following notable comments:

“Inflation persistence will depend on how quickly companies pass through cost increases and if long-term inflation expectations remain well anchored.”

“Higher-than-expected tariffs would very likely raise both unemployment and inflation.”

“If higher inflation expectations get entrenched, [the] road to price stability is longer, economic scars are deeper.”

“Important to keep any tariff-related price increases from fostering more persistent inflation.”

Other Assets

• Gold is up by 2%.
• Crude Oil Futures are down by 4.3%.
• Natural Gas Futures are down by 2.7%.
• Bitcoin is down by 1.8%.