April 23, 2025

After the market ended at the worst April performance since 1932, perhaps the President learned that it was not a good idea to attack the Federal Reserve Chair in such a way. In remarks to  reporters on Tuesday, he walked back his previous statements that had fueled speculation about Powell's job security and helped to contribute to the latest stock market downturn.

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After saying last week that Powell's "termination" couldn't come fast enough, the president said Tuesday, "I have no intention to firing him. I would like to see him be a little more active in terms of his idea to lower interest rates. This is the perfect time to lower interest rates. If he doesn't, is it the end? No, it's not."

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In recent weeks, Trump has expressed growing frustration with the Federal Reserve’s reluctance to continue cutting short-term interest rates. The president believes that such cuts are necessary given what he describes as a lack of inflationary pressure in the economy.

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On Tuesday, Trump resumed his criticism of Fed Chair Jerome Powell, asserting that inflation is no longer a concern—despite confirming that Powell would remain in his position. He cited declines in energy and grocery costs as evidence that inflation is no longer a concern. Trump has argued that falling prices in key consumer categories should justify lower interest rates.

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Trump said last week about Powell, "If I want him out, he'll be out of there real fast, believe me," Trump told reporters in the Oval Office during a meeting with Italian Prime Minister Giorgia Meloni. "I'm not happy with him."

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Meanwhile, as of Monday’s awful session as the dollar slumped to a three-year low as growing global skepticism over U.S. investments intensified, driven by Trump’s ongoing trade war and his public criticism of the Powell. These actions had rattled confidence in the traditional economic order, prompting investors to pull back.

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Chair Powell had maintained that Trump’s trade policies, particularly the use of tariffs, are generating economic uncertainty, which could slow growth and contribute to higher inflationary pressures.

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Despite the tension with Trump, Powell has repeatedly affirmed the Fed's independence and commitment to resisting political influence, emphasizing the central bank's dual mandate to maintain stable prices and support maximum employment.

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The Federal Reserve has paused further cuts to its benchmark federal funds rate, which currently stands at approximately 4.33 percent, a full percentage point lower than it was last August, as inflationary pressures have shown signs of easing.

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The Fed had originally raised the rate in response to surging inflation during President Biden’s term, driven by the global economic rebound from the COVID-19 pandemic and elevated energy and food costs following Russia's 2022 invasion of Ukraine.

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So after this turnaround on the comments about the Fed and some conciliatory remarks from Treasury Secretary Bessent about potential progress in dealing with trade relations with China, the market went nuts on the upside with the Dow skyrocketing by 1,016 points to 39,186 with all 30 members higher.

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The S&P also went very strongly on the upside as well with a 130 point gain to 5287 with 99% of its members gaining ground, while the Nasdaq also did extremely well with a 429 point jump to 16,300.

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Even the lagging Russell 2000 Index of small stocks made a decent gain of 50 to 1890 while the VIX moved down to 30.57.

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The value of the dollar also stabilized after sliding against the euro and other competitors, while longer-term Treasuries held steadier as more calm returned to financial markets. Sharp, unusual moves for the dollar and for Treasurys have recently raised worries that Trump’s policies are making investors more skeptical about U.S. investments’ reputation as the world’s safest.

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The only prediction that many strategists are willing to make is that financial markets will likely continue to veer up and down as hopes rise and fall that Trump may negotiate deals with other countries to lower his tariffs. If no such deals come quickly enough, many investors expect the economy to fall into a recession.

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The International Monetary Fund on Tuesday slashed its forecast for global economic growth this year to 2.8%, down from 3.3%. And for the U.S, it lowered its forecast for growth to 1.8%. But Vice President JD Vance also said he made progress with India’s prime minister, Narendra Modi, on trade talks Monday.

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A suite of better-than-expected profit reports from big U.S. companies, meanwhile, helped drive U.S. stocks higher.

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EFX jumped 14% after reporting a better profit for the first three months of 2025 than analysts expected. It also said it would send more cash to its shareholders by increasing its dividend and buying up to $3 billion of its stock over the next four years.

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Dow component 3M climbed 8% after the maker of Scotch tape and Command strips said it made more in profit from each $1 of revenue during the start of the year than expected. The company also stood by its forecast for profit for the full year, though it said tariffs may drag down its earnings per share by up to 40 cents per share.

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Homebuilder PHM gained 8% after it likewise delivered a stronger profit for the start of 2025 than analysts expected.

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TSLA reported after the close that its first-quarter car sales fell by 13% from the year before, as it has been hurt by vandalism, widespread protests and calls for a consumer boycott amid a backlash to Musk’s oversight of cost-cutting efforts for the U.S. government.

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Stocks also showed how Trump’s tariffs could create winners and losers as he tries to remake the global economy and trade.

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FSLR jumped by 10% after the Department of Commerce finalized harsher-than-expected solar tariffs on some southeast Asian communities.

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Defense contractors, meanwhile, had some of the market’s sharpest losses after RTX said tariffs on Mexican and Canadian imports, along with other products, could mean an $850 million hit to its profit this year. RTX, which builds airplane engines and military equipment, fell by 10% even though it reported a stronger profit for the latest quarter. Fellow defense contractor NFX fell as well.

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KMB also lost ground even though the maker of Huggies and Kleenex likewise reported a better-than-expected profit. Its C.E.O.  said that “the current environment will now mean greater costs across our global supply chain” versus what it expected at the start of the year, and the company lowered its forecast for an underlying measure of profit this year.

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In the bond market, longer-term yields eased following an unsettling run higher the day before. The yield on the 10-year Treasury pulled back to 4.39% from 4.42% late Monday.

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This week will see the following earnings releases: yesterday – Dow component 3M higher, in addition to GE, PHM, EFX while NOC, NTX, LMB were lower; today – Dow component BA plus TSLA, GEV, DHI, ODFL, NEE, R higher; tonight - Dow component IBM plus ALK;  Thursday – Dow components MRK and PG, plus GOOG, VLO, XEL, UNP; Friday – SLB.

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Economic reports will show: today - March new home sales; Thursday – weekly jobless claims, March durable goods orders, March existing home sales; Friday – final March U. of Michigan Consumer Sentiment Survey.