April 8, 2025

The market yesterday swung through one of the most volatile days ever om both directions before ending mainly lower after President Trump threatened to move his tariffs higher, despite a stunning display showing how dearly investors want him to do the opposite.

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The S&P slipped by 12 points at the end of the day full of heart-racing reversals as battered financial markets try to figure out what Trump’s ultimate goal is for his trade war. If it is to get other countries to agree to trade deals, he could lower his tariffs and avoid a possible recession. But if it is to remake the economy and stick with tariffs for the long haul, stock prices may need to fall further.

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The Dow fell 349 points, and the Nasdaq composite edged up by 15 to 15, 603.

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All three indexes started the day sharply lower, and the Dow plunged as many as 1,700 points following even worse losses elsewhere in the world. But it suddenly surged to a gain of nearly 900 points in the late morning which was its largest intraday reversal of all time. The S&P meanwhile went from a loss down to 4835, which put it into a bear market of worse than 20% to a gain up to 5247, which would have been its biggest jump in years.

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The sudden rise followed a false rumor that Trump was considering a 90-day pause on his tariffs, one that a White House account on X quickly labeled as “fake news.” That a rumor could move trillions of dollars’ worth of investments shows how much investors are hoping to see signs that Trump may let up on tariffs.

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Stocks quickly turned back down, and shortly afterward, Trump dug in further and said he may raise tariffs more against China after the world’s second-largest economy retaliated last week with its own set of tariffs on U.S. products.

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It is a slap in the face to investors because it suggests that Trump may not care how much pain he inflicts on the market. Many professional investors had long thought that a president who used to crow about records reached under his watch would pull back on policies if they sent the Dow reeling.

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On Sunday Trump told reporters aboard Air Force One that he was not concerned about a selloff and that “sometimes you have to take medicine to fix something.”

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Trump has given several reasons for his stiff tariffs, including to bring manufacturing jobs back to the United States, which is a process that could take years. He said on Sunday that he wanted to bring down the numbers for how much more the United States imports from other countries versus how much it sends to them.

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Indexes nevertheless kept swinging between losses and gains Monday after Trump’s latest tariff threat, in part because hope still remains in markets that negotiations may still come.

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All that seemed certain Monday was the financial pain hammering investments around the world for a third day after Trump announced tariffs in his “Liberation Day.”

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Stocks in Hong Kong plunged 13% for their worst day since 1997. A barrel of benchmark U.S. crude oil dipped below $60 during the morning for the first time since 2021, hurt by worries that a global economy weakened by trade barriers will burn less fuel. Bitcoin  sank below $79,000, down from its record above $100,000 set in January, after holding steadier than other markets last week.

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Trump’s tariffs are an attack on the globalization that has remade the world’s economy, which helped bring down prices for products on the shelves of U.S. stores but also caused production jobs to leave for other countries.

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It also adds pressure on the Federal Reserve as investors have become nearly conditioned to expect the central bank to swoop in as a hero by slashing interest rates to protect the economy during every downturn. But the Fed may have less freedom to act this time around because inflation remains higher than the Fed would like. And while lower interest rates can goose the economy, they can also put upward pressure on inflation.

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“The recent tariffs will likely increase inflation and are causing many to consider a greater probability of a recession,” JPMorgan CEO Jamie Dimon wrote in his annual letter to shareholders Monday. “Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth.”

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In the bond market, Treasury yields rallied to recover some of their sharp drops from earlier weeks. Some of the big move may have been because of reduced expectations for cuts to interest rates by the Fed.

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The yield on the 10-year Treasury jumped to 4.20% from 4.01% late Friday.

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Earlier in the day, the S&P briefly fell more than 20% below its record set less than two months ago. If it finishes a day below that bar, it would be a big enough drop that becomes a bear market, below the 10% correction.

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The S&P, which sits at the heart of many investors’ 401k accounts, is coming off its worst week since COVID began crashing the global economy in March 2020.

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In summary, the Dow fell by 349 to 37,965, the S&P dipped by 12 to 5062, the Nasdaq eked out a 15 point gain to 15,603 while the pathetic Russell 2000 Index of small stocks continued to sink deeper into a bear market with a decline of 17 to 1810 while the VIX gained up to 46.98 after getting as high as 60.13 on the early market lows.

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Earnings this week will have: today – PLAY higher; tonight -  WDFC; Wednesday – STZ; Thursday – DAL; Friday – BLK, FAST, JPM, WFC, MS.

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Economic reports show: Wednesday – minutes of last month Fed interest rate decision; Thursday – March C.P.I, weekly jobless claims; Friday – March P.P.I., early April U. of Michigan Consumer Sentiment Index.