Keller Grain -

The S&P 500 Index ($SPX) (SPY) today is up +0.06%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.20%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.24%.  June E-mini S&P futures (ESM25) are up +0.13%, and June E-mini Nasdaq futures (NQM25) are up +0.28%. 

Stock indexes today recovered from early losses and are trading mixed due to the strength in the Magnificent Seven stocks.  Stocks today initially opened lower ahead of Wednesday’s announcement of new US tariffs.  President Trump will announce the details of the reciprocal tariffs on Wednesday at 3 pm EST.  Stock index futures extended their losses today on a report from the Washington Post that said President Trump is considering tariffs of around 20% on most imports to the US.  The tariff worries have fueled risk-off sentiment in asset markets and sparked safe-haven buying of government debt and gold, with the 10-year T-note yield falling to a 4-week low today and the price of gold climbing to a new record high. 

US economic news today bolstered stagflation concerns and were bearish for stocks.  US Feb JOLTS job openings fell more than expected, and the US Mar ISM manufacturing index fell to a 4-month low.  Also, inflation concerns drew attention after the Mar ISM prices paid sub-index rose at the fastest pace in 2-3/4 years. 

The US Feb JOLTS job openings fell -194,000 to 7.568 million, weaker than expectations of 7.658 million.

The US Mar ISM manufacturing index fell -1.3 to a 4-month low of 49.0, weaker than expectations of 49.5.  The Mar ISM prices paid sub-index rose +7.0 to a 2-3/4 year high of 69.4, stronger than expectations of 64.6. 

US Feb construction spending rose +0.7% m/m, stronger than expectations of +0.3% m/m.

Stocks have been under pressure over the past four weeks due to fears that US tariffs will weaken economic growth and corporate earnings. On March 4, President Trump imposed 25% tariffs on Canadian and Mexican goods and doubled the tariff on Chinese goods to 20% from 10%.  On March 8, Mr. Trump reiterated that he would impose reciprocal tariffs and additional sector-specific tariffs on foreign nations on April 2.  Last Wednesday, President Trump signed a proclamation to implement a 25% tariff on US auto imports, effective April 3.  The tariffs will initially target vehicles fully assembled outside the US and, by May 3, will expand to include automobile parts made outside the US.  Mr. Trump said the tariffs were “permanent,” and he was not interested in negotiating any exceptions.

Market attention this week will include Wednesday’s March ADP employment change (expected to climb by +120,000).  On Thursday, the March ISM services index is expected to fall -0.5 to 53.0, and on Friday, March nonfarm payrolls are expected to increase by +138,000, and the March unemployment rate is expected unchanged at 4.1%.  Also, March average hourly earnings are expected +0.3% m/m and +4.0% y/y, unchanged from February.  Finally, on Friday, Fed Chair Powell is scheduled to speak to the Society for Advancing Business Editing and Writing Conference on the economic outlook.

The markets are discounting the chances at 21% for a -25 bp rate cut after the May 6-7 FOMC meeting.

Overseas stock markets today are higher.  The Euro Stoxx 50 is up +0.44%.  China’s Shanghai Composite Index closed up +0.38%.  Japan’s Nikkei Stock 225 recovered from a 6-1/2 month low and closed up +0.02%.

Interest Rates

June 10-year T-notes (ZNM25) today are up +22 ticks.  The 10-year T-note yield is down -5.9 bp to 4.146%.  June T-notes today rose to a 4-week high, and the 10-year T-note yield dropped to a 4-week low of 4.131%.   T-notes are rallying on the idea that US tariffs might drive the economy into recession, prompting the Fed to continue cutting interest rates.  T-notes also have carryover support from today’s strength in European government bonds.  T-notes extended their gains today after the US Feb JOLTS job openings fell more than expected, and the US Mar ISM manufacturing index contracted at the steepest pace in 4 months. 

European bond yields today are moving lower.  The 10-year German bund yield fell to a 3-1/2 week low of 2.656% and is down -6.7 bp to 2.671%.  The 10-year UK gilt yield fell to a 1-1/2 week low of 4.601% and is down -4.8 bp to 4.627%.

The Eurozone Mar S&P manufacturing PMI was revised downward by -0.1 to 48.6 from the previously reported 48.7. 

The Eurozone March CPI rose +2.2% y/y, right on expectations and the slowest pace of increase in 5 months.  The March core CPI rose +2.4% y/y, weaker than expectations of +2.5% y/y and the smallest increase in 3 years.

The Eurozone Feb unemployment rate unexpectedly fell -0.1 to a record low of 6.1%, showing a stronger labor market than expectations of no change at 6.2%.

Swaps are discounting the chances at 79% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

Strength in the Magnificent Seven stocks today is supportive of the overall market.  Tesla (TSLA) is up more than +4% to lead gainers in the S&P 500 and Nasdaq 100 after Wells Fargo Securities added the stock to its Q2 Tactical Ideas list.  Also, Alphabet (GOOGL), Meta Platforms (META), and Microsoft (MSFT) are up more than +1%.  In addition, Amazon.com (AMZN) is up +0.37%, and Apple (AAPL) is up +0.18%. 

Chip makers are sliding today and are weighing on the broader market. Intel (INTC) is down more than -2% to lead losers in the Nasdaq 100.  Also, NXP Semiconductors NV (NXPI), ON Semiconductor (ON), Advanced Micro Devices (AMD), GlobalFoundries (GFS), Applied Materials (AMAT), ARM Holdings Plc (ARM), Analog Devices (ADI), Microchip Technology (MCHP), Lam Research (LRCX), Texas Instruments (TXN), and Qualcomm (QCOM) are down more than -1%. 

Airline stocks are falling today on downgrades.  Delta Air Lines (DAL) is down more than -4% after Jeffries downgraded the stock to hold from buy.  Also, United Airlines Holdings (UAL) is down more than -4%, and American Airlines Group (AAL) is down more than -4% after Jeffries downgraded it to hold from buy. Southwest Airlines (LUV) is down more than -3% after Jeffries downgraded the stock to underperform from hold with a price target of $28.  In addition, Alaska Air Group (ALK) is down more than -2%.

Johnson & Johnson (JNJ) is down more than -4% to lead losers in the S&P 500 and Dow Jones Industrials after a federal judge rejected the company’s third attempt to use bankruptcy of one of its units to end baby powder cancer claims. 

Genuine Parts Co (GPC) is down more than -1% after Goldman Sachs downgraded the stock to sell from neutral with a price target of $114.

CyberArk (CYBR) and Crowdstrike (CRWD) are up more than +1% to lead cybersecurity stocks higher after Stephens initiated coverage on the stocks to overweight.

First Watch Restaurant Group (FWRG) is up more than +7% after Cowen upgraded the stock to buy from hold with a price target of $22. 

Keurig Dr Pepper (KDP) is up more than +1% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $40.

Ulta Beauty (ULTA) is up more than +1% after Goldman Sachs upgraded the stock to buy from neutral with a price target of $423.

Shake Shack (SHAK) is up more than +1% after Loop Capital Markets upgraded the stock to buy from hold with a price target of $127.

Earnings Reports (4/1/2025)

Adverum Biotechnologies Inc (ADVM), Golden Matrix Group Inc (GMGI), Lifezone Metals Ltd (LZM), Cino Inc (NCNO), Novagold Resources Inc (NG), Sandisk Corp/DE (SNDK), Ultralife Corp (ULBI).