Five things you need to know

• Stocks are sliding further, adding to losses after a $2.5 trillion wipeout of US equities. Treasuries rallied, pushing 10-year yields below 4% once more, and the dollar steadied.
• President Donald Trump said he was open to reducing his tariffs if other nations were able to offer something “phenomenal.” Trump defended the levies, saying the economic turbulence would settle.
• The US probably added 140,000 new jobs in March, a slowdown from the prior month yet a still-healthy pace of hiring. The report is due at 8:30 a.m. in Washington.
• The Fed’s Jerome Powell speaks on the economy at 11:25 a.m. Money-market traders now see the central bank cutting interest rates by 100 basis points this year, up from about 75 basis points before the tariffs were announced. Wall Street forecasters are divided on monetary policy.
• Republicans are weighing a new tax bracket for those earning $1 million or more to offset some costs of proposed tax legislation, a departure from decades of GOP policy. Talks have included a new top rate of 39% to 40%, up from 37% currently.

Hitting all corners

Yesterday’s stock market selloff hammered home the message that Donald Trump is serious about upending the global trading system — and it appears, at least for now, that fears of a market crash won’t stop him.

The plunge hit all corners of the market, even sectors that aren’t directly affected by tariffs, as fears about a recession triggered by the trade regime spooked traders. Financials are a good example: The KBW Bank Index notched its biggest slide since the March 2023 regional banking crisis.

Another potential recession signal: Transportation stocks, seen as an economic bellwether, entered a bear market yesterday. 

Corporate bonds, too, got whacked, with US junk bonds leading the biggest slump in global high-yield debt since 2020. 

It all raises the stakes for Federal Reserve Chair Jerome Powell, who already faces the difficult task of balancing a slowdown in the US against the risk of another surge in inflation.

It also comes as the Trump administration moves to slash spending and eliminate tens of thousands of federal jobs under the direction of Elon Musk’s DOGE team, fanning fears about a potential rise in unemployment. 

“The tariffs are really bad for US and global growth, but it also adds to inflation risk,” said Tracy Chen, a portfolio manager at Brandywine Global Investment Management. “I don’t think the Fed can cut now with all this uncertainty.”

Wall Street has been quick to react: UBS Global Wealth Management downgraded US equities, slashing its year-end target for the S&P 500 to 5,800 from 6,400 due to lower earnings estimates and valuation. The new forecast still implies a 7.5% gain from yesterday’s close. —Liz Capo McCormick, Carmen Reinicke, Julien Ponthus and Esha Dey

On the move

• BP drops 2.7% in London. The oil producer, under pressure from activist Elliott Investment Management, said Chairman Helge Lund plans to step down as the company shifts away from the net zero strategy he championed.
• Amazon.com shares slips 0.7% in premarket trading. The company’s market cap closed below $2 trillion yesterday as tariffs battered tech stocks. 

• Tesla shares are down 0.5%. JPMorgan cuts its estimates after disappointing first-quarter deliveries. Analysts from Evercore ISI and UBS have already trimmed their full-year estimates. The stock fell 5.5% yesterday. 
• Danone rises 2.2% in Paris. Morgan Stanley analysts said they now prefer the stock over Nestle, arguing the French food company is trading at an “unwarranted” discount to its Swiss peer given its more attractive setup.  —Subrat Patnaik

Buyer strike

As investors game out the risks of retaliation to the tariffs, one question is whether foreigners might scale back purchases of Treasury bonds. 

The next round of holdings data from China and Japan will be particularly scrutinized as the two countries are the largest overseas owners of US sovereign debt, and also because Trump’s massive trade duties are heavily focused on Asia. China has already trimmed its Treasury stockpile for three straight years, while Japan’s has also dropped, based on the latest US government data.

“One potential element of retaliation is to demur from buying Treasuries,” said John Velis, a macro strategist at BNY in New York, referring to global investors. “Not buying is probably more likely than selling,” he said, adding there are alternatives such as bunds as Germany increases issuance. —Ruth Carson, Liz Capo McCormick and Masaki Kondo

Only one of them can be right

Legendary investor Bill Gross had a warning for prospective dip buyers yesterday: Don’t. 

The co-founder and former chief investment officer of Pimco said the stock market selloff is a “deep market event” with little resolution in sight. “Investors should not try to ‘catch a falling knife’,” he said in an email. “This is an epic economic and market event similar to 1971 and the end of the gold standard except with immediate negative consequences.”

Wall Street veteran Edward Yardeni, meanwhile, is counseling the opposite: Investors should buy the dip, because the market is rebuffing Trump on his tariff policy. 

A “great buying opportunity is being created here,” the strategist who coined the terms “Fed Model” and “bond vigilante” said in a Bloomberg TV interview. “The market is giving a big thumbs down to this tariff policy.”

The president of Yardeni Research Inc. said Trump’s move will face a big political backlash, with a growth slowdown that may even factor into the midterm elections in 2026. Trump is going to “back off in a way that he can declare” a victory with some concessions from US trading partners in the next three to six months, he said.

Gross isn’t buying it: “Trump can’t back down anytime soon. He’s too macho for that.” —Denitsa Tsekova and Abhishek Vishnoi

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