April 16, 2025: Scaled Back Tariffs
What a difference a week makes. Primarily in response to the abrupt rise in long-term Treasury yields, last Wednesday the White House drastically scaled down the tariffs set forth the week prior, dropping tariffs on most countries to 10% (from 25%) and thus creating a three-month window to help facilitate bilateral negotiations with tariff-stricken trading partners. US equity markets immediately rejoiced on the news: the S&P 500 and Nasdaq Composite closed +9.52% and +12.16% in Wednesday trading, marking the 8th and 2nd highest 1-day percentage change in history for each index (respectively). Over the full week, the S&P 500 returned +5.73%, the Dow Jones +4.97%, and the Nasdaq Composite +7.30%. The 10-year US Treasury note continued its hectic April, rising 50 basis points in trading last week – the most in over two decades – thereby fully nullifying the post-tariff announcement plunge that briefly took the 10Y yield below the 4% level. The VIX cooled from the high close of 52.33 set last Tuesday (4.8), and at the time of this writing has fallen into the sub-30 range. The US Dollar continued its recent unravelling, losing nearly -3% last week and vastly underperforming all G-10 currency peers. While the scaled-back tariffs development is certainly welcome, continued caution is nonetheless warranted: the US Administration has already ratcheted up its trade war with the PRC to its current 125% tariff level on Chinese imports, and another potential round of tariff announcements targeting the pharmaceutical and semiconductor sectors looms. Progress, to be sure…but with so much still yet to be defined, we strongly encourage caution against excessive optimism of a “cure-all” remedy.
Index Data & Market Performance
In Focus
Economic data released last week followed the broader 2025 trend of sufficient hard data/ghastly soft data. The highlight of the past week was the March CPI & PPI (hard) data, with both the headline and core results for each reading coming in below consensus expectations at both the monthly and annual tenors, suggesting rising prices concerns have yet to come to fruition. As for the survey (soft) data, the April preliminary University of Michigan data on Friday was downright nasty across all subcomponents, with one-year inflation expectations reaching an almost unfathomable 6.7% handle –
The highest reading in 40 years (and up from 2.8% at the end of 2024; comparatively, the NY Fed’s median one-year ahead expectations this week registered 3.6%). The week underway is relatively light on economic data, with Retail Sales, Industrial Production, and Housing Starts data for the March measurement period leading the way. Earnings season gains steam into its second week, with quarterly earnings due midweek from Voyager platform names Progressive (Ticker: PGR), American Express (Ticker: AXP), and Netflix (Ticker: NFLX).
The following economic data is slated for release in the week ahead:
Monday:Fed Governor Chris Waller, Philadelphia Fed President Patrick Harker, and Atlanta Fed President Raphael Bostic Speak
Tuesday: April Empire State Manufacturing Survey (Actual: -8.1/Estimate: -13.5); Fed Governor Lisa Cook Speaks
Wednesday: March Retail Sales, March Industrial Production, February Business Inventories
Thursday: Weekly Jobless Claims; March Housing Starts & Building Permits
Friday: US Equity Markets Closed – Good Friday Holiday
