The S&P 500 Index ($SPX) (SPY) gained 0.38% on Tuesday, while the Dow Jones Industrials Index ($DOWI) (DIA) slipped by 0.03%. In contrast, the Nasdaq 100 Index ($IUXX) (QQQ) rose by 0.82%. Additionally, June E-mini S&P futures (ESM25) saw an increase of 0.38%, and the June E-mini Nasdaq futures (NQM25) climbed by 0.81%.

Following early losses on Tuesday, stock indexes rebounded largely due to the strong performance of the Magnificent Seven stocks. The market opened lower as investors awaited the announcement of new US tariffs scheduled for Wednesday. President Trump is set to reveal details about the reciprocal tariffs at 3 PM EST, which will take immediate effect, according to a White House official.

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Market sentiment was further dampened by a Washington Post report indicating that President Trump is considering reciprocal tariffs of around 20% on most US imports. These concerns have fueled a risk-averse climate in the market, leading to increased safe-haven buying of government bonds and gold. Consequently, the yield on 10-year Treasury notes dropped to a four-week low on Tuesday, while gold prices reached a new record high.

Economic data released on Tuesday added to concerns about stagflation and was negative for stocks. US job openings for February fell by 194,000 to 7.568 million, below the anticipated 7.658 million. Additionally, the ISM manufacturing index for March fell to a four-month low of 49.0, lower than the expected 49.5. Inflation worries were also highlighted as the prices paid sub-index in the ISM rose at the fastest rate in nearly three years.

US construction spending for February increased by 0.7% month-over-month, exceeding expectations of 0.3%.

The ongoing pressure on stocks over the last month is attributed to fears that US tariffs could undermine economic growth and corporate earnings. On March 4, President Trump imposed tariffs of 25% on Canadian and Mexican goods and increased tariffs on Chinese goods from 10% to 20%. On March 8, Trump reiterated plans to impose reciprocal tariffs and additional sector-specific tariffs on April 2. Last Wednesday, he signed a proclamation introducing a 25% tariff on US auto imports, which will apply to vehicles fully assembled outside the US and will expand to include auto parts by May 3. Trump described these tariffs as "permanent" with no intention of negotiating exceptions.

This week, market focus will be on various economic indicators, including March's ADP employment change, expected to rise by 120,000, and Thursday's ISM services index, which is projected to decrease by 0.5 to 53.0. On Friday, March nonfarm payrolls are anticipated to increase by 138,000, with the unemployment rate expected to hold steady at 4.1%. Average hourly earnings are forecasted to rise by 0.3% month-over-month and 4.0% year-over-year, consistent with February's figures. Additionally, on Friday, Fed Chair Powell is scheduled to address the Society for Advancing Business Editing and Writing Conference regarding the economic outlook.

Currently, markets are pricing in a 21% likelihood of a 25 basis point rate cut after the FOMC meeting on May 6-7.

Internationally, stock markets closed higher on Tuesday, with the Euro Stoxx 50 up by 1.37%. China's Shanghai Composite Index increased by 0.38%, while Japan's Nikkei 225 rebounded from a 6.5-month low, closing up by 0.02%.

Interest Rates

June 10-year T-notes (ZNM25) rose by 18 ticks on Tuesday, with the 10-year T-note yield declining by 5 basis points to 4.159%. The T-notes reached a four-week high, while the yield dropped to a four-week low of 4.131%. The rally in T-notes was driven by concerns that US tariffs might push the economy into recession, prompting the Fed to continue lowering interest rates. Additionally, falling inflation expectations supported T-notes, following a drop in the 10-year breakeven inflation rate to a one-week low of 2.332%. T-notes also benefited from strength in European bonds.

European bond yields fell on Tuesday, with the 10-year German bund yield dropping to a three-and-a-half-week low of 2.656%, finishing down by 5.1 basis points at 2.687%. The 10-year UK gilt yield dropped to a one-and-a-half-week low of 4.601%, closing down by 4.1 basis points at 4.634%.

The Eurozone's March S&P manufacturing PMI was revised down by 0.1 to 48.6, slightly below the previously reported figure. The Eurozone's March CPI rose by 2.2% year-over-year, in line with expectations and marking the slowest growth in five months. The core CPI increased by 2.4% year-over-year, which was lower than expectations of 2.5% year-over-year and marked the smallest rise in three years. In a positive development, the Eurozone's February unemployment rate unexpectedly fell by 0.1 to a record low of 6.1%, indicating a stronger labor market than anticipated.

Swaps currently indicate a 77% probability of a 25 basis point rate cut by the ECB at its April 17 policy meeting.

US Stock Movers

The strength of the Magnificent Seven stocks on Tuesday positively impacted the overall market. Tesla (TSLA) surged over 3% after Wells Fargo Securities added it to its Q2 Tactical Ideas list. Other tech giants, including Alphabet (GOOGL), Meta Platforms (META), Microsoft (MSFT), Amazon.com (AMZN), and Nvidia (NVDA) also saw gains of over 1%. Apple (AAPL) added 0.48% to its value.

Clothing brands Ralph Lauren (RL) and Tapestry (TPR) both climbed by over 3% after their peer PVH Corp (PVH) surged over 17% following surprisingly strong guidance for 2026 EPS.

CyberArk (CYBR) and Crowdstrike (CRWD) rose by more than 2% as Stephens initiated coverage with an overweight rating.

Airline stocks faced declines due to downgrades. Southwest Airlines (LUV) dropped over 6% after Jeffries downgraded it to underperform with a price target of $28. Delta Air Lines (DAL) and American Airlines Group (AAL) each fell by more than 2% following similar downgrades. United Airlines Holdings (UAL) and Alaska Air Group (ALK) also experienced decreases of over 1%.

Chip manufacturers saw a dip on Tuesday, exerting pressure on the broader market. Notably, Intel (INTC) fell by more than 3%, and both GlobalFoundries (GFS) and ON Semiconductor (ON) dropped more than 2%. Texas Instruments (TXN) and Analog Devices (ADI) also declined by over 1%.

Johnson & Johnson (JNJ) led the S&P 500 and Dow Jones Industrials losers, falling over 7% after a federal judge dismissed the company's third attempt to resolve baby powder cancer claims through bankruptcy of one of its units.

Moderna (MRNA) witnessed a drop exceeding 3%, compounding Monday’s 8% loss as the vaccine maker reacted to the resignation of Peter Marks, a leading FDA official overseeing drug approvals and vaccines.

Pharmaceutical companies faced selling pressure after HHS Secretary Robert F. Kennedy Jr. removed several senior officials overseeing drug approvals. Notable declines were seen in Biogen (BIIB) and Pfizer (PFE), both down by more than 3%, while Merck & Co (MRK), Eli Lilly & Co (LLY), Bristol-Myers Squibb (BMY), and Regeneron Pharmaceuticals (REGN) fell by over 2%.

First Watch Restaurant Group (FWRG) increased by over 7% following an upgrade from Cowen to buy with a price target of $22.

Keurig Dr Pepper (KDP) gained more than 2% after Morgan Stanley raised its rating to overweight from equal weight, setting a price target of $40.

Ulta Beauty (ULTA) rose by over 2%, following a Goldman Sachs upgrade to buy from neutral, with a target price of $423.

Shake Shack (SHAK) increased by more than 2% after Loop Capital Markets upgraded it to buy from hold, targeting $127.

Earnings Reports (4/2/2025)

AngioDynamics Inc (ANGO), Franklin Covey Co (FC), Penguin Solutions Inc (PENG), Resources Connection Inc (RGP), RH (RH), and UniFirst Corp/MA (UNF) are scheduled to report earnings.

At the time of publication, Rich Asplund did not hold (neither directly nor indirectly) positions in any mentioned securities. All information and data in this article are provided for informational purposes only. For more details, please refer to the Barchart Disclosure Policy here.

For more news, stay tuned to Barchart.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of Nasdaq, Inc.

On Tuesday, the S&P 500 Index ($SPX) closed up by 0.38%, while the Dow Jones Industrials Index ($DOWI) dipped slightly by 0.03%, and the Nasdaq 100 Index ($IUXX) increased by 0.82%. June E-mini S&P futures were up by 0.38%, alongside a 0.81% gain in June E-mini Nasdaq futures. Stocks initially faced losses due to impending announcements regarding new tariffs from President Trump, but they rebounded, primarily helped by the performance of the Magnificent Seven stocks, including notable increases in companies like Tesla, Alphabet, and Meta Platforms. In anticipation of the new tariffs, which are set to be announced at 3 PM EST on Wednesday, stocks were pressured by concerns of increased import tariffs, potentially around 20%, leading to a cautious market environment.

These tariff speculations ignited a risk-off sentiment, with investors favoring safer assets such as government bonds and gold, culminating in a four-week low for the 10-year Treasury note yield. Additionally, reports indicated bearish trends in the local economy, with the February JOLTS job openings falling more than anticipated and the March ISM manufacturing index reaching a four-month low. Inflation concerns were also affirmed by a rise in the ISM prices paid sub-index, which hit its highest level in nearly three years.

On a positive note, February construction spending showed resilience, increasing by 0.7% month-over-month against expectations of only 0.3%. However, the market’s broader apprehensions grew regarding the potential negative impact of tariffs on economic growth and corporate earnings, as fears intensified following the previous imposition of tariffs on Canadian, Mexican, and Chinese goods.

This week’s economic calendar includes pivotal reports updates, such as Wednesday’s ADP employment change forecasted to show a rise of 120,000 jobs and Thursday’s expected decline in the ISM services index. Friday's expectations show a predicted increase in nonfarm payrolls by 138,000 and steady unemployment at 4.1%. Market expectations suggest a 21% chance of a 25 basis point rate cut following the upcoming FOMC meeting, indicating a potential pivot in the Federal Reserve's approach amid economic uncertainties.

Overseas markets posted gains, with the Euro Stoxx 50 up by 1.37%, and the Shanghai Composite and Nikkei indices also showing recovery. U.S. interest rates saw declines, with the 10-year T-note yield falling to 4.131%, as there was growing anticipation that tariffs might push the U.S. economy towards a recession, prompting further Fed rate cuts. Falling inflation expectations added support to T-notes, reflecting investor sentiment towards safer assets amidst declining manufacturing statistics.

Tech stocks supported the market’s upward movement, with significant gains in Tesla and the other "Magnificent Seven." Conversely, airline stocks faced downgrades, most notably Southwest Airlines, which plunged after a downgrade from Jefferies. The chip manufacturing sector also struggled, contributing to the market's pressure, highlighted by Intel's 3% drop, while pharmaceutical stocks suffered due to regulatory changes and external pressures leading to sharp declines among major companies.

In the retail sector, several stocks, including Ulta Beauty and First Watch Restaurant Group, experienced upward adjustments in their ratings, prompting positive movement in their stock prices.

Overall, the interplay of tariff concerns, economic indicators, and sector-specific performances characterized Tuesday's market activities, with investors navigating a complex landscape shaped by both domestic and global influences.