A Manic Monday — Evening Brief – 04.07.25
The rollercoaster ride for U.S. stocks continued Monday, with the major indices experiencing the largest intraday moves (8% top to bottom) since March 2020. The CBOE Volatility Indec (VIX) exploded to 52.16 – its highest level since the onset of COVID. U.S. Treasury yield similarly whipsawed (a 22-basis point intraday range for the 10-year yield), while the U.S. dollar weakened.
The S&P 500 rose about 1% in mid-morning trading, rebounding from an early onslaught of up to 4.7%, after losing over 10% across Thursday and Friday. However, the recovery faltered, with the index ending down 0.25% % at the close.
The trigger for the brief and sharp rally aligned with a social media post suggesting a potential 90-day tariff pause for select countries, alongside reports of possible business-led legal challenges to the tariffs. The White House quickly dismissed the rumor of a pause as “fake news.”
The big drop in U.S. equities, along with lower interest rates, higher spreads, and a lower U.S. dollar, mean the market interprets this as mainly negative for the U.S. but also the global economy.
The notion of a tariff reprieve gained traction over the weekend, fueled by Pershing Square’s Bill Ackman, a prominent hedge fund manager. In an X post, Ackman warned of an impending “economic nuclear winter” unless President Trump paused his tariff agenda, urging him to halt a “global economic war” sparked by last week’s “reciprocal” tariff announcement, set to begin Wednesday.
JPMorgan Chase CEO Jamie Dimon warned that the latest round of tariffs is likely to drive up inflation and dampen economic growth. “There also remains a growing need for increased expenditure on infrastructure, the restructuring of global supply chains and the military, which may lead to stickier inflation and ultimately higher rates than markets currently expect,” Dimon said in a letter to shareholders.
At the opening bell, the S&P 500 teetered on the edge of a bear market, down 20% from its February peak. The Nasdaq, after an initial sharp drop, leveled off near flat by mid-morning. The Dow Jones Industrial Average opened down 1.68%, while the Russell 2000 climbed 3.2%, despite starting the day with losses of 4.68%, 3.84%, and 4.37%, respectively.
The selloff echoed declines in global markets. The UK’s FTSE 100 and the Stoxx 600 each shed around 4.6%, while Asian markets saw steeper falls: Japan’s Topix plunged over 7%, and China’s CSI 300 dropped 7%, with the Hang Seng and Hang Seng China Enterprises indexes both down about 13% as they caught up after Friday’s close.
China’s swift countermeasure—imposing 34% tariffs on U.S. imports, matching Trump’s additional levy—heightened fears of a global trade war. President Trump announced that, starting Tuesday, he will impose an extra 50% tariff on Chinese goods entering the U.S., reacting to China’s retaliatory tariffs. Taiwan and Indonesia, hit with 32% tariffs, chose diplomatic engagement over countermeasures. The EU is set to respond on April 9, while other countries have yet to declare their stance.
Amid the chaos and unpredictability, JPMorgan increased its U.S. recession probability to 60%, up from 40%. Goldman Sachs economists downgraded their 2025 fourth quarter-over-fourth quarter GDP growth projection to 0.5% from 1%. They also reduced their annual average GDP growth estimate to 1.3% from 1.5% and raised their 12-month recession likelihood to 45%, up from 35%.