Key Takeaways
- Markets Await Tariff Announcement, Watching Futures For Initial Reaction.
- Falling Yields And ISM PMI Signal Economic Weakness Concerns.
- Gold And Oil Prices Reflect Uncertainty Amid Tariff Talks.
Stocks were mixed on Tuesday with the S&P 500 up 0.3%. The Nasdaq Composite was up 0.9% while both the Russell 2000 and Dow Jones Industrial Average were flat. Markets have been waiting on today’s announcement from President Trump as to just what new tariffs imposed by the U.S. will look like. That announcement is expected today, after the close of trading. While the tariff news will be the most talked about story, there are also some other items worth noting and what they may be suggesting from a macro perspective.
Let’s begin though with tariffs. Not much is known at this point as to just what will and won’t be tariffed or the rates which will be applied. President Trump has kept his plans to himself but will announce them today at 3PM CT. While equity markets will be closed, index futures trade until 4PM CT and then reopen at 5PM. I think those will give us the first glimpse of how markets interpret whatever is announced.
On Tuesday, the most recent Institute of Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) was released. That index came in at 49, below estimates of 49.5. While this isn’t a headline grabbing number like Friday’s employment report, I bring it up because it is one of those numbers you hear about when it breaks a certain threshold, which is what it did by falling below 50. Generally speaking, when this number is above 50, it means the economy is expanding. When it falls below 50, it suggests a contracting economy and is a possible recession indicator.
Related to the ISM PMI number is what we’re seeing with the benchmark 10-year note and its yield. After hitting a high of 4.81% in January, rates have been steadily declining. Currently, yields on the 10-year are down to 4.14%. As recently as just a couple months ago, elevated yields were being talked about as a sign of inflation. Now, the narrative has switched. Falling rates aren’t being attributed to inflation coming under control, but rather, as a sign of a weakening economic outlook.
The ISM PMI and fall in rates are just two data points and I don’t want to jump to any conclusions about the future of the economy. At the same time, in addition to Friday’s jobs report, we have a fair amount of economic data this week, much of which isn’t something we might normally pay attention to. However, when investors begin getting nervous, they latch on to economic data they might otherwise ignore.
Tied into the economic data are gold and oil prices. Gold, often seen as a safe haven, is trading above $3160 in premarket. Since its low of $1831 back in October of 2023, gold has been on a tear and is up 20% this year. Until recently, oil prices were trading in the mid-$60s. Prices have jumped above $70 recently, but I don’t think that is a result of demand. Instead, I think it’s a result of tariffs. President Trump announced a 25% tariff on all goods from any country doing business in the U.S. that also imports oil from Venezuela. Therefore, even at $70, I believe oil is suggesting a weakened economic outlook.
Turning to individual stocks, according to The Wall Street Journal, Visa is offering Apple $100 million dollars to take over its credit card business. Goldman Sachs was the original issuer of the Apple Card, which is supported by the MasterCard network. Since Goldman announced plans to leave the consumer lending sector, a bidding war has been going on for Apple’s business with American Express, Chase and MasterCard all making offers.
Tesla is scheduled to announce first quarter sales today. As Elon Musk has become more of a political figure, shares of Tesla have come under a lot of selling pressure. For the year, shares are down 34%. At the same time, Tesla dealerships and cars have been protested against and vandalized. Musk’s association with the Trump Administration has had the effect of making the Tesla brand an extension of a political ideology. Therefore, it will be interesting to hear their sales numbers and outlook.
For today, obviously the big story will be after the close. We often see directional moves ahead of big news and then as the release nears, markets move back toward being unchanged. Therefore, I would not be at all surprised if we see a big move intraday that reverses itself. I’m not necessarily expecting any panic at this point. While the VIX is at 23.54 in premarket, thus far, all the selling we have seen has been orderly. VIX briefly touched 30 at one point this year, which is a number where things can get panicky, but it quickly pulled back from that level. In fact, I wouldn’t be surprised if we see an increase in volatility during the day, then a contraction overnight. While most agree tariffs are bad for an economy, there may be a sense of certainty after the announcement, allowing VIX to contract. As always, I would stick with your investing plan and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.