Markets Daily: Dazed and confused

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Markets Snapshot S&P 500 Futures 5,608.5 +0.56% Nasdaq 100 Futures 19,531 +0.68% Stoxx Europe 600 Index 541.66 +0.89% Hang Seng Index 23,600.31 -0.76% Bitcoin 82,636.19 -0.18% Market data as of 05:58 am EST. View or Create your Watchlist Market data may be delayed depending on provider agreements.

Five things you need to know

President Donald Trump's 25% tariffs on steel and aluminum imports came into force, triggering an immediate reprisal from the EU as the global trade war enters a new and perilous phase. Economists say US inflation probably stayed elevated last month after a big increase in January, adding to evidence that progress on taming prices has stalled. The consumer price index is due at 8:30 a.m. in Washington, with economists predicting a 0.3% increase. Goldman Sachs strategists lowered their year-end target for the S&P 500 to 6,200 from 6,500, implying an 11% gain from Tuesday's close. The reduction was also in view of declines in the "Magnificent 7" stocks. A potential Ukraine ceasefire now hinges on whether Russia's Vladimir Putin will accept the terms. US and Ukrainian negotiators reached the accord in Saudi Arabia to halt the conflict, which began with Russia's full-scale invasion three years ago. House Republicans passed legislation to keep the US government open past a Saturday shutdown deadline, daring moderate Democrats in the Senate to block the measure over objections it fails to constrain Elon Musk's cost-cutting crusade.  It's been a bleak period for US stocks. If this risk aversion continues, will we see the Fed put or the Trump put first? And is the era of US stock market exceptionalism over? Will the US yield curve continue to steepen in 2025? And how much further can the dollar decline? Click here to take part in the latest MLIV Pulse survey.

Dizzying spell

Less than two months into Donald Trump's second presidency, a new reality seems to be settling in: This time around, the billionaire who has promoted his own gospel of wealth isn't watching the stock market as a barometer of his success. In fact, it seems like he may be willing to sacrifice the bull market — and, in the short term, even the growth of the economy itself — to upend a global order he says has served America poorly for decades.  Take yesterday. Just after 10 a.m., a half hour after the opening bell, the S&P 500 had started to steady from the fear-induced selloff that swept across Wall Street on Monday. Then Trump fired off another social-media broadside in his trade spat with Canada, sending stocks lurching downward again. "No one is blinking on the trade war yet and that's troubling to our clients," said Jamie Cox, managing partner at Harris Financial Group. "The market thought Trump was bluffing. Now we're living through the difficulties of it." It's made for a dizzying spell for traders who'd ridden the AI euphoria and swelling corporate profits to one of the strongest runs since the 1990s internet boom.  In just a few short weeks, it's given way to a virtually non-stop churn of volatility fueled by the chaotic rollout of Trump's plans in all-capped social media posts or television appearances. The S&P 500 is now down 9.3% from its all-time high from last month, on the verge of the 10% drop that market watchers consider to be a correction in a bull market. And the bulls are tempering their optimism: Goldman Sachs lowered its year-end target for the S&P 500 Index to 6,200 from 6,500, implying an 11% gain from yesterday's close.  Trump, for his part, doesn't see a recession in the offing, and says he's not concerned by the selloff.  Markets "are going to go up and they're going to go down,'' he said at the White House yesterday. "But you know what, we have to rebuild our country." Some traders aren't so sanguine.  "I'm treating this like the Great Financial Crisis or European debt crisis," Peter Tchir, head of macro strategy at Academy Securities. "I think we get a chance to have a small bounce, but I'm beginning to think we might have 20% downside from here." —Carmen Reinicke and Jess Menton

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On the move

Intel shares jump 7.9% in premarket trading. Reuters reported that TSMC has pitched Nvidia, Advanced Micro Devices and Broadcom about taking stakes in a joint venture that would operate the US chipmaker's factories. Zealand Pharma soars 24% in Copenhagen. Swiss drugmaker Roche licensed a new weight-loss treatment from the company for as much as $5.3 billion.  Inditex, the owner of Zara stores, falls 7.7% in Madrid after saying sales were off to a slower start in the first quarter.  Puma drops 23% in Munich to the lowest level since 2016. It disappointed investors with softer-than-expected results and a forecast for another year of slow growth. Stitch Fix surges 19% after boosting its revenue forecast.  Adobe is slated to publish results after the close. Bloomberg Intelligence notes it may hold off on raising its outlook amid economic uncertainty, despite impressive traction for its AI tools. —Subrat Patnaik

Risk barometer

In credit markets, investors have long seen lower-rated American companies as less risky than their European counterparts. Not any more. For the first time in two years, investors are demanding a bigger premium to hold junk-rated US debt than the European equivalent, reflecting fears that Donald Trump's tariff regime will lead to an economic slowdown. At the same time, credit spreads in Europe have — for the most part — been tightening as ambitious fiscal plans re-write the investment playbook, boosting multiple asset classes. "Investors went short EU credit right after the US election, and perhaps got too bearish," said Fahd Malik, a high-yield portfolio manager at AllianceBernstein. "Now you are seeing a massive unwind of that position.'' The compensation investors demand to hold US junk-rated bonds over risk-free Treasuries has jumped to about 3.40 percentage points, widening about 0.50 point in a matter of weeks. By contrast, the spread between European high-yield bonds and the benchmark has shrunk to about 3.20 percentage points. Junk-bond spreads are a gauge of investors' perceptions about the outlook for businesses, and as such can be a powerful leading indicator of overall economic health. Goldman Sachs sees US spreads widening further, citing tariff risks and signs the White House is willing to tolerate short-term economic weakness. The bank's strategists now see high-yield spreads reaching about 4.40 percentage points in the third quarter, an increase from their previous 2.95-point forecast. —Abhinav Ramnarayan, Denitsa Tsekova and Aaron Weinman

Housing mood music

Stock traders aren't the only ones tracking every Trump social-media utterance. Would-be home buyers, too, have a lot riding on how the president affects markets. With US house prices still on the rise across much of the country, and mortgage rates hovering above 6.5%, affordability will be a concern for many house hunters this spring. And Trump's tariff wars have the potential to drive interest rates higher by reheating inflation — or push them lower if the economy instead is tipped into recession.  With the prime season for home sales approaching, early indications for the health of the US housing market — from weakening consumer confidence and falling stock prices to sinking home-purchase contracts and a spike in deal cancellations -- don't look especially promising. "The negative mood music seems to have resumed after a brief Trump bump," said Thomas Ryan, North America economist for Capital Economics Ltd. "I don't think house prices are going to fall, but I'm expecting a much cooler market." —Prashant Gopal

One number to start your day -52% The decline in Tesla's stock from its all-time high in December. Click here to read more about Tesla's stock price decline.

What else we're reading

Fink, Wall Street's Ultimate Key Man, Holds Tight to BlackRock A Global Steel War Heats Up With Trump's Latest Tariff Move China Piles the Pressure on India in Its Own Backyard Battery Maker Northvolt Files for Bankruptcy in Sweden Walmart Faces Heat from Beijing After Demand for Price Cuts Fed Staff Met With Treasury's DOGE Team in January, Filing Shows Education Department to Cut Half of Workforce in DOGE Push

On the latest Trumponomics, we try to understand a possible "Mar-a-Lago Accord" and the views of Stephen Miran, nominee to lead the White House Council of Economic Advisers. Host Stephanie Flanders is joined by Shawn Donnan, senior writer for economics with Bloomberg, and Mark Sobel, the US chairman of the Official Monetary and Financial Institutions Forum. Listen on Apple, Spotify, or wherever you get your podcasts.

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