US Markets Decline After Tariff Announcement
US equity markets closed lower on Thursday following President Donald Trump’s announcement of new tariffs on imported automobiles. Trump unveiled a 25% tariff on imported cars and light trucks, effective April 3, with auto parts facing duties from May 3. The move rattled investors and put pressure on auto stocks:
- General Motors shares fell over 7%
- Ford declined 3.9%
- Aptiv and BorgWarner dropped around 5% each
- Tesla gained 0.4%, supported by its largely domestic production
Major indices ended in negative territory:
- S&P 500 fell 0.33% to 5,693.31
- Nasdaq Composite dropped 0.53% to 17,804.03
- Dow Jones Industrial Average declined 0.37% to 42,299.70
Defensive sectors such as consumer staples and healthcare outperformed and helped cap overall losses.
Economic Indicators Reflect Ongoing Strength
The number of Americans filing new jobless claims remained stable at 224,000, indicating continued labour market strength. Additionally, Q4 GDP growth was revised up from 2.3% to 2.4%, suggesting solid economic momentum heading into 2025.
Despite persistent policy uncertainty, developed markets have posted nearly 10% gains this year. However, Trump’s unpredictable trade policies have added volatility, particularly around inflation and supply chain disruptions. The upcoming reciprocal tariff announcement on April 2 is another source of investor caution, though the administration has signaled some flexibility.
Bond yields moved higher, with the 10-year US Treasury yield rising to 4.36%. In Europe, equity markets traded lower, with the tariff announcement dragging down sentiment across auto-related sectors.
Asian Equities Mixed Amid Rate Hike Speculation and Tariff Fears
Most Asian markets declined on Friday, particularly in Japan, where stronger-than-expected inflation data raised expectations of an early rate hike by the Bank of Japan. Auto and tech sectors suffered losses due to the US tariff news and chip supply concerns. However, Chinese equities outperformed on optimism surrounding AI development and economic stimulus, while Australia’s ASX 200 posted modest gains ahead of next week’s key economic events.
US Futures and European Markets Under Pressure
US equity futures dipped overnight as investors awaited the PCE price index report, with concerns over inflation and retaliatory tariffs clouding the outlook for future interest rate cuts.
On Thursday, European markets also fell. The DAX, CAC 40, and FTSE 100 all dropped due to worries about US tariffs on automobiles. European carmakers like Volkswagen and Mercedes-Benz saw declines.
In earnings updates:
- H&M posted weaker-than-expected sales
- Next delivered positive results
Oil prices recovered after recent losses, driven by a larger-than-expected drop in US crude inventories.
Currency and Commodity Market Update
The US dollar held around 104.3 on Friday as investors anticipated the inflation report.
- EUR/USD traded at 1.0790
- GBP/USD stood at 1.2944
Oil prices remained near one-month highs in Asian trading, on track for a third consecutive weekly gain amid US threats of tariffs on Venezuelan oil buyers and a larger-than-expected drop in US crude stockpiles.
Equities on the Move – Stock Reactions & Analyst Highlights
Company-Specific News
- Lululemon warned of lower annual revenue and profit, citing weak demand driven by tariffs on China and Mexico. Holiday sales beat expectations, but competition and slowing demand in the Americas remain concerns.
- Rocket Lab and Stoke Space Technologies secured a $5.6 billion contract under the National Security Space Launch Phase Three Lane One fiscal 2025, sending Rocket Lab’s stock up 9.3% in after-hours trading.
- Hertz and Avis Budget surged over 20% each, as the tariff announcement raised expectations of increased car rental demand.
- Auto parts retailers O’Reilly, AutoZone, and Advance Auto Parts gained, while global car manufacturers fell.
- Lyft is reportedly close to acquiring taxi app FreeNow, owned by BMW and Mercedes. Details of the transaction remain undisclosed.
Stocks Under Pressure
- AppLovin shares dropped 20% after a report by Muddy Waters Research raised concerns over deplatforming risks and alleged improper data practices.
- Novo Nordisk lost 25% in March amid concerns that its obesity drug Wegovy is falling behind competitor Eli Lilly’s Zepbound. Despite strong Q4 2024 sales, weak prescription data and potential US pharmaceutical tariffs weighed on sentiment.
- GameStop fell over 22% after announcing a $1.3 billion convertible bond offering to finance its bitcoin pivot, raising concerns about its strategy and struggling retail business. Despite initial excitement over the crypto move, store closures and uncertainty have pushed shares down nearly 30% for the year.
- ProSiebenSat.1 declined as MFE-MediaforEurope made a low acquisition offer, raising speculation of a “creeping control” tactic.
Analyst Ratings and Sector Insights
- CoreWeave cut its US IPO size by 23.5%, pricing shares at $40, raising $1.5 billion with a $23 billion valuation. The Nvidia-backed company cited low investor demand.
- Ferrari reaffirmed its financial targets despite tariff concerns. Analysts believe its strong brand and high-end customer base will absorb the impact.
- Mizuho raised Alibaba’s target to $170, citing strong AI prospects.
- HSBC cut Tesla’s target from $165 to $130, citing weaker fundamentals and increased competition.
- Bank of America maintained a Buy on Nvidia, pointing to strong AI demand despite export restrictions.
- Jefferies downgraded AMD, citing lagging AI performance compared to Nvidia and Intel.
- Bank of America reinstated Roku with a $100 price target, citing potential in connected TV advertising.
- Goldman Sachs remains bullish on European banks, highlighting ING, UniCredit, and UBS.
- BNP Paribas Exane initiated Carnival, Royal Caribbean, and Viking with Outperform ratings, while assigning Neutral to Norwegian Cruise Line.
- Deutsche Bank downgraded Air France KLM and EasyJet amid macro risks, while upgrading Ryanair due to stronger fundamentals.
Upcoming Data to Watch
All eyes are on today’s Core PCE Price Index release – a critical inflation gauge for the Federal Reserve. A higher reading may reduce expectations of imminent rate cuts, while a weaker number could strengthen the case for easing, potentially lifting stocks and pressuring the dollar.
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