Bond Market Twists Tariff Arm to 90-Day Pause

Wednesday, April 8, 2025

So we started the day quoting Mr T, and now we’ll conclude quoting Dinah Washington: “What a Difference a Day Makes.” One little 90-day pause on global tariffs, and market indexes shoot up to levels not seen since the introduction of the Covid vaccine, if not well before that. The Dow gained +2,962 points, or +7.87%, the S&P 500 grew +474 points, +9.52%, the Nasdaq +1,857 points, +12.16%, and the small-cap Russell 2000 +153 points, +8.71%.

President Trump sat with his new tariff policies for nearly a week and watched market indexes hack apart by double-digits across the board: the Dow -10%, the Russell 2000 -11%, the S&P 500 -13% and the Nasdaq almost -14%. Instead of clear and immediate capitulation from the U.S.’s trading partners, he saw a counter-tariff measure rom the EU and two from China. It became untenable, even for Trump’s amazing capacity for stressful situations.

Except for China, where the tariff war rages on — and where we will see the difference in the price and availability of inexpensive goods in this country right away — a 90-day pause has lifted tariffs until the week after Independence Day here in the U.S. (Fitting, as the tariffs placed onto all these countries at once Trump called “Liberation Day.”) Will fairer trade deals be reached between now and then? How much damage to our international relationships has already been made?

In any case, Allianz economic advisor Mohamed el-Erian today said, “There was a debate on what would convince the US Administration to opt for some type of pause on tariffs. Would it be Congress, the President’s advisors, business leaders, the legal system, markets, or something else? We got the answer today: It’s the government bond market — particularly, how close it gets to the line that separates wild price volatility from market malfunctioning.”

What to Expect from the Stock Market Tomorrow

In any normal trading week, tomorrow’s Consumer Price Index (CPI) would have commanded most of the headlines. Expectations are for headline CPI month over month to cool to +0.1% in March from +0.2% in February. CPI year over year, aka the Inflation Rate, is expected to tick down 20 basis points (bps) to +2.6%. The last time we were that low was back in October of last year, with September ’24’s +2.4% the lowest Inflation Rate in four years.

Also, like almost every Thursday, Weekly Jobless Claims are expected to remain in range — between 215-225K on Initial Claims, and around 1.9 million on Continuing Claims, where they were last week. We’ve seen these levels revise beneath 1.9 million several times over the past few months, so we’ll see if this pattern holds. Or maybe we’ll start seeing some evidence of tens of thousands of layoffs in the federal government and elsewhere.

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