Schwab Market Update

Published as of: April 7, 2025, 9:17 a.m. ET

(Monday market open) After suffering its worst week since the pandemic, Wall Street faced more carnage Monday as the Trump administration spent the weekend doubling down on intentions to keep massive tariffs locked in place. Stocks rebounded slightly just before the open after Trump trade advisor Peter Navarro said Trump is seeking cuts to tariffs and non-tariff trade barriers. The question this week—besides whether Trump might blink or announce deals—is if investors start to nibble with many large tech stocks at huge discounts. Meanwhile, there's little in the way of data or earnings today to shift focus, recession odds continue to ramp higher, and JPMorgan Chase (JPM) CEO Jamie Dimon told investors that tariffs could boost inflation and slow growth.

JPMorgan is one of several big banks reporting at the end of the week after earnings season unofficially kicks off with Delta Air Lines (DAL) Wednesday. The airline industry had a tough first quarter even before last week's tariff news undercut their shares dramatically. Many have already sliced guidance, but it wouldn't be surprising to hear more bad news not just from airlines but from railroads and trucking firms set to report soon. In general, first quarter results might get overlooked as investors focus on outlooks for the rest of the year.

"Earnings estimates are still pretty lofty for 2025, although they've come down, and are still for about 10% growth," said Liz Ann Sonders, chief investment strategist at Schwab. "What's interesting about that is revenue estimates are somewhat subdued. What analysts have been banking on in keeping those earnings estimates relatively high is continued strong profit margins. And that's now being called into question, or at least it should be." During earnings calls, analysts should try to get companies to put a little "more meat on the bones" in terms of tariffs' likely impact on profit margins, Sonders added.

1. Bitcoin joins sell-off: After weathering the hurricane pretty well and trading roughly flat last week, Bitcoin (/BTC) turned tail overnight and plunged with the rest of the market. The cryptocurrency is now below its 200-day moving average near $78,000, a level where it's found support the last couple of years, according to Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. The current sell-off on Wall Street has tested whether Bitcoin can serve as a port in the storm after falling with the market on several past steep drops over the last few years.

2. Recession clues: Treasuries flattened early Monday after investors piled into fixed income seeking perceived safety and as odds of Fed rate cuts to fight an economic slowdown dramatically climbed. "If the tariffs that have been announced are maintained—a big if—then the risk of recession in the next 12 months will rise significantly," said the Schwab Center for Financial Research. "The Cleveland Fed is forecasting two consecutive quarters of negative growth in the second half of the year. Moreover, the 3 month/10-year Treasury curve is inverted, signaling expectations of much slower growth and recession risk." Schwab experts expect rate cuts this year. Additionally, they say, there's a risk that financial conditions could tighten. Credit spreads rose last week, and if those conditions persist businesses and consumers might not be able to get financing they need. That scenario could cause the Fed to cut rates sooner rather than later. There's a host of Fed speakers this week, perhaps providing color to the proceedings.

3. Technical considerations: Technical support levels for major indexes got trampled last week as they often do in a major sell-off like this or the pandemic. Still, there are some embers glowing. The Relative Strength Index (RSI), a momentum tracker, fell to 24 on Friday for the SPX. That's well into what analysts consider "oversold" territory and the lowest RSI has been since the COVID-19 bottom. Sometimes oversold conditions can suggest a turnaround, though that's not guaranteed. More distressed sellers could be forced out of the market if the downside continues, and there's likely to be heavy activity around opens and closes, specifically. Naturally, tariff developments will probably steer the ship more than technical levels this week. "Tariffs throw a wrench in everything," said Cooper Howard, director, fixed income strategy at the Schwab Center for Financial Research. "Volatility is likely to remain elevated as the market tries to sift through what is a negotiating tactic and which tariffs are likely to stick." The Cboe Volatility Index (VIX) stayed above 40 early Monday, down from overnight peaks but still the highest since last August, suggesting investors expect more turbulence ahead.

- Tesla (TSLA) fell nearly 6% in overnight trading to levels near the March lows after last week's first quarter delivery numbers disappointed and investors fled from large growth names. Today, it was reeling after longtime bull Wedbush analyst Dan Ives slashed his price target, according to Barron's.

- Nvidia (NVDA) dropped 5% in pre-market trading and was on pace to open below $90 per share for the first time since last May following China's decision to respond harshly to U.S. tariffs last week. The trade war has been very tough on semiconductors, with so much exposure to Asia in both manufacturing and sales.

- Japan's Nikkei 225 (N225:JP) dropped nearly 8% earlier Monday and has been among the hardest hit Asian stock markets. This is partly due to investors piling into the Japanese yen, a perceived safe haven, which would potentially raise the price of Japanese exports.

- The U.S. Dollar Index ($DXY) steadied early Monday but remains well below its January peak. More weakness in the dollar might suggest investors selling the benchmark currency amid perceptions of U.S. economic weakness and potential Fed rate cuts. Today's slight rebound could reflect risk-off trading.

- Chinese tech company Alibaba (BABA) fell 7% Monday after a nearly 10% drop Friday as Chinese firms lost ground amid the tariffs' focus on that country.

- A number of airline, manufacturing, and retail stocks received analyst downgrades and price target decreases today from Wall Street analysts and many firms have lowered their year-end SPX expectations.

- Last week saw the number of SPX stocks trading at or above their 200-day moving average drop to 37.4% from 47.2%. The numbers are even worse for the Nasdaq Composite and the Russell 2000^® (RUT), according to Bloomberg data. Levels this low can sometimes indicate investor sentiment being weak enough to point toward a countertrend, but again, there's no guarantee.

- The CME FedWatch Tool shows roughly 50-50 chances of the Fed cutting rates 25 basis points at its early May meeting, up from 14% a week ago. This despite Fed Chairman Powell saying last Friday that there's "no hurry" to adjust policy with inflation still above target.  

- Technically, the SPX is trading around the 61.8% Fibonacci Retracement level from the October 2022 lows to the February highs, noted Schwab's Peterson. Sometimes this can serve as technical support. However, technical indicators suffered severe damage last week, especially when the SPX and Nasdaq-100^® (NDX) took out last August's lows. The psychological 5,000 level is one to watch for the SPX. Below that, a drop to 4,915 would put the SPX into bear market territory, down 20% from its high. Last April's low just above 17,000 could be one to watch for the NDX.

- AppLovin (APP), one of the worst-performing tech names on Friday with a 16% plunge, dropped another 7% this morning as investors shifted money out of the technology industry. Palantir (PLTR) and Palo Alto Networks (PANW) were also hit hard early today.

- Shares of the largest U.S. bank stocks including JPM and Morgan Stanley (MS) crumbled between 6% and 8% early Monday and regional bank shares also declined. The Nasdaq Bank Index (BANK) is down more than 11% so far this month as Treasury yields sank and recession odds bubbled.

- Crude oil (/CL) dipped 2.7% to just above $60 early Monday after falling under that level earlier for the first time since 2021 amid global recession concerns and last week's announcement of a production hike from OPEC and its allies.

- Odds of a U.S. recession rose to 45% from 35%, according to Goldman Sachs (GS), but that factors in what the bank calls a "large reduction" in tariffs scheduled to take effect April 9, Barron's reported. If those tariffs do take effect, the firm would expect to change its forecast.

- Shares of crypto-associated names MicroStrategy (MSTR) fell more than 10% and Coinbase (COIN) dropped 5% in overnight trading as cryptocurrency values lost ground. 

- The U.S. 10-year Treasury note yield fell below 4% early Monday and is down more than 80 basis points from its 2025 peak. Meanwhile, the Fed policy-sensitive 2-year Treasury note yield dropped even more dramatically and hit its lowest level since 2022, below 3.6% as investors built in higher odds of a May rate cut.

- Europe's STOXX Europe 600 is down 5% this morning as investors await a possible European Union response to U.S. tariffs. A major increase might be another bearish development this week for investors to be wary of.

This one-year S&P 500 (SPX—candlesticks) chart shows some technical areas to watch. The 50-day moving average (blue line) is approaching the 200-day moving average (red line). If the 50-day goes below the 200-day, this would represent what's called a "death cross" and would be viewed as very negative from a technical perspective. At the same time, the RSI for the SPX (lower chart) slipped to pandemic-era lows Friday at 24, which could be an oversold signal.