Breakfast News: Pivot And Pause
April 10, 2025
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Wednesday's Markets |
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| S&P 500 5,457 (+9.52%) |
| Nasdaq 17,125 (+12.16%) |
| Dow 40,608 (+7.87%) |
| Bitcoin $82,082 (+7.11%) |
1. Another Wild Day on Wall Street
A record $5.1 trillion of value was added to U.S. stock markets yesterday following President Trump's 90-day tariff pause and lowered reciprocal levies during this period.
- "Clear, predictable conditions are essential for trade and supply chains to function": European Commission President Ursula von der Leyen praised the turnaround, less than a day after the EU approved 25% tariffs on a wide range of U.S. goods from steel and soya beans, to almonds and aluminum. This morning, these were put on hold for 90 days.
- Goldman lowered China GDP growth forecast by 0.5% this year: Bridgewater Associates founder Ray Dalio called for a trade deal with China, with Goldman Sachs (GS +0.45%) decreasing their economic forecasts for the nation based on tariff impact.
2. Amazon Caught in The Crosshairs
China is home to around half of Amazon (AMZN +2.05%) sellers, with plans being made by many to hike prices for the U.S. or pull out of the market completely, according to the head of the Shenzhen Cross-Border E-Commerce Association.
- "This isn't just a tax issue, it's that the entire cost structure gets entirely overwhelmed": Wang Xin spoke of the unprecedented blow it provides for Amazon sellers in the country, with Amazon also under pressure given the potential loss of trading revenue.
- 60% of items come from first-party vendors: Amazon has reportedly already cancelled some direct import orders originating from vendors in China and Southeast Asian countries, as the company is tagged as the importer and therefore responsible for paying the new tariffs.
3. TSMC Impresses With Revenue Surge
Taiwan Semiconductor (TSM +1.40%) pleasantly surprised investors with a trading update showing strong demand for AI servers and smartphones, with the fastest pace of revenue growth since 2022.
- Demand high ahead of anticipated trade disruption: Despite some concerns that spending on data centers and AI chips might be slowing, TSMC bucked the trend with revenue above expectations.
- $100 billion U.S. chipmaking deal: Semiconductors are currently exempt from reciprocal tariffs. The commitment from TSMC's CEO of large-scale investment in U.S. chipmaking last month could help to ease any company-specific impact going forward.
4. Bonds Tell a Different Story
U.S. Treasury yields spiked as investors sold bonds, with the 10-year maturity jumping 22 basis points to rally above 4.3%. Higher yields is the opposite of what the administration wants, in order to reduce the cost of Government borrowing.
- Implications for monetary policy: Futures pricing now only shows three interest rate cuts through to the end of the year, which was at five cuts near the start of the week.
- Contrasting to stock market buying: The sharp selling of bonds has been put down to factors such as hedge funds closing out loss-making trades, concern around U.S. debt being a safe haven, and worries China may look to start selling their Treasury holdings.
5. Foolish Lessons From Market Volatility
Before the pause on tariffs was announced, Wall Street's 'Fear Gauge' – the CBOE Volatility Index (VIX) – hovered around 50. Investors at the Fool shared their views with members, with chief investment officer Andy Cross noting "This kind of heightened volatility can be unnerving. ... But we do know history remains firmly on the side of the investor who stays in the game through market drops like this. "
- "The VIX is an imprecise gauge. But it's letting us know, for example, that high-beta stocks are likely getting rocked": TMF co-founder and CEO Tom Gardner stated "I'm also looking for quality growth companies that are badly beaten down. If we're heading into recession, earnings numbers will be all over the place this year. But with a 5+ year horizon, I'm looking to buy."
- "Expect – yet embrace – further volatility": Dividend Investor's Anthony Schiavone commented "Sizable market swings are likely to occur in the near term. It's impossible to know when stocks will bottom, but if history is any indication, expected future returns have increased from just a few weeks ago."
6. Foolish Fun
Fool analyst Sanmeet Deo, CFA, wrote to Epic members on Tuesday saying "If you are feeling it, do something for yourself and buy a little bit of the S&P 500 index ... Write down why you bought and save it to read in 5+ years."
Have you bought the index since the beginning of April? If so, why? Discuss with friends and family, or become a member to hear what your fellow Fools are saying.
