It was a relatively quiet day in the markets with only Canadian wholesale trade data on the economic calendar. However, tariffs remained front and center in market discussions.
Last week, the Trump administration raised tariffs on Chinese goods to 145%, prompting swift retaliation from Beijing. At the same time, the U.S. delayed tariffs on several other countries by 90 days—though earlier tariffs remain in effect. Then, in a late-Friday development, the administration said electronics would be excluded from the broader “reciprocal tariffs,” offering a boost to tech names like Apple.
But that relief was short-lived. By Sunday, Commerce Secretary Lutnick clarified that electronics would still fall under upcoming semiconductor-specific tariffs set to roll out in a month or two. President Trump added further confusion by stating there were no “exceptions” at all—only that the goods were now classified under a different tariff bucket subject to a 20% levy, aimed at punishing China for its role in fentanyl trafficking.
Despite the whiplash of announcements, markets appear to be growing numb to the erratic tariff headlines—perhaps invoking the old adage: “Fool me seven times, shame on you; fool me eight times, shame on me.” Stocks opened higher and held onto gains, though the session saw its fair share of intraday swings.
What is the latest Fed interpretation of the tariffs? Fed Governor Chris Waller weighed in by describing the new tariff policy as one of the most significant economic shocks the U.S. has faced in decades. He noted that March’s 12-month PCE inflation is likely to come in at 2.3%, with core PCE around 2.7%. In the first quarter, the economy grew modestly, the labor market remained solid, and inflation, while still too high, showed signs of slow improvement. Waller emphasized that monetary policy is currently restricting economic activity in a meaningful way and expressed hope that underlying inflation will continue to moderate. He added that inflation expectations remain anchored and projected inflation to return to more moderate levels by 2026.
Waller warned that partial suspensions of tariffs are creating additional uncertainty, complicating the timing of any policy shifts. Given this backdrop, he said the outlook is highly uncertain and called for flexibility in monetary policy. He outlined various tariff scenarios: under a smaller tariff scenario, the Fed could afford to be more patient, potentially cutting rates in the second half of the year. However, if tariffs average 10%, inflation could peak around 3%, while a 25% average tariff could push inflation as high as 5%. In that case, the drag on output and employment could be long-lasting, with unemployment potentially rising to 5%. Still, Waller believes the inflationary impact of higher tariffs would be temporary.
Looking at the closing levels for the market shows
Market Close Snapshot
Despite index gains, mega-cap tech lagged:
-
Amazon: -1.48%
-
Broadcom: -1.97%
-
Nvidia: -0.20%
-
Meta: -2.20%
-
Microsoft: -0.16%
The advance was not broadly supported, reflecting caution under the surface.
Bond Market
U.S. yields moved lower following last week’s dramatic rise (10-year yield jumped 50 bps—marking a multi-decade record). Today’s closing snapshot:
-
2-year yield: 3.855% (-10.1 bps)
-
5-year yield: 4.020% (-13.5 bps)
-
10-year yield: 4.35% (-10.07 bps)
-
30-year yield: 4.15% (-6.0 bps)
FX Market
The U.S. dollar ended the day mixed versus major currencies:
-
EUR: +0.06%
-
JPY: -0.31%
-
GBP: -0.80%
-
CHF: -0.07%
-
CAD: +0.09%
-
AUD: -0.64%
-
NZD: -0.89%
Commodities & Crypto
-
Crude oil: +$0.10 at $61.55
-
Silver: +$0.005 at $32.33
-
Gold: -$25 (-0.78%) to $3,211.44
-
Bitcoin: +$1,045 to $84,756
