S&P 500 Plows Through Rough Waves of Volatility

Wall Street’s bulls and bears experienced one of the more turbulent weeks for the U.S. stock market for quite some time. However, by the end of the week, the S&P 500 (Index: SPX) closed at 5,371.96, up almost 5.9% from where it closed out the preceding week.

When we refer to turbulence, we’re mainly describing the wild swings the index went through during trading on Monday, 7 April 2025 and Tuesday, 8 April 2025, even though the day-to-day changes failed to qualify as interesting. That changed on Wednesday, 9 April 2025 when the S&P 500 experienced its third-best day in history. The index clocked a 9.52% gain, ranking only behind 13 October 2008’s 11.58% increase and 28 October 2008’s 10.79% increase. The event that prompted the large rally was President Trump’s announcement of a 90-day pause in most of the reciprocal tariffs he announced on 2 April 2025, which benefits all nations except for China.

Thursday, 10 April 2025 saw the market fall by 3.5% as China and the U.S. continued exchanging retaliatory tariffs, but quieted down on Friday, 11 April 2025 with the S&P 500 recovering almost two percent.

The latest update of the alternative futures chart finds the trajectory of the S&P 500 is continuing to follow the track associated with investors focusing on the current quarter of 2025-Q2.

With tariff-related news events starting to somewhat settle down, the CME Group’s FedWatch Tool continues to project the Fed will hold off on cutting the Federal Funds Rate until the conclusion of its 18 June (2025-Q2) meeting, at which time it will reduce this interest rate by 0.25%. After that, the FedWatch Tool anticipates the Fed will reduce rates two more times by 0.25%, on 30 July 2025 (effectively 2025-Q3) and again on 29 October (2025-Q4). Although the probability the Fed will act by 7 May (2025-Q2) to resume cutting rates decreased from a 1-in-3 chance to a 1-in-5 chance, investors appear to remain focused on the current quarter in setting stock prices.

Looking forward, we’ve reached a period in which the dividend futures-based model’s projections will be skewed by the echoes of past volatility in stock prices. This situation arises because the model uses historic stock prices as the base reference points from which it projects their future. This time around, we have a triple-whammy to deal with, in that stock prices from 13 months ago, 12 months ago, and just 1 month ago are contributing to the echo effect.

Whenever we run into this situation, our practice is to add a redzone forecast range to the alternative futures chart that bridges over the period which we know in advance will be impacted by these echoes for more than a couple of weeks. We’ve added one in this chart, which assumes that investors will likely remain focused on the current quarter of 2025-Q2 in setting current day stock prices. Given recent events, we’ve clearly entered into a new volatility cluster in which we anticipate stock prices will remain more volatile than the range that might be considered “typical” during this period and it’s possible we may need to extend it beyond what we’ve indicated at this time.

As we go into the trading week ending on Friday, 18 April 2025, stock prices are on the high side of that projected range, but if you look closely at the chart, there has been a significant change in the dividend outlook associated with 2025-Q2 and other future quarters, which is a story we’ll cover separately later this week. We’ll also take a closer look at the market’s volatility in another separate analysis later this week.

Until then, here are the main market-moving headlines that contributed to the random onset of new information investors had to absorb during the trading week ending on Friday, 11 April 2025.

Monday, 7 April 2025

• Signs and portents for the U.S. economy:

• Trump says not looking at tariff pause, will talk to China
• Tariffs will lead to 2 million fewer auto sales in US this year, auto advisory firm forecasts
• Companies eye US expansion to lessen fallout from tariffs
• Oil prices slide 2% to near 4-year low as US trade conflict fuels recession fears

Fed minions claim they should only have one priority, not sending any clear signal:

• Fed’s priority should be to keep inflation in check: Kugler
• No Fed ‘put’ when it’s unclear which way the economy may pivot

Bigger bailout developing in China:

• China sovereign fund steps in to support stocks plunging on trade war

BOJ minions see more inflation developing in Japan:

• Japan’s Feb real wages down for 2nd straight month as inflation bites

ECB minions getting really excited to deliver more Eurozone rate cuts while their uncertainty grows:

• ECB expected to cut rates in April and June as tariffs threaten recession
• ECB rates could fall faster as recession risk mounts
• ECB’s Schnabel says ‘dramatic surge’ in uncertainty may get worse

EU minions thinking about getting in on global tariff war as bigger trouble continues developing for EU economy:

• EU Commission proposes 25% counter-tariffs on some US imports, document shows
• How has the EU watered down its countermeasures to US tariffs?
• ECB rates could fall faster as recession risk mounts

Dow and S&P ended lower while Nasdaq edged up after a day of whipsawing

• Dow, S&P 500 end wild session lower, Trump digs in on tariffs
• Tariff storm ravages Magnificent Seven as Apple nears one-year low

Tuesday, 8 April 2025

• Signs and portents for the U.S. economy:

• COMMODITIES Oil hits 4-year low, coffee falls as trade war escalates

Fed minions stuck on inaction as they worry about inflation, market bets they’ll be pushed to cut rates sooner than they plan:

• Fed’s Daly sees time to tread slowly, carefully on policy
• Fed’s Goolsbee: ‘way bigger’ than expected tariffs pose inflation risks
• Traders boost bets Fed will start cutting rates in May

Bigger bailouts, trouble developing in China:

• China state firms pledge to boost share purchases to calm markets

• China’s state asset regulator to support firms with share buybacks

‘It’s like throwing darts blindfolded’; tariffs take toll on Chinese exporters

BOJ minions still thinking about hiking Japan’s interest rates, bigger trouble developing in Japan:

• BOJ’s Ueda sticks to rate-hike stance but signals focus on risks
• Japan’s bankruptcy filings hit 11-year high in FY2024/25, TSR tally shows

ECB minions more worried about potential inflation in the Eurozone than recession:

• ECB’s Stournaras says higher inflation due to tariffs could delay monetary policy normalisation

S&P 500 hits lowest close in almost a year as hopes wane for tariff concessions

• Volatility grips markets as Wall Street roars out of the gate, ends with a whimper
• Gold’s current rally: echoes of the 1980s with a more sustainable core

Wednesday, 9 April 2025

• Signs and portents for the U.S. economy:

• Trump issues 90-day pause on most reciprocal tariffs except for China

• In stunning U-turn, Trump walks back some tariffs, triggering historic market rally
• Trump’s tariffs on China to rise to 104% overnight, White House says

China escalates trade war with 84% tariffs on US goods

• Effective Tariff Rate Hits 1909 Levels As Global Trade War Explodes

US 30-year mortgage rate dropped last week, applications surged

Oil jumps 4% after Trump pauses tariffs on many countries, raises China levy

Fed minions still wanting to hold off delivering interest rate cuts sooner:

• Fed officials signal no plans to ride to the rescue with rate cuts
• Fed minutes show broad sense US risks tilted towards higher inflation, slower growth

• Fed minutes show some officials favored steady balance sheet drawdown

Bigger trouble, stimulus developing in China:

• Yuan falls to 2007 lows as US tariffs on China kick in
• Exclusive: China’s central bank asks state lenders to reduce dollar purchases
• China’s car exports under pressure as Trump tariffs roil overseas markets

BOJ minions get bigger inflation trouble developing in Japan:

• Japan’s wholesale inflation accelerates, signal sticky cost pressure

ECB minions starting to think they may have a tariff problem:

• Exclusive: ECB braces for bigger-than-anticipated growth hit from tariffs

A wild, historic day for markets sees S&P 500 notch best day since 2008 financial crisis

• Wall Street rebounds sharply after Trump announces 90-day tariff pause
• Nasdaq Composite logs second-best day in its history on Trump’s tariff about-turn
• Gold surges in best showing since October 2023 as U.S.-China tariff war keeps escalating

Thursday, 10 April 2025

• Signs and portents for the U.S. economy:

• US consumer prices unexpectedly fall in March
• Oil settles down over 3% as investors reassess Trump’s tariff flip

• EIA slashes oil price outlook, warns of lower oil demand from tariff uncertainty

Trump Has Added 145% Tariff to China, White House Clarifies

Fed minion doesn’t seem to understand why rate cuts would be needed:

• Fed’s Goolsbee: Rate cuts still possible if economy gets back on track

Fed minions worried about tariffs and inflation:

• Fed should lead in financial technology space, Harker says
• Fed must keep tariffs from fostering persistent inflation: Logan
• Kansas City Fed’s Schmid to stay focused on inflation in light of tariff risks

Bigger trouble, stimulus developing in China:

• China’s deflationary pressures persist as trade gloom worsens
• China’s consumer prices extend declines in March

ECB minions thinks Euro gives independence from US, want digital version to compete with US stablecoin crypto-currency:

• ECB’s Villeroy says Trump policies have eroded confidence in US dollar
• ECB Exec Renews Push For Digital Euro To Counter US Stablecoin Growth

ECB minions also afraid of things in the shadows, expected to cut deposit interest rates to protect big EU banks:

• ECB warns about financial risk coming from shadow banks

• ECB warns that fragmented EU bank scene is vulnerable to shocks

ECB to cut deposit rate on April 17 on downside risks to economy, inflation: Reuters poll

Wall Street slides a day after historic rally, S&P tumbles 3.5% and Nasdaq sheds 4%

• Gold hits record high as US-China trade war intensifies, dollar weakens

Friday, 11 April 2025

• Signs and portents for the U.S. economy:

• China strikes back at Trump tariff hike, US stands its ground

• China raises duties on US goods to 125%, calls Trump tariff hikes a ‘joke’
• Chinese Airline Delays Boeing Jet Delivery as Tariffs Surge
• China tariffs exempt U.S. semiconductor companies that outsource manufacturing: report

Fed minions say tariffs will increase inflation, unemployment, which they should “lean against”. Also say that markets are “holding in for now”:

• Fed’s Williams says tariffs will push up inflation, unemployment

• Producer Prices Fell in March as Energy, Food Costs Declined

Fed should ‘lean against’ persistent tariff-driven inflation, Musalem says

Fed’s Collins tells Yahoo Finance that markets are holding in for now

Bigger trouble, stimulus developing in China:

• China’s rare earth exports grind to a halt as trade war controls bite
• China’s March exports likely got front-loading lift before Trump’s new tariffs took effect
• Exclusive: China has considered opening its $520 billion ETF market to Western market makers, sources say

ECB minions gearing up for Eurozone bailouts:

• ECB ready to deploy its instruments to maintain financial stability, Lagarde says

Wall Street posts best weekly advance since early Nov 2023 as tariffs dominate headlines

• Dow jumps 600 points Friday, capping one of the most volatile weeks on Wall Street ever

The raw Atlanta Fed’s GDPNow tool‘s projection of what real GDP growth will be in 2025-Q1 improved to -2.4% from its -2.8% estimate a week earlier. However, the GDPNow tool’s alternate model forecast, which corrects for the unusual surge in gold imports during the quarter that’s badly skewing the raw projection, rose an estimate of -0.8% growth to -0.3% growth. Which is to say it’s predicting the U.S. economy will shrink during the current quarter, but not anywhere near as badly as the raw reading indicates.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of a Wall Street bull and a bear who are riding on a boat in very rough seas”.