Stocks Closed Sharply Higher Yesterday After 90-Day Pause On Most Reciprocal Tariffs Stocks soared yesterday with all of the major indexes up sharply. The Nasdaq, for example, was up more than 12% (it's biggest 1-day gain in over 2 decades), and the S&P 500 was up nearly 10%. But not before both bonds and stocks were in the red early on. In fact, worries that overnight selling of Treasuries, and fears of a soft bond auction weighed on all aspects of the market. Selling was exacerbated by reports that the administration was ratcheting up tariffs on China to 125% (up from the previous day's 104%). But then came news that the White House would put a 90-day pause of the reciprocal tariffs for most countries, to give everyone time to negotiate a better deal. In the meantime, the 10% base tariffs would stay on. But the larger, more onerous ones would be on hold while negotiations took place. However, China was excluded from that pause, because they retaliated, and the 125% tariffs remain in place. We might very well hear some new news concerning the fluid situation between the U.S. and China soon. Could be favorable with cooler heads prevailing. Or not, with each side raising the tariff stakes. We shall see. For now, however, the market breathed a sigh of relief that most of the reciprocal tariffs are on pause (sans China), with hopes that in the end, it leads to lower tariffs for all and more access to foreign market for the U.S. (BTW, the bond auction saw strong demand after all.) Yesterday's FOMC Minutes (from the March meeting) came and went with little fanfare. There were no new revelations. And it reiterated what we already knew – that Fed officials were worried that tariffs could increase inflation. What's interesting to note, given the events of the day, is that Fed Chair Jerome Powell, shortly after the tariffs were announced on April 2, said that they were larger than expected, essentially saying it was worse than the worst-case scenario some had been expecting. But he seemed calm in the aftermath, and never mentioned lowering GDP or increasing inflation estimates, beyond what they had communicated in the March meeting. However, now that the worst-case scenario has seemingly been rescinded (except for China), I would imagine even the Fed can breathe a little easier. Although, knowing they didn't seem to make any adjustments to their outlook when things looked to be at their worst, I don't think they'll be making any adjustment to their outlook now that things appear better. But Goldman Sachs did just that. Early Wednesday, they had increased their risk of recession from 45% to 65% in the wake of President Trump's tariff announcement. But after yesterday's tariff pause, they quickly hit the brakes on that forecast, putting the odds back at 45%. (For context, the Fed recently said that there's virtually always a 25% chance for a recession at any time. So, while 45% sounds like a lot, it's more modest when compared to a virtual baseline of 25%.) What a week, and there's still 2 days left. In other news, the market will get another look at inflation today with the Consumer Price Index (CPI – retail inflation). The last CPI report showed annual core inflation (ex-food & energy) down two-tenths of a percent at 3.1%. Today's report is expected to show the core rate down again at 3.0%. We'll see if the market can build on yesterday's gains today, or at least retain the lion's share of them. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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