Schwab Market Update

Trade War, Recession Fears Rattle Wall Street

April 3, 2025 Alex Coffey
Stocks plunged 3% on much stronger tariffs than analysts had anticipated. Tech, apparel, and big box stores fell most. Yields and the dollar cratered and volatility spiked.

Published as of: April 3, 2025, 9:24 a.m. ET

Listen to this article

Listen here or subscribe for free to the Schwab Market Update in your favorite podcast app.

The markets Last price Change % change
S&P 500® index

5,670.97

+37.90

+0.67%

Dow Jones Industrial Average®

42,225.32

+235.36

+0.56%

Nasdaq Composite®

17,601.05

+151.16

+0.87%

10-year Treasury yield

4.03%

-0.16

--
U.S. Dollar Index

101.64

-2.16

-2.08%

Cboe Volatility Index® 27.07
+5.56

+25.8%

WTI Crude Oil

$67.01

-$4.63

-6.46%

Bitcoin

$81,898.07

-$4,575.29

-5.29%

(Thursday market open) President Trump's tariffs plunged Wall Street back into correction mode this morning, sending major indexes down more than 3% toward six-month lows. The sweeping tariffs—which include an across-the-board 10% tariff on imports and will top 50% for some countries, including China—put U.S. trade barriers at their highest levels since the Model T was a new car and far surpassed what most analysts anticipated. Volatility spiked, recession fears ramped up, and Treasury yields plunged as investors sought perceived safety away from equities.

The hardest hit areas early today included multi-national stocks with heavy export and import exposure, including apparel firms, big box stores, and tech. The U.S. dollar also cratered to five-month lows, somewhat surprising considering tariffs would normally cause the greenback to rise. "It seems investors are more focused on potential weakness in U.S. growth as a result of tariffs," said Kathy Jones, chief fixed income strategist at Schwab. "It's a substantial regressive tax—about 2% of gross domestic product."

Tariffs are taxes on U.S. companies. They'll likely pass along some of the costs to U.S. consumers, who will then lose spending power. Consumer spending is 70% of the economy, and a substantial dip likely means slower growth and possibly recession. "The announcement launches an unprecedented economic experiment, one which most economists believe will result in higher prices, slower growth, and rising inflation, but which the White House believes will fundamentally reshape the U.S. economy with ultimately positive results," said Michael Townsend, managing director, legislative and regulatory affairs at Schwab. "Time will tell which view turns out to be correct."

To get the Schwab Market Update in your inbox every morning, subscribe on Schwab.com.

Three things to watch

1. Tech, cars, and shoes get stomped: Stocks down the most this morning included names like Apple (AAPL), Nike (NKE), Walmart (WMT), and Nvidia (NVDA). "Tech is under particular pressure this morning given the intricacies of their global supply chains and the input source diversions many companies underwent following 2018's trade war, including to places like Vietnam," said Liz Ann Sonders, chief investment strategist at Schwab. Tariffs on goods imported from Vietnam were set yesterday at 46%. There's no real investment playbook in this unprecedented situation, but Sonders told Bloomberg yesterday that investors might want to look for companies with stable profit margins, more domestic exposure, lower volatility, and stability in dividend yields. They should also consider diversification outside the United States.

2. Tariffs paint murky picture as earnings loom: If companies provide guidance when earnings season starts next week, investors could get a sense of how tariffs might affect the bottom lines of various industries and how companies plan to manage the tariff impact. Goldman Sachs (GS) estimates that every five-percentage point increase in the U.S. tariff rate reduces S&P 500 earnings per share by roughly 1% to 2%, assuming companies can pass through most of the tariffs to consumers. Generally, companies pass along higher prices but may be less able to now after consumers just suffered three years of high inflation. Current double-digit earnings growth estimates on Wall Street were predicated on strong margins, which now will be under tariff pressure. "The consensus for 10% earnings growth, given what we know now, is too lofty an assumption," Schwab's Sonders told Bloomberg. "The path of least resistance for earnings is significantly down from here."

3. OPEC hikes oil supplies: Over the last month, the S&P 500's energy sector is the only one of the 11 to post significant gains. Energy might seem like a surprising sector to rally, considering trade wars often lead to economic slumps that can ease demand for oil. However, there's plenty of geopolitical uncertainty supporting crude prices. U.S. threats against Iran and threats to restrict Russian and Venezuelan oil tariffs among the price-supportive factors. On the horizon, however, crude oil faces pressure today on supply fears.  Eight members of OPEC, plus allies led by Russia, approved a 411,000 barrel per day production hike that will take place in May, CNBC reported.

On the move

- Apple fell 7.5% ahead of the open, as it and other large technology stocks reacted to the tariff news. Nvidia dropped 5.6%, Tesla (TSLA) fell 5.6%, and Amazon (AMZN) slipped 6%.

- Nike was among many apparel and shoe makers hit hard by the tariff news, as these firms do so much business overseas and also have manufacturing plants abroad. Nike took a 11.6% tumble ahead of the open, Skechers USA (SKX) fell 11.3%, lululemon (LULU) fell 15%, and Deckers Outdoor (DECK) fell 12.3%.

- Walmart fell 5.9% ahead of the open and Target (TGT) fell nearly 10%. Dollar Tree (DLTR) slipped 12.8%. Most big-box stores feature huge international supply chains, meaning they'll likely see margins hurt by tariffs.

- DoorDash (DASH) fell 7% in pre-market trading after gaining 3.7% yesterday on announcing a partnership with Domino's Pizza (DPZ).

- General Motors (GM) and Ford (F) each fell about 2% ahead of the open, a better performance than the overall market, in part because they've already been under so much tariff pressure and because Trump didn't announce new tariffs on Canada and Mexico, where many car parts are manufactured.

- Technical support levels for major indexes looked like they could take a big hit today. The S&P 500 index (SPX) appeared on the way to taking out its six-month March intraday low of 5,488. There's possible support at 5,400, but that, too, appears in danger. Below that is a level near 5,130 to 5,140 that goes back to last summer's sell-off.

- The VIX rose sharply this morning but remained below peaks seen in March and December, possibly a sign that there's lack of panic on Wall Street. Some analysts think the silver lining behind Trump's high tariffs is that they can be negotiated down.

- Initial weekly jobless claims were tame at 219,000 but continuing claims jumped toward three-year highs above 1.9 million. U.S. Challenger job cuts data for March showed U.S. employers cutting 275,000 jobs, the highest since May 2020 and up from 172,000 in February. ISM Services PMI® data are out later today and tomorrow brings the March nonfarm payrolls report at 8:30 a.m. It is expected to show U.S. March jobs growth of 130,000, down from 151,000 in February, with unemployment staying at 4.1%.

More insights from Schwab

Cautionary tale: Amid tariffs and worries about economic growth, investors are turning toward fixed income. "While we see value in yields at current levels, we don't think this is the time to take risk in duration—a measure of sensitivity to interest rate changes—or credit quality," said Schwab's Jones in her latest analysis of the bond market.

Cautionary tale: Amid tariffs and worries about economic growth, investors are turning toward fixed income. "While we see value in yields at current levels, we don't think this is the time to take risk in duration—a measure of sensitivity to interest rate changes—or credit quality," said Schwab's Jones in her latest analysis of the bond market.

" role="dialog" aria-label="

Cautionary tale: Amid tariffs and worries about economic growth, investors are turning toward fixed income. "While we see value in yields at current levels, we don't think this is the time to take risk in duration—a measure of sensitivity to interest rate changes—or credit quality," said Schwab's Jones in her latest analysis of the bond market.

" id="body_disclosure--media_disclosure--89106" >

Cautionary tale: Amid tariffs and worries about economic growth, investors are turning toward fixed income. "While we see value in yields at current levels, we don't think this is the time to take risk in duration—a measure of sensitivity to interest rate changes—or credit quality," said Schwab's Jones in her latest analysis of the bond market.

Chart of the day

The energy sector index rose from about 900 to start 2025 to almost 1,000, fell to 900 and is now at about 992. That happened as crude oil has been about flat rising from about $73 per barrel to over $80, declining to below $68, an is now about $71.

Data sources: CME Group, S&P Dow Jones Indices. Chart source: thinkorswim® platform.

Past performance is no guarantee of future results.
For illustrative purposes only.

The S&P Energy Select Sector Index (IXE—candlesticks) is the best-performing S&P sector year-to-date, up about 10%, even as the price of crude oil (/CL—purple line) is right near where it started the year. Usually the energy sector tends to closely track crude prices, but that hasn't been the case in 2025. Keep in mind that even at today's levels, the energy sector still hasn't fully clawed back to where it topped last November.

The week ahead

Check out the Investors' Calendar for a summary of the top economic events and earnings reports on tap this week.

April 4: March nonfarm payrolls, unemployment.
April 7: No major earnings or data.
April 8: No major earnings or data.
April 9: FOMC minutes, earnings from Delta (DAL) and Constellation Brands (STZ).
April 10: March CPI and core CPI and expected earnings from CarMax (KMX).
 

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. 

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed. 

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve. 

Schwab Center for Financial Research ("SCFR") is a division of Charles Schwab & Co., Inc.

Supporting documentation for any claims or statistical information is available upon request.

Past performance is no guarantee of future results.

For illustrative purposes only.

Investing involves risk, including loss of principal. 

Diversification strategies do not ensure a profit and do not protect against losses in declining markets. 

Indexes are unmanaged, do not incur management fees, costs, and expenses and cannot be invested in directly. For more information on indexes, please see schwab.com/indexdefinitions

The policy analysis provided by the Charles Schwab & Co., Inc., does not constitute and should not be interpreted as an endorsement of any political party.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed-income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors.

Digital currencies [such as bitcoin] are highly volatile and not backed by any central bank or government. Digital currencies lack many of the regulations and consumer protections that legal-tender currencies and regulated securities have. Due to the high level of risk, investors should view digital currencies as a purely speculative instrument.

Cryptocurrency-related products carry a substantial level of risk and are not suitable for all investors. Investments in cryptocurrencies are relatively new, highly speculative, and may be subject to extreme price volatility, illiquidity, and increased risk of loss, including your entire investment in the fund. Spot markets on which cryptocurrencies trade are relatively new and largely unregulated, and therefore, may be more exposed to fraud and security breaches than established, regulated exchanges for other financial assets or instruments. Some cryptocurrency-related products use futures contracts to attempt to duplicate the performance of an investment in cryptocurrency, which may result in unpredictable pricing, higher transaction costs, and performance that fails to track the price of the reference cryptocurrency as intended. Please read more about risks of trading cryptocurrency futures here.

0425-0130