Schwab Market Update

Published as of: April 1, 2025, 9:24 a.m. ET

(Tuesday market open) It's a new month but major indexes are up to their old ways, dropping overnight along with Treasury yields ahead of tomorrow's "Liberation Day" tariff announcement from the White House. Once again, U.S. stocks went the opposite way of their European and Asian counterparts early Tuesday, extending a trend toward U.S. underperformance after the S&P 500 index (SPX) fell 4.6% in the first quarter. A sharp decline in yields suggests investors might seek perceived safety in fixed income.

Though there are hopes that tomorrow's announcement could provide some relief on Wall Street, there hasn't been much evidence lately of investors stepping in to buy dips, but there also hasn't been an all-out capitulation. Instead, the market continues to grind slowly lower, with U.S. stocks posting their worst quarter versus the rest of the world's indexes since the 1980's and investors crouched in a defensive posture.

Data this week could help investors determine if recent soft consumer and business sentiment reflect actual weakness in manufacturing and jobs. Friday's March nonfarm payrolls report caps all other data and is expected to show 130,000 jobs added, down from 151,000 in February, with unemployment remaining at 4.1%. Should job growth fall to the level analysts expect, it would still indicate hiring stability. However, that "contrasts with a decline in confidence among business leaders likely to be evident in this week's ISM reports for March," said Jeffrey Kleintop, chief global investment strategist at Schwab. Those reports kick off with ISM Manufacturing PMI^®  this morning.

1. Tariff deadline approaches: While investors focus on tomorrow's 3 p.m. ET tariff announcement, the policy won't immediately go into place. There may be more process ahead, including negotiation with trading partners and possible legal challenges. Also, investors should watch how other countries react. So far, there's been little sign of major trading partners wishing to negotiate over the tariffs. Instead, they've pushed back with trade barriers of their own, and yesterday Chinese state media said China, Japan, and South Korea are coordinating a response, Reuters reported. Among the U.S. businesses most vulnerable to tariffs are automobiles, semiconductors, pharmaceuticals, alcohol makers, energy, and agriculture. Bloomberg data suggests that Trump's plan would raise U.S. tariff rates to the highest level since World War II.
    
2. VIX hints at calmer waters ahead: Speaking of volatility, it's surprisingly low for stocks despite the looming tariff announcement. While the Cboe Volatility Index (VIX) trades near 23, up from below 20 last week, it's not showing signs of disorderly or chaotic action as investors attempt to hedge tariff risk. Nor has it stormed to levels near 30 seen last December when the Federal Reserve delivered a bearish surprise on the future rate path. And somewhat surprisingly, the VIX futures complex is now in backwardation, meaning contracts further out in the year trade below the spot contract's level. The futures curve indicates a pullback to around 21 by late May, suggesting traders think volatility will contract over the next month and a half. Typically, lower volatility suggests a smoother market more likely to rally. Earlier this year, VIX was in contango—where contracts farther ahead hold a premium to the front-month—which can hint at future stock market weakness. That turned out to be correct. For now, investors simply seem to be staying out of the way rather than doing lots of hedging.
    
3. Jobs data all week: Tariffs may hog the headlines now, but the U.S. employment situation will compete for news space this week. Friday's March jobs report is key. But today brings the February Job Openings and Labor Turnover Survey (JOLTS), which because of its age may be less relevant but still could provide a sense of how much demand employers have at a time of economic uncertainty. Analysts expect JOLTS of 7.68 million, roughly unchanged from 7.74 million in January and still a healthy figure. A big drop in openings or the quit rate, or both, might indicate tariff issues starting to become more deeply rooted in the jobs market, but keep in mind  the data is from February when there was less uncertainty. Also, weekly jobless claims data haven't indicated many cracks yet in the jobs market. Another report that sometimes flies under the radar is Challenger job cuts, due Thursday morning. It soared to 172,000 in February, the highest since July 2020, and analysts expect another rise in March, according to Trading Economics.

• PVH (PVH) climbed 15% in early trading after the owner of brands like Tommy Hilfiger and Calvin Klein reported better-than-expected quarterly earnings.
   
• Newsmax (NMAX) climbed another 24% after rising more than 700% yesterday in its first day of trading following the conservative media company's initial public offering.
   
• Nvidia (NVDA) edged higher early Tuesday after dropping nearly 2% Monday on worries about future AI spending. The PHLX Semiconductor Index (SOX) fell 14% in the first quarter.
   
• Tesla (TSLA) jumped 3.6% in early trading  after another weak performance Monday as investors await first quarter delivery numbers due tomorrow. Analysts expect deliveries of around 360,000, down from 387,000 in the same quarter a year ago. The stock fell 36% in the first quarter. Chinese EV maker XPeng (XPEV) reported deliveries of 33,205 vehicles in March, more than triple a year ago.
   
• MicroStrategy (MSTR) and Coinbase (COIN) both climbed more than 2% early Tuesday after struggling much of the first quarter as Bitcoin (/BTC) dove 12% from its December 31 close amid risk-off trading sentiment. Still, Bitcoin managed to close the quarter well above its March lows of below $80,000.
   
• Caesars Entertainment (CZR) and MGM Resorts (MGM) extended their losses early Tuesday, after both slumped yesterday following disappointing data for February from the Nevada Gaming Control Board.
   
• Gold (/GC) edged higher after hitting a new record above $3,100 per ounce yesterday in what ended up being the best quarter for the yellow metal since 1986. Gold outperformed the SPX by 23.6% in the first quarter, only 0.3 percentage points less than it did in the pandemic first quarter of 2020. Gold tends to thrive on uncertainty, and besides tariffs there's also plenty of geopolitical worry supporting the asset.
   
• Johnson & Johnson (JNJ) dropped 3.7% ahead of the open after a judge rejected the company's $10 billion proposal to end tens of thousands of lawsuits alleging that its baby powder and other talc products cause ovarian cancer, Reuters reported.
   
• In another negative development that might raise inflation concerns even as tariffs threaten growth, crude oil (/CL) hit five-week highs above $71.50 per barrel earlier today as President Trump threatened to impose secondary tariffs on Russian crude and to attack Iran.
   
• CVS Health (CVS) was the best S&P 500 performer of the first quarter, up 51%, and Deckers Outdoor (DECK) was the worst, dropping 45%. CVS might have benefitted from diversification and its dividend while recession fears hit retail stocks like Deckers, Barron's noted.

Weekly view: Though international stock performance recently outpaced the Magnificent Seven, there was some sign of that trend pausing last week, Schwab's Kleintop said in his Weekly Market Outlook. "We will be watching to see if there is more of the revenge of the Mag 7 this week," he added. He's also focused on scheduled remarks from Fed Chairman Jerome Powell this Friday.

The S&P 500 fell 5% last quarter and is down 9% from recent highs, but remains in a long-term uptrend, as this five-year chart shows. While an attempt to stay above the 200-day moving average (blue line) flamed out late last month, it would take a much sharper drop, down to the 5,120 to 5,130 area, to end the technical uptrend that goes back to late 2022. A closer term potential technical support point on further dips would likely be near 5,400.

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

April 2: ADP employment change, factory orders, and earnings from RH (RH) and BlackBerry (BB). 
April 3: ISM Services and earnings from Conagra (CAG), Acuity Brands (AYI), and Lamb Western (LW). 
April 4: Nonfarm payrolls, unemployment.
April 7: No major earnings or data.
April 8: No major earnings or data.