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There was some heavy selling after the open that accelerated until a bottom at 12:30 pm ET. The Nasdaq came perilously close to a 7% decline but there was a bounce there and Trump’s comments that hinted at possibly removing 10% tariffs at least on some countries led to some modest further buying.

Closing changes:

• S&P 500 -3.5%
• Nasdaq Comp -4.3%
• DJIA -2.5%
• Russell 2000 -5.2%
• Toronto TSX Comp -3.4%
• Mexican Bolsa -2.8%

What scares me about the broader price action was that even at the peak of the intraday selling, we had US long-date yields moving higher and the US dollar slumping. I don’t think I’ve ever seen a 6% Nasdaq decline and a 1% rise in the Australian dollar on the same day. That kind of breakdown in correlations in unsettling.

This article was written by Adam Button at www.forexlive.com.

The data from New Zealand would usually be of interest but soooooooooo much has happened since March this data point is stale.

This article was written by Eamonn Sheridan at www.forexlive.com.

Here is report from Charlie Gasparino at Fox Business:

Sources: Trump Administrative is moving toward a possible delisting of Chinese public co shares on US exchanges. Sources: Incoming SEC chair Paul Atkins likely to take up delisting issue when he officially takes office. Sources: Delisting possibility comes amid trade war with China but also growing GOP Congressional appetite to delist Chinese companies. Sources: US law allows delisting if Chinese companies don’t allow inspection of books and ties to the Chinese government. Sources: Lawmakers particularly concerned about so-called “golden shares” that grant the Chinese government control over listed cos

That’s not going to help Chinese multiples but I just don’t see any way that you could fully block US investors from China. There are many foreign ETFs tracking Chinese stocks.

In any case, this is more of the floating of an idea than anything else. It would take awhile and could be more of a threat to get China to negotiate.

This article was written by Adam Button at www.forexlive.com.

Yesterday was seen as something of a crisis averted for the bond market but the vigilantes are back today. Even a strong 30-year auction with a 2.6 bps stop through was able to only briefly halt the selling.

Yields are now at the highs of the day up 6.9 bps to 4.86%.

Why?

I suspect the budget vote might have something to do with it. Fiscal hawks in the Republican party caved on the vaguest of promises from Senate and House leaders to find savings amounting to $1.5 trillion.

The message is that leadership would rather strong-arm holdouts rather than find real savings. The result is likely to be a budget that further increases the US deficit at a time when it’s already running at 6-7% of GDP (and potentially heading into a recession). At the same time, the largest US trading partners are being harangued for financing that deficit.

Old WSJ Fedwatcher Jon Hilsenrath today writes about rising yields today:

Why? The most obvious reason is that the House today passed a budget agreement that conforms to Senate plans to INCREASE budget deficits from $2 trillion a year to nearly $3 trillion in the years ahead. There’s simply too much darn supply of Treasury debt.

So far the DOGE cuts are cosmetic, and might even worsen the deficit by stripping the Internal Revenue Service of workers and thus enforcement power. The Penn Wharton Budget Model estimates the deficit is up 7.5% so far this year compared to a year earlier.

The deficit isn’t shrinking and Congress doesn’t seem to have a viable plan to address it prospectively.

I still tend to think there are issues around the basis trade and swaps that are problematic and hurting bonds but at some point the long-term deficit problem will become a near-term one.

This article was written by Adam Button at www.forexlive.com.

He loves to talk:

• The bar for a Fed policy change is now pretty high
• Fed should keep all options on the table
• Current tariffs will drive up inflation near term, hurt growth
• Current tariffs are higher than most scenarios even with Trump’s pause
• Says he prefers market-based inflation data compared to surveys

Fed officials keep on saying that they’re in no hurry to cut rates and the market continues to price in at least one cut in the next two meetings with 99 bps priced in the year ahead.

This article was written by Adam Button at www.forexlive.com.

The US dollar is in the midst of its worst day since 2022 today and it’s not because today’s CPI report was a tad soft. The foundations of the US dollar’s global dominance are cracking.

The Trump administration reversed course on the worst of the ‘reciprocal’ tariffs but we’re still left with a 10% global rate and 145% on China, which is effectively an embargo.

Even looking at it on the surface, what are you going to do with a 10% tariff? You are going to sell less to America, which means you will receive fewer dollars.

Here is Milton Friedman talking about protectionism:

For the United States, the best approach would be to unilaterally eliminate its trade restrictions and say to the world: ‘Come and sell your goods here. We’re delighted to buy from you and sell to you.’

Of course, when you sell to us, you’ll receive dollars. What will you do with those dollars? You can’t eat them. If you’d like to stack them up and burn them, we’d be delighted—we could print all the paper you want. But nobody will do that.

If other countries sell things to us for dollars, they will inevitably spend those dollars back here. There’s no doubt about that.

For decades, they have been doing just that and it’s kept the dollar strong and at the center of the global financial system. China has bought Treasuries, Japan is the largest foreign investor in the US, massive amounts of money flows into the US equity market and American venture capital. The US has benefited tremendously.

Now the US administration seems to think it can re-write the rules of economics. Today we got yet-another sign that Congress doesn’t care about deficits with the House moving forward a Republican Senate bill that would increase the deficit to $3 trillion from $2 trillion by the end of the decade.

More importantly, the US appears to be adopting some kind of mercantilist system with a floor at 10% tariffs. After the U-turn yesterday on reciprocal tariffs, I highlighted that this was still a big question and today White House economic advisor Kevin Hassett indicated no one would rate a rate below that.

That’s a big problem.

There is also an over-ridding strategy that doesn’t appear to be about taking down global trade barriers but rather bringing back factories to the United States. First of all, the timeline to do it is way longer than markets or the economic can tolerate without a recession or very slow growth but there is a reason the factories left in the first place — they weren’t competitive. With US workers earning more than ever and 4% unemployment, that’s not going to change.

To look at it a different way: What have 30 years of globalization led to? The #1 thing in my mind is persistent disinflation in goods that’s led to persistently low borrowing rates. Reverse it and we will get persistent inflation in goods and high borrowing rates. Does that sound like a place you want to invest in?

The message is over-arching message from the market right now is that the policy mix isn’t going to work. It might lead to poor growth, perhaps to high inflation, probably to low productivity and maybe all of that.

This article was written by Adam Button at www.forexlive.com.

• Prior was -307.0B
• Last March was -237.0B
• Year to date FY 25 deficit at $1.307 trillion compared to $1.065 trillion a year earlier
• March customs duties were $8.75 billion
• Outlays $528B vs $569B prior
• Receipts $368B vs $332B prior

There is a lot of variance in monthly budget data but that annual number tells the story.

This article was written by Adam Button at www.forexlive.com.

• I haven’t seen the stock market
• Says they will work out something for both the US and China
• The first deal on tariffs is very close

These are some positive comments because 145% tariffs ain’t it.

This article was written by Adam Button at www.forexlive.com.

For the second day in a row we got a good auction at the long end with a 2.6 bps stop through today after a big concession in the past few hours.

It was a $22b sale and the bid-to-cover was 2.43 vs 2.37 previously.

Unlike yesterday, there also wasn’t any sign of waning foreign participation. Directs claimed 25.8% vs. a
18.1% norm, dealers took 12.3% vs. a
14.6% average and indirects were at 61.9% vs. an average of
67.3%.

This article was written by Adam Button at www.forexlive.com.

I would imagine that if they abolish the tariffs, there will be a flood of Chinese EVs into the EU that would swamp German carmakers. There is a real rift in the EU in that many countries and consumers would love the have the cheaper cars, while Germany would suffer. But if you’re one of those countries that had its domestic industry already crushed by no tariff imports so Germans could be buy cheaper goods, you would only be asking for fair treatment.

All that said, this could just be part of some kind of broader negotiation either with China or a message to the US. At the end of the day, you have to assume that whoever makes the cheaper, better cars is going to win in the global marketplace.

This article was written by Adam Button at www.forexlive.com.

What a brutal day for stocks.

The S&P 500 briefly traded down by 5.1% but has trimmed that to 4.8%. A 7% decline in the S&P 500 would trigger a 15-minute trading halt if it occurs before 3:25 pm ET. After 3:25 pm, trading continues unless a 20% decline is hit.

Technically, we’re now testing the 61.8% retracement of the tariff rally from yesterday.

This article was written by Adam Button at www.forexlive.com.

The US dollar index (DXY) is having is worst day since November 2022. The price is down 1.81% on the day and at the lowest level since early October 2024.

The low price today has reached 100.76. The low price from 2024 is at 100.157. The move below that level would target a low price from 2023 near 99.589.

The biggest mover today is the USDCHF with the decline of -3.58%. The USDCHF is trading at its lowest level since 2011.

The USD is -2.9% versus the JPY and -2.08% versus the EUR.

The dollar is trading the best against the CAD and the AUD but is still down -0.50% versus those currencies

This article was written by Greg Michalowski at www.forexlive.com.