Wall Street Whipsaws Amid Escalating Trade War and Surging Yields

Key Highlights:

• S&P 500 rebounds 0.5%, Nasdaq up 1.4%, while Dow trades flat
• China slaps 84% tariffs in response to US duties; EU and Canada join retaliation
• Treasuries lose haven appeal as 10-year yield spikes to 4.37%
• Trump urges calm, Fed signals cautious stance on rate adjustments

Wall Street attempted a fragile recovery on Wednesday, shrugging off early gloom as global trade tensions deepened and bond markets reeled. The S&P 500 gained 0.5%, the Nasdaq Composite rallied 1.4%, and the Dow Jones Industrial Average ticked up 57 points, or 0.1%, in a volatile session underscored by a geopolitical chessboard in flux.

The day’s gains followed four brutal sessions that saw the S&P 500 shed 12% and the Dow plunge over 4,500 points. The tech-heavy Nasdaq lost over 13% in that stretch as investors scrambled to make sense of a market battered by tit-for-tat tariffs and growing fears of recession.

Wednesday’s uptick came despite China’s announcement of an 84% tariff on US imports, effective Thursday, in retaliation to the US imposing a massive 104% levy on Chinese goods earlier this week. The European Union also piled on, approving tariffs on $23 billion worth of American products ranging from soybeans to motorcycles, targeting politically sensitive US states. Canada has reaffirmed plans for a 25% levy on non-compliant US-made vehicles under the USMCA agreement.

“Markets are telling us there are buyers waiting in the wings for the faintest whiff of constructive news on tariffs,” said Carol Schleif, chief market strategist at BMO Private Wealth. “But investors can’t tell if they’ve reset to the right levels. President Trump has invented a whole new game.”

As global markets shook, President Trump took to social media with a fiery message, urging Americans to hold their nerve (7th April 2025):

“The United States has a chance to do something that should have been done DECADES AGO. Don’t be Weak! Don’t be Stupid! Don’t be a PANICAN (A new party based on Weak and Stupid people!). Be Strong, Courageous, and Patient, and GREATNESS will be the result!”

https://x.com/realDonaldTrump/status/1909258777380974625 

Despite the president’s reassurances, uncertainty looms large. Minneapolis Federal Reserve President Neel Kashkari warned that rising tariffs are likely to increase inflation and dampen economic growth, leaving the Fed hesitant to adjust rates in either direction. “The bar for cutting rates, even in the face of a weakening economy and increased unemployment, is higher,” Kashkari wrote.

Meanwhile, the bond market delivered a red flag. Yields on the 10-year Treasury note jumped above 4.37%, the sharpest three-day climb since 2001. The 30-year briefly touched 5% in Asia before retreating. Such rapid moves have investors questioning the safety of traditional safe-haven assets.

Adding to market jitters, the Bank of England released a report on Wednesday highlighting growing concerns over the use of artificial intelligence in trading, warning that rapid adoption could outpace risk managers’ understanding and trigger destabilizing market events.

While stocks showed signs of stabilizing by mid-session, trading remained erratic. Apple, Nvidia, and Tesla each surged over 3%, lifting the broader tech sector. Still, the outlook remains highly sensitive to trade developments and Fed policy signals.

With Consumer Price Index data due Thursday, and Fed minutes offering a deeper look into the central bank’s March deliberations, investors are bracing for more market swings. Until then, the specter of a protracted global trade war continues to overshadow any near-term optimism.

As Carol Schleif put it, “There’s no recent playbook to operate from. The old rules don’t apply — and for now, everyone is learning in real time.”