Thu, April 17, 2025 | 7:50AM ET

Wednesday sell-off disappointing, but stocks "in a better place" vs 4/7-4/8. Thus, notion of structural low still intact.

Name: FS Insight
Price range: $$$

Tom Lee, CFA ^AC

Head of Research

NO VIDEO TODAY: I am on a flight today so unable to record a video

The S&P 500 had a rough session Wednesday, falling -2.2% and the Nasdaq 100 falling an even greater -3%. In this post-Liberation day environment, “headlines” not fundamental developments drive market moves, and we discuss the prominent headwinds below (NVDA charge-off and Powell statements). Our overall takeaway is that this pullback is disappointing (but not surprising) and markets are in a much better place Wednesday compared to 4/7-4/8 last week when the S&P 500 was probing 4,800. Thus, to us, we are not too bothered by this pullback:

We are not in a “normal” market at the moment, and the 3 (maybe 4) headlines pressuring markets on Wednesday:
– overnight: NVDA announced a $5b charge due to the future restriction of its H20 chip sales to China
– overnight: US increases China tariffs to a further absurd 245%
– noon: US negotiating with 70 nations to disallow China to ship goods thru to USA
– 1:30pm ET: Fed Chair Powell at Eco Club Chicago states Fed “wait and see” mode on tariffs
Do these headlines fundamentally cut the value of the US stock market by $1 trillion? Nope.
Do these headlines meaningfully increase the odds of a US recession? Nope.
Do these headlines increase the risk of higher inflation? Nope.
Do these headlines make investors nervous? Yes.
The point of the above is just to highlight that stocks fell because markets got nervous and this is why the VIX rose 8% to 32. It’s not great to see the VIX rising again, but 32 is still way better than 40 and way better than 60.
This gets to our point about the equity market footing is in a better place Wednesday than it was 4/7-4/8 when we were staring at S&P 500 4,800:
– White House is showing flexibility by deferring reciprocal tariffs
– White House is deferring China tariffs on semis and other goods
– China is signaling some “back channel” willingness to speak
Fed Chair Powell Wednesday stated a view consistent with his stance when he spoke at the business writers conference about 10 days ago. Basically, the Fed is on “wait and see”:
– foremost, the tariff impact cannot be known because the tariff plan not finalized
– the inflation impacts might seem larger than prior expectations, so inflation impact larger
– Fed sees anchoring inflation expectations as key, which means Fed needs to wait
– Fed is not in a position to counter a weakening economy, unless economy really tanks
This is exactly what Powell said on Friday 4/4 and that day equities also fell. But this is not incrementally new. However, there is something new:
– on 4/4 Powell at NABE: US 10-yr 3.90% to 4.05%, +15bp
– Wednesday Powell at EC Chicago: US 10-yr 4.35% to 4.28%, –7bp
Big difference, yields surged on 4/4 and fell Wednesday on Powell’s comments. So, we think this tells us bond markets are taking his comments positively (containing inflation risk) and not suggesting there is a mounting market crisis.

BOTTOM LINE: US markets are in a better position Wednesday versus 4/7 to 4/8

In our view, we believe markets are in a better position Wednesday compared to 4/7 to 4/8 and even going forward, we believe incremental headlines can have a “positive tilt”:

Better tariff headlines: Tariff headlines, in our view, can have a positive tilt. After the close Wednesday, President Trump at 5:50pm ET posted on TruthSocial:
– “A Great Honor to have just met with the Japanese Delegation on Trade. Big Progress!”
– this is a good sign and we know there are 5 nations the US is prioritizing, including Japan
China offering possible “olive branch:” China has suggested it is open to talks if the US names a “point person” — so it seems like the backchannel doors are open or staying open. This is positive progress.
Yields no longer surging: Yields are well off the recent highs of 4.50% and have been drifting lower. Is the unwind of the basis trade behind us? That would be a positive. Recall, last week investors worried about the flight out of the US leading to higher long-term rates. That is gone.
Weaker dollar helps US multinationals: Similarly, the dollar is weaker today. While it’s not great to see weaker dollar, this does help US multi-nationals as this boosts exports and also raises the FX benefit of overseas revenues.
Stocks seem to be in a better place
So we believe this makes sense to put on the investor hat, rather than the tactical hat.

Wednesday sell-off disappointing, but stocks in a better place vs 4/7-4/8. Thus, notion of structural low still intact.

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Key incoming data April:

~~4/1 9:45 AM ET: Mar F S&P Global Manufacturing PMI~~ Tame
~~4/1 10:00 AM ET: Mar ISM Manufacturing PMI~~ Tame
~~4/1 10:00 AM ET: Feb JOLTS Job Openings~~ Tame
~~4/2 10:00 AM ET: Feb F Durable Goods Orders MoM~~ Tame
~~4/3 8:30 AM ET: Feb Trade Balance~~ Tame
~~4/3 9:45 AM ET: Mar F S&P Global Services PMI~~ Tame
~~4/3 10:00 AM ET: Mar ISM Services PMI~~ Tame
~~4/4 8:30 AM ET: Mar Non-farm Payrolls~~ Hot
~~4/7 9:00 AM ET: Mar F Manheim Used Vehicle Index~~ Tame
~~4/8 6:00 AM ET: Mar Small Business Optimism Survey~~ Tame
~~4/9 2:00 PM ET: Mar FOMC Meeting Minutes~~ Mixed
~~4/10 8:30 AM ET: Mar Core CPI MoM~~ Tame
~~4/11 8:30 AM ET: Mar Core PPI MoM~~ Tame
~~4/11 10:00 AM ET: Apr P U. Mich. 1yr Inf Exp~~ Hot
~~4/14 11:00 AM ET: Mar NYFed 1yr Inf Exp~~ Mixed
~~4/15 8:30 AM ET: Apr Empire Manufacturing Survey~~ Tame
~~4/16 8:30 AM ET: Mar Retail Sales~~ Tame
~~4/16 10:00 AM ET: Apr NAHB Housing Market Index~~ Tame
~~4/16 4:00 PM ET: Feb Net TIC Flows~~ Tame
4/17 8:30 AM ET: Apr Philly Fed Business Outlook
4/17 9:00 AM ET: Apr M Manheim Used Vehicle Index
4/23 9:45 AM ET: Apr P S&P Global Services PMI
4/23 9:45 AM ET: Apr P S&P Global Manufacturing PMI
4/23 10:00 AM ET: Mar New Home Sales
4/23 2:00 PM ET: Apr Fed Releases Beige Book
4/24 8:30 AM ET: Mar P Durable Goods Orders MoM
4/24 8:30 AM ET: Mar Chicago Fed Nat Activity Index
4/24 10:00 AM ET: Mar Existing Home Sales
4/25 10:00 AM ET: Apr F U. Mich. 1yr Inf Exp
4/28 10:30 AM ET: Apr Dallas Fed Manuf. Activity Survey
4/29 9:00 AM ET: Feb S&P CS home price 20-City MoM
4/29 10:00 AM ET: Apr Conference Board Consumer Confidence
4/29 10:00 AM ET: Mar JOLTS Job Openings
4/30 8:30 AM ET: 1Q A GDP QoQ
4/30 8:30 AM ET: 1Q ECI QoQ
4/30 10:00 AM ET: Mar Core PCE MoM

Economic Data Performance Tracker 2025:

Economic Data Performance Tracker 2024:

Economic Data Performance Tracker 2023:

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