We now appear to be moving into a new phase of market reaction to the external shock of President Trump following through on his tariff threats last week. Following Thursday’s initial negative response, Friday’s panic selloff, and Monday’s stabilization, today we have a big bounce underway with short sellers taking profits and bargain hunters stepping in.
This morning finds Dow Futures up 3.0% and more than 1,000 points, while S&P and NASDAQ futures are up 2.6%-2.7%. Overseas, the Dax and FTSE are both up 2.5% and the Nikkei soared 6.0%. Commodities are also bouncing back with Copper up 1.7% and Crude Oil up 0.6%. Gold is up 1.7% trading back up above $3,000/oz, Silver is up 2.0%, trading back up above $30.00/oz, Bitcoin is up 2.0% but still trading below $80,000.
It remains to be seen, however, if this is a sustainable rebound or a dead cat bounce. There is still a lot of uncertainty out there about how long the tariff war may drag on, and what impact that and US government spending cuts may have on inflation, interest rates, GDP and corporate earnings. Thursday brings consumer price reports for the US and China. Friday is the official kickoff to earnings season with several big US banks reporting. Investors may look to their results, commentary and guidance for hints to where the economy is heading especially after the profit warnings from airlines and consumer products companies in recent weeks.