VIDEO: Why Tariff Developments, Not March Inflation Data Will Drive the Market

In today’s Daily Rundown, Chris Versace recaps the latest tariff news and other developments, including comments from Minneapolis Fed President Neel Kashkari, that have the market jostling around yet again. 

As Chris sets out to travel to London, he lays out the items TheStreet Pro Portfolio will be paying attention to over the coming days, sharing why he thinks today’s Fed FOMC minutes and the March CPI and PPI reports will not be market-moving items. 

We also remind you about today’s Office Hours in the Forum from 4 p.m.–4:30 p.m. ET, and Chris asks for your help as he gets ready to talk with one of TheStreet Pro’s other contributors next week. 

Transcript

CHRIS VERSACE: Hey, friends. Chris Versace here. It is Wednesday, April 9. And stocks are, once again, bouncing around on what is today, I guess we could call it, Trump reciprocal tariff day. And that day, as I just named it, is being met with, let's just call, retaliatory tariffs from China, but also, too, as we learned mid-morning, from the eurozone as well.

Also, what did we see this morning? Walmart pulled its quarterly profit forecast due to tariffs. And Delta Airlines pulled its 2025 forecast because of a combination of tariffs and, as we've been talking about, slower consumer spending. We also had JPMorgan's Jamie Dimon says he sees a recession as being rather possible. And Goldman Sachs is out warning for a bigger stock drawdown.

In addition to all of that, if there was any question about the prospect for the Fed and potential rate cuts, well, Federal Reserve Bank of Minneapolis President Neel Kashkari said that tariffs are simply making it harder to justify interest rate cuts. Kashkari went on to say that inflation is seen re-accelerating because of tariffs, at least in the short term.

That kind of echoes the comments that we heard from Fed Chair Powell last Friday, and really not much of a surprise to us. We continue to question the market's expectation for four, possibly even five 25 basis point rate cuts this year. So far, the data doesn't really support it.

But, again, as we go through the coming weeks, even possibly the coming months, we will continue to update our view, not only about the economy and earnings prospects, but about the potential for the Fed to deliver a rate cut. But, as we see it today, we just don't expect the Fed to do anything in the near term. That would be the May meeting, possibly the June meeting.

But, again, as it stands today, probably not. So that's where we are, folks. And, as we discussed in our opening comments this morning, we've got a few hurdles ahead of us.

Yes, the March quarter earnings season and June quarter guidance, we've been quite vocal about that. But, candidly, what we saw from Walmart and from Delta, that simply reaffirms our thinking that guidance for the June quarter is likely to be a little underwhelming, to put it nicely, relative to market expectations.

At the same time, we're also waiting to see, how does President Trump respond to these retaliatory tariffs that were announced from China and the eurozone today? He's talked about potentially escalating the tariff response. But now, let's see what he does and kind of update our thinking based on what we find out.

So I guess the message here is that, given all of that, even though the market oscillators are indicating the market is oversold or, in some cases, extremely oversold, we recognize that there are other items the market and investors are going to have to contend with. That is why we are continuing to stay on the sidelines.

The big why here, and we've talked about it but it bears repeating, is that we do not want to get head faked like some people did on Tuesday. Now, with that said, and kind of setting the tone for how we're going to be managing the portfolio near term, let's shift gears and talk about what's coming at us this afternoon and the next few days. Well, this afternoon around 2:00 PM, we'll get the Fed FOMC meeting minutes.

You know, I know that the market tends to focus in on this. We will be reading it. We will be dissecting it. But I have to be blunt here-- given what we heard from Powell last week, and even Kashkari earlier this morning, I just don't see the market really focusing on the meeting minutes this time around. But we'll have some comments.

Thursday, we get the March CPI. Now, the consensus for the core is expected to tick lower to 3.0% on a year-over-year basis from February's 3.1%. Now, again, based on what we saw in the March PMI reports, not likely to see this happen.

But even if it does tick lower, the reality is that this report, as I'll talk about in a minute, is rather backward looking. However, it surprises to the upside, that will reinforce the notion that the Fed is not likely to do anything near term. Friday, we get the March core PPI.

Now, with this, it is expected to tick higher to around 3.6%. That's up from 3.4% in February. It is going to, likely, reflect some of the cost pressures that we just talked about, again, in those March PMI reports.

And that also bakes in some of what we started to see with Trump's initial tariffs that were announced in February and then pushed off. But, again, I would argue that these reports aren't really going to matter because the reality is that the market's really focused now on the impact of the tariffs, which just started very recently.

And we won't really see the impact until the April CPI and PPI figures. I'm going to argue with you that those figures will matter much, much more to the market. Because, again, it's going to capture and show in, not quite real time, but capture and show the impact of tariffs.

Now, as we think about Kashkari's comments and even Powell's comments, you know, we're just going to have to wait and see what the inflation does. But, again, it's likely to tick higher. And I think that's going to keep the Fed in pause mode.

The question that we're going to have to ponder as we get this oncoming data over the next few weeks-- really, that April data-- is whether or not it shows that the economy is just slowing and inflation is ticking higher, or if it's a little more than that, potentially stagflation, potentially signaling that there could be a greater argument, let's call it, for now that a recession is possible.

But, of course, all of this is going to hinge on how things play out on the tariff front. In the comments that I shared with you this morning, we do expect to see the conversation continue. We know that Trump is going to be announcing some pharmaceutical tariffs. We know that we're waiting for the next round of retaliation from the eurozone.

And, again, that conversation is likely to span well into next week, given when the Italian prime minister is expected to meet with Trump on April 17. So I expect there's going to be a lot of volleying back and forth. We're going to continue to sit back, be calm, cool, and collected, digest what we learn, update our thinking along the way as it relates to that.

One other thing, as it relates to this week, though, the earnings season will start to accelerate. We will hear from JP Morgan and Morgan Stanley on Friday. Now, with Morgan Stanley, we talked about earlier in the week how with Klarna, Chime, and StubHub kind of pushing off their IPOs, the guidance that Morgan Stanley is likely to give on the investment banking front might be a little tepid compared to what folks were thinking they would hear back in January, back in February, maybe even as early as March.

But we'll continue to evaluate what they say as they say it. The stock has been clobbered. I would argue that a lot of that is already baked into the stock price. But let's see what their guidance has to say.

At the same time, we'll also be digging into comments from JP Morgan-- what they say about the consumer, the loan activity. What are they seeing with Treasury yields and mortgage activity? That comment alone from Jamie Dimon should be pretty interesting.

But we'll also want to hear what he says more about the road ahead. Remember, a few moments ago, I mentioned that Dimon says that with tariffs, he sees an increasing sign that a recession is a likelihood. We'll want to hear more from Dimon on that very topic on Friday.

Now, of course, as I said before, as we navigate the next couple of days, Trump tariffs, it's going to be top of mind. And we'll be breaking it all down for you as well. Now, you're probably asking, Chris, today's Wednesday. Why are we talking about the next couple of days?

Well, part of it is to get everyone ready for what's to come, make sure that we have the right mindset. We understand what the portfolio will be looking for. But also, I will be traveling the next few days, and I will be getting, as a result, a boots-on-the-ground view from London, and it's going to be one that I'll be sharing with you.

Whether it's good, bad, or, candidly, ugly, I'll be sharing all the insights and learnings that I get from my time over there. But rest assured we will be having comments every day to you. If we have to take action, we will. And by "we," I mean not only myself, but also Bob Lang.

So while I will be out of sight, perhaps, I will not be far away. And I'll be back in this very seat where I am today with you on Tuesday. So, before I get going to London, a couple of things.

We will have a shortened set of office hours today from 4:00 PM to 4:30 PM in the bullpen. Why 4:00 to 4:30? Well, I do need to get to the airport to get to London. But I'm also going to ask you, members, a favor.

Next week, I'll be chatting with the Street Pros' Peter Tchir in something new that we're hoping to bring to you. And I'm going to ask for your help this way. In the forum, I'm going to start a section, and I'm going to ask you all to tell me what questions, if you could, would you ask Peter Tchir, right-- whether it's about the bond market, the economy, tariffs, what have you.

And I promise you that as many questions as I can ask Peter, I will ask him. And I will be sharing the answers with you. That's all I can say for now about that-- little tease there.

But, again, look for that in the forum. And, again, I hope to see you all for our shortened office hours this afternoon. And with that, we'll just say, please be sure to check your emails, your alerts. It's a-- you know, again, it's a nerve-wracking, angst-filled, uncertain time.

And we're going to have our latest thoughts coming at you. So please be sure to check your emails and your alerts. And, again, if we happen to make any moves with the portfolio, I don't foresee it in the next couple of days. But if we do, if we do, we want to make sure that you are right there with us. Thanks for watching.