Investors on a knife-edge as one fake headline prompts huge index swings. (0:15) JPM’s Dimon says tariffs will slow growth. (2:42) Mesa Air, Republic to merge in major regional carrier deal. (4:41)Show Notes Trump threatens 50% more tariffs on China MicroStrategy announces major digital lossEpisode transcripts: seekingalpha.com/wsb Sign up for our daily newsletter here and for full access to analyst ratings, stock quant scores, dividend grades, subscribe to Seeking Alpha Premium at seekingalpha.com/subscriptions.
Chapter 1: What market events are causing current volatility?
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news, and analysis. Good afternoon. Today is Monday, April 7th, and I'm your host, Kim Kahn. Our top story so far. The stock market has gone from edgy to jumpy to nervous as a long-tailed cat in a room full of rocking chairs, if you'll forgive the technical terms.
Volatility and swings are the order of the day, and investors look unsure which way to turn as the major averages bounce around. Case in point, one erroneous tariff headline pushed the Nasdaq composite, which had been down more than 4% at its intraday lows, to more than 4% in the green. Cheney strategist Guy Lebas noted the S&P 500 was tracing a 780-point intraday path. Those are just wild moves.
Chapter 2: How did a fake headline impact the stock market?
The headline that President Trump was considering a 90-day pause on tariffs on all countries except for China came from a known financial Twitter account, which said its source was Reuters. CNBC reported the headline, but later said it was unconfirmed, and the White House finally denied the headline, calling it fake news.
Chapter 3: What are the current U.S. trade tariff developments?
Instead, Trump later indicated that he was ready to heap an additional 50% tariff onto Chinese goods entering the U.S. as of Tuesday in response to China's 34% retaliatory tariffs on U.S. goods. That would bring the tariff rate on Chinese goods to more than 100%. The major averages are now down between 1 and 2%, but the swings haven't stopped, and a higher finish wouldn't be out of the question.
The VIX volatility index, also known as the fear gauge, topped 60 overnight, and it's currently near 50. That's a level that can prompt short-term buying. The CNN fear and greed index is at a lowly 4 on a scale of 0 to 100, indicating fear in the extreme. Also potentially supporting stocks is some unexpected action in the bond market, where treasury yields have been moving higher.
Chapter 4: Why is the bond market reacting unexpectedly?
The 10-year yield is up more than 10 basis points, back above 4.1%. It touched below 3.9% on Friday. Renaissance Macro said the move could be related to people dumping their bonds to raise cash, which is, quote, not good. Another possibility is sovereign selling, which would also be worrying. What's unlikely is that it's a sudden renewed faith in growth.
Chapter 5: What are the latest forecasts from Goldman Sachs?
Goldman Sachs lowered its 2025 fourth quarter over fourth quarter GDP growth forecast to 0.5% down from 1%. It also lowered its annual average GDP growth forecast from 1.5% to 1.3% and raised its 12-month recession probability to 45% up from 35%.
Chapter 6: How might tariffs affect inflation and economic growth?
Chief Economist Jan Hatsias cites a sharp tightening in financial conditions, foreign consumer boycotts, and a continued spike in policy uncertainty that is likely to depress capital spending by more than we had previously assumed. In his letter to shareholders, JPMorgan Chase CEO Jamie Dimon warned that the latest round of tariffs is likely to drive up inflation and dampen economic growth.
There also remains a growing need for increased expenditures on infrastructure, the restructuring of global supply chains and the military, which may lead to stickier inflation and ultimately higher rates than markets currently expect, Diamond said.
The economy is facing considerable turbulence, including geopolitics, with the potential positives of tax reform and deregulation, and the potential negatives of tariffs and trade wars, ongoing sticky inflation, high fiscal deficits, and still rather high asset prices and volatility, he added.
Among active stocks today, Bernstein said tariffs could eliminate 20% in free cash flow and shave 50% in full-year 2026 adjusted EPS for General Motors. Analyst Daniel Roeske downgraded the stock to underperform for market perform and lowered its price target to $35 from $50. He said, For the past six months, we've been cautious as U.S. policy uncertainties started to mount.
Now, with greater clarity, the outlook for GM is clearly unfavorable. Our revised numbers reflect the impact of tariffs, softening consumer sentiment, and the realization that GM's peak in the cycle may be behind it. Strategy, formerly MicroStrategy, recognized a $5.91 billion unrealized loss on its digital assets for Q1 2025, which is expected to result in a net loss for the quarter.
The company has amassed holdings of Bitcoin on its balance sheet. We may not be able to regain profitability in future periods, particularly if we incur significant unrealized losses related to our digital assets, the company said in a filing. As a result, our results of operations and financial condition may be materially adversely affected. And U.S.
Steel is rallying after Trump ordered a national security review of its planned sale to Nippon Steel. The Committee on Foreign Investment review comes after former President Joe Biden originally blocked the deal. The new review may allow the White House administration to potentially approve the deal.
In other news of note, Mesa Air Group struck an all-stock deal to merge with Republic Airways to create a leading publicly traded regional airline. Upon closing, the combined company will be renamed Republic Airways Holdings and is expected to remain NASDAQ-listed under the new ticker RJET. Terms of the deal were not disclosed.
Republic shareholders would own 88% of the combined company, while Mesa shareholders would own a minimum of 6%, up to 12%. Mesa CEO Jonathan Ornstein said, Today's announcement is an exciting next step in Mesa's more than 40-year history, one that represents the best outcome for our shareholders, employees, and all of our stakeholders.
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