WSJ What’s News
U.S. Stocks Fall Sharply as Global Economic Outlook Remains Uncertain
Thu, 10 Apr 2025
P.M. Edition for April 10. Yesterday’s market rally gave way to declines as the impact of a trade war with China sinks in. Plus, services are a major U.S. export now being pulled into Trump’s trade wars. WSJ economics reporter Konrad Putzier joins to discuss. And the House passes a budget blueprint for President Trump’s “one big, beautiful bill.” We hear from Journal tax policy reporter Richard Rubin about what the blueprint lays out and what it leaves up for debate. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: Why did U.S. stocks fall sharply?
U.S. stocks fell sharply as investors reckoned with an uncertain economic outlook. Plus, how President Trump's tariffs threaten a major U.S. export, services.
This could impact service exports by just damaging the American brand. And you're seeing this around the world. There's all these people that are now basically souring on American companies because they feel the U.S. is being hostile. It's attacking their country. It's a trade war.
Chapter 2: What impact do tariffs have on U.S. services?
And the House has narrowly passed the budget blueprint for Trump's one big beautiful bill. But that may have been the easy part. It's Thursday, April 10th. I'm Alex Osola for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. If yesterday's stock market rally was a party, today investors were feeling the hangover. U.S.
stocks declined sharply as investors sorted through a global economic outlook that remains uncertain despite drastic improvements over the past 24 hours. A softer-than-expected inflation report today did little to console investors. The market declines accelerated after the White House said the tariffs the U.S.
now imposes on China added up to 145 percent, not the 125 percent it previously indicated. Stocks then paired those losses in afternoon trading. Bank stocks and tech shares were hit hard, retracing some of yesterday's epic gains. And Wall Street's fear gauge, the SIBO volatility index, was rising, though far below levels of earlier this week. The three major U.S. indexes fell sharply today.
The Nasdaq, which posted its biggest gain in more than two decades yesterday, led the losses, ending more than 4% lower. The Dow dropped about 1,000 points, or 2.5%. And the S&P 500 lost about 3.5%. New data from the Labor Department out today showed that inflation cooled unexpectedly last month.
Consumer prices were up 2.4 percent in March from a year earlier, lower than February's gain of 2.8 percent and well below the 2.6 percent rise that economists expected. Prices excluding food and energy categories, the core measure which economists watch in an effort to better capture inflation's underlying trend, rose 2.8 percent, again below forecasts for a 3 percent increase.
That was the smallest increase in the core measure since March 2021. For more behind the numbers, I'm joined by WSJ economics correspondent Harriet Torrey. So, Harriet, these numbers don't take into account much of Trump's tariff policies because his liberation day wasn't until April. But normally a slowdown in inflation would be welcome news. Is it this time?
This is definitely good news for consumers because they've been hit very hard by inflation over the past few years. And of course, it's good news for the Fed as well, because the Fed has been trying for a long time to bring inflation back to 2%. However, this data is actually looking pretty stale now because tariffs have now been paused. There's been a lot going on since this report came out.
And to be fair, some tariffs were coming into effect in March, but that didn't really show up in the data. We saw some very slight moves around in categories that are exposed to exports like apparel, and things like that, but nothing particularly major. So it's almost like this report represents the calm before the storm.
There were a couple of things that did show pretty significant price drops like hotel prices and gasoline prices that fell last month. How worrying are these as signs of weakening domestic demand?
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Chapter 3: What does the budget blueprint mean for Trump's agenda?
Chapter 4: How does inflation affect consumers in the current economy?
Chapter 5: What are the implications of the recent inflation report?
Consumer prices were up 2.4 percent in March from a year earlier, lower than February's gain of 2.8 percent and well below the 2.6 percent rise that economists expected. Prices excluding food and energy categories, the core measure which economists watch in an effort to better capture inflation's underlying trend, rose 2.8 percent, again below forecasts for a 3 percent increase.
That was the smallest increase in the core measure since March 2021. For more behind the numbers, I'm joined by WSJ economics correspondent Harriet Torrey. So, Harriet, these numbers don't take into account much of Trump's tariff policies because his liberation day wasn't until April. But normally a slowdown in inflation would be welcome news. Is it this time?
This is definitely good news for consumers because they've been hit very hard by inflation over the past few years. And of course, it's good news for the Fed as well, because the Fed has been trying for a long time to bring inflation back to 2%. However, this data is actually looking pretty stale now because tariffs have now been paused. There's been a lot going on since this report came out.
And to be fair, some tariffs were coming into effect in March, but that didn't really show up in the data. We saw some very slight moves around in categories that are exposed to exports like apparel, and things like that, but nothing particularly major. So it's almost like this report represents the calm before the storm.
There were a couple of things that did show pretty significant price drops like hotel prices and gasoline prices that fell last month. How worrying are these as signs of weakening domestic demand?
Yeah, we did see some big swings in categories related to travel, such as airline fares. And economists that I spoke to did say this could be a sign that people are cancelling trips, maybe just want to stay home and see how the economy plays out.
So that is a sign that potentially consumers are getting a little bit edgy because often when the economy slows down, the places that people will cut their spending is in discretionary categories, things like travel and hotels.
That was WSJ economics correspondent Harriet Torrey. Thank you, Harriet. Thanks. Inflation may have cooled off for many goods last month, but for eggs, it heated up. The same Labor Department data showed that the average price of a dozen large Grade A eggs more than doubled in March from the year before, climbing above $6 for the first time. Still, relief could be on the horizon.
The price hike from the prior month was less dramatic than increases in January and February. Wholesale prices declined and demand for eggs usually falls after the winter holidays, helping to relieve some price pressure. And the avian flu outbreaks that have squeezed egg supplies are starting to ease as farmers rebuild stocks.
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Chapter 6: How are U.S. service exports impacted by global economic uncertainty?
— Coming up, you can't put a tariff on services. But this major U.S. export is now being pulled into Trump's trade wars. That's after the break. —
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President Trump has said that tariffs can help close the massive U.S. trade deficit in goods, which he sees as a sign of economic weakness. But that's only part of the trade story. Though the U.S. imports more goods than it exports, the country exports a lot of services, a category that includes things like travel, credit services, and computer software.
Trump didn't take services into account in his tariff math, but they're still being affected by his trade wars. WSJ economics reporter Conrad Puzier is here to tell us more. Conrad, how important are services to the U.S. economy?
They're incredibly important. They're 80% of the U.S. economy, roughly. And the U.S. now runs a goods trade deficit, but is really a services export champion. Social networks like Facebook and Instagram, financial products, the big banks and asset managers, all those things are really successful American exports, and they're hugely important to the U.S. economy.
This one grain of salt, though, that you have to take with some of these export figures is that some of the services exports aren't actually all that real because there is a lot of tax avoidance stuff that's going on that kind of inflates some of these bilateral trade service numbers.
So countries can't put tariffs on other country's services. That seems kind of obvious. But there are things they can do to chip away at them, right? What are some of those things?
Yeah, it gets a little bit harder going after services, right? Because they don't go through a ports. They don't go through a customs office. So tariffs don't really work all that well. But what other countries can do if they want to go after U.S. service companies in retaliation for Trump's tariffs is you can tax them. You can fine them. You can otherwise restrict their operations.
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