After a brutal last week on Trump tariff concerns, Wall Street attempted to bounce back on April 7. Invesco QQQ Trust QQQ added 0.24% in the key trading session and advanced 1.2% after hours. SPDR S&P 500 ETF Trust SPY lost 0.2% but added 1.1% after hours, and The SPDR Dow Jones Industrial Average ETF Trust DIA slipped around 1% during regular trading on April 7 but recovered with a 1.3% gain in after-hours trading.
Wall Street’s Mixed Signals
In a nutshell, Wall Street didn’t exactly rally on Monday, but after a brutal 10% sell-off over two sessions, a more-or-less flat close came as a relief. Still, market nerves are far from settled. The VIX volatility index surged above 60 — only the second time it has reached such levels since the COVID-19 pandemic.
Is the Newly Awakened Rebound Sustainable?
Skepticism surrounds the sustainability of the current rebound. Despite the market’s bounce, President Donald Trump has shown no sign of easing up on his aggressive trade stance. In fact, he has escalated the situation, threatening an extra 50% in tariffs on China — raising total levies well beyond 100%.
Many Wall Street strategists are cutting the S&P 500 target on Trump’s tariffs. DoubleLine’s Gundlach said the S&P 500 could bottom at 4,500 and suggested investors to stay defensive, as quoted on CNBC.
Due to Trump tariff fears, recessionary risks have risen.Goldman Sachseconomists, led by Jan Hatzius, now see a 45% chance of a U.S. recession in the next 12 months, up from 35% last week. Before this, Goldman had been at a 20% recession probability risk, as quoted on Yahoo Finance.
Against this backdrop, some U.S. sector-based exchange-traded funds (ETFs) like SPDR S&P Metals and Mining ETF XME and iShares U.S. Medical Devices ETF IHI have made great efforts to rebound. Both ETFs were up in the key trading session on April 7, unlike other funds. XME added 2.1% while IHI gained 0.7%.
Japan Emerges as a Bright Spot
Meanwhile, Japan emerged as the standout performer. The Nikkei jumped 6%, thanks to optimism that Trump’s tariff threats might be a start to negotiations. Supporting this view, U.S. Treasury Secretary Scott Bessent is expected to lead trade talks with Tokyo in the coming days. iShares MSCI Japan ETF EWJ could act as a good pick here. The ETF EWJ added 1.5% after hours on April 7.
Bottom Line
It all depends on tariff negotiations. If the situation worsens, we may see a further slide in stocks. And if there is any glimmer of hope on the tariff front, beaten-down stocks and ETFs would stage an ascent.
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Invesco QQQ (QQQ): ETF Research Reports SPDR S&P 500 ETF (SPY): ETF Research Reports SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports iShares MSCI Japan ETF (EWJ): ETF Research Reports SPDR S&P Metals & Mining ETF (XME): ETF Research Reports iShares U.S. Medical Devices ETF (IHI): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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