Wild week for stocks, bonds and the dollar as tariff war rages

U.S. financial markets wrapped up one of their most volatile weeks since the COVID-19 pandemic as President Donald Trump plays fast and furious with his tariff plan that prompted retaliation from China.

When the dust settled, all three of the major benchmarks recorded gains on Friday, which added to the weekly advance. 

The Dow Jones Industrial Average gained 5% for the week, the S&P 500 nearly 6% and the Nasdaq Composite 7%.

Still, the three major indexes remain negative for the year.

VOLUME AND VOLATILITY

The final numbers did not come without nail-biting. The CBOE’s Volatility Index, also known as Wall Street’s fear gauge, hit a five-year high as the Dow saw swings of more than 2,000 points during several sessions.

AMID STOCK SELL-OFFS, DON’T PANIC, EXPERTS SAY

The Dow gained 2,692 points on Wednesday, the biggest one-day point rise in history. Total trading volume on this day neared $30 trillion, the highest since at least May 2019, as tracked by Dow Jones Market Data Group. This is the same day that Trump, in a surprise pivot, paused tariffs on some countries.

BlackRock CEO Larry Fink noted the market’s resiliency on a conference call with investors Friday, and said he remains optimistic about capital markets. 

“We do not see systemic risks that there is not a pandemic,” Fink said. “The financial system is shown safe and sound, and the resiliency. The markets are trading more, more volume with the liquidity than any other time. With all this volatility, the markets have proven to be quite successful and work quite well. “Obviously, there’s near-term uncertainty.”

TARIFF PROGRESS

While uncertainty around tariffs tested investor resolve, the White House insists deals are being hammered out by U.S. Trade Representative Jamieson Greer. 

“He confirmed that more than 15 offers are already on the table, which is remarkable in just a mere matter of days. And, as I said earlier, we’ve heard from more than 75 countries around the world,” White House press secretary Karoline Leavitt said on Friday. 

BOND MARKET: 10-year Treasury Yield 4.5%

Government bonds are flashing a more troubling signal as investors pull money out over concerns of a looming recession. When yields rise, prices fall. The 10-year Treasury, the benchmark for borrowing costs such as mortgages and personal loans, hit 4.5%, the highest since February. The weekly 50-plus basis point jump was the biggest in over 40 years.

Treasury Secretary Scott Bessent was asked about this trend on Wednesday.

“There’s some very large, leveraged players who are experiencing losses that are having to do leverage,” he told Maria Bartiromo during an interview on “Mornings With Maria.” “I believe that there is nothing systemic about this. I think that it is an uncomfortable but normal deleveraging that’s going on in the bond market.”

BIG BANKS CEOS WEIGH IN ON TRUMP’S TARIFFS: ‘CONSIDERABLE TURBULENCE’

Bessent was also asked about the weakening U.S. dollar and actions by the Chinese.

“They’ve actually been weakening their currency, which is a loser for everyone. And again, when I hear all these stories that the dollar is no longer going to be the reserve currency, if you end up with the Chinese who are willing to use their currency as a trade tool, that doesn’t seem like a very good reserve asset to me,” Bessent said. 

The euro and the Japanese yen are up 8% vs. the greenback. 

U.S. RECESSION? 

A handful of Wall Street firms are dialing up odds that a U.S. recession is possible. JPMorgan Chase CEO Jamie Dimon shared his view this week. 

“I hear it from just everybody now. ‘I’m going to cut back a little bit, I’m gonna wait, see what happens.’ That is kind of recessionary talk,” Dimon said Wednesday in an exclusive interview on “Mornings with Maria.” When asked if he’s personally expecting a recession, Dimon responded: “I am going to defer to my economists at this point, but I think probably that’s a likely outcome.”

His firm ratcheted up recession odds to 60%, while Goldman Sachs now sees a 45% chance of one hitting America. 

CONSUMER FEARS

The University of Michigan’s Surveys of Consumers on Friday reported that its Consumer Sentiment Index dropped to 50.8 this month from 57 in April, the fourth straight monthly drop. 

“This decline was pervasive and unanimous across age, income, education, geographic region and political affiliation,” said Surveys of Consumers Director Joanne Hsu.

RECESSION FEARS, TARIFF UNCERTAINTY PROMPT PLUNGE IN CONSUMER SENTIMENT

“Sentiment has now lost more than 30% since December 2024 amid growing worries about trade war developments that have oscillated over the course of the year. Consumers report multiple warning signs that raise the risk of recession: expectations for business conditions, personal finances, incomes, inflation, and labor markets all continued to deteriorate this month,” Hsu added.

INFLATION 

The consumer price index for March dropped 0.1% vs. February but remained up 2.4% annually, still above the Federal Reserve’s 2% mandate.

While costs are easing, prices for items such as eggs and uncooked ground beef remain elevated, up 60% and 10%, respectively. 

GOLD SAFE HAVEN

The precious metal saw some volatility this week but rebounded to an all-time high of $3,222.20 an ounce. The 7% weekly gain was the biggest since March 2020. Even before the tariff wars escalated, several strategists conveyed bullish views on the yellow metal, also an inflation hedge and a traditional safe haven. 

“While traditionally inflation and real yields have been the main drivers of gold prices, recently central bank buying has emerged as the primary catalyst behind the current gold price increase,” according to an early April research note by Bank of America’s Global Commodity Research’s Franciso Blanch and Irina Shaorshadze. The team sees gold reaching $3,500.

BITCOIN

The largest cryptocurrency by market value rose Friday, hovering just above $83,000. Still, its down 21% from its all-time high of $106,734.51 reached in December 2024.