The markets have been on a rollercoaster ride, with U.S. equities staging a sharp recovery, bond yields shifting gears, and fresh trade tensions resurfacing as former President Trump rattled the tariff sabers once again.

Equity Swing: From Panic to Pause

S&P 500 E-mini futures initially took a dive but managed to claw back over 6 percentage points from the intraday low, eventually ending up 0.2%. The rebound was sparked by a fleeting headline suggesting a potential 90-day tariff pause by the U.S. administration. However, that optimism was quickly doused when both Trump and his trade advisor, Peter Navarro, shot the rumor down.

On the trading desks, things started out rough. High touch equity flows and retail orders leaned heavily toward selling at the open. But sentiment began to shift around 10:00 a.m. ET, right around the time those tariff pause rumors hit the wire. Since then, flows have become more balanced, and the systematic selling pressure appears to be tapering off. Underneath the surface, there’s been a noticeable pickup in stock-level dispersion — a sign that algorithmic trading may be taking a back seat for now. Growth stocks are starting to pull ahead of value names, and while the broader tone remains cautious, momentum is quietly building.

Bond Market: Bear Steepener in Play

The bond market saw a significant shift, with the U.S. yield curve undergoing a bear steepening. Most notably, the 30-year Treasury yield surged by 24 basis points. The short end of the curve is pushing higher as traders reassess the likelihood of an emergency Fed rate cut, with the OIS market now pricing in just 90 basis points of cuts for all of 2025.

Meanwhile, long-end yields may be reacting to talk of a massive GOP-led tax cut proposal — $5.3 trillion from the Senate, even more aggressive than the House’s $4.5 trillion version. Still, that alone doesn’t seem enough to explain the sharp move in 30-year yields. Some on the street are speculating that foreign central banks could be behind the selling, though there’s no confirmation on that front.

Trump Escalates Trade War Rhetoric

Adding to the market mix, Trump posted on Truth Social that he plans to slap a 50% tariff on Chinese goods if Beijing doesn’t roll back its 34% retaliatory tariffs by Tuesday, April 8. He also threatened to shut down all ongoing trade negotiations with China, turning up the heat ahead of what was hoped to be a possible thaw in relations.

USDCNH responded swiftly, jumping 0.7% on the day as traders priced in a higher likelihood of escalating trade friction. If the threats materialize, it could mark a major inflection point for global markets — one that investors will be watching closely.

Between policy headlines, shifting rate expectations, and renewed trade tension, markets are navigating a volatile environment. While equity momentum is beginning to tilt positive and bond markets adjust to new fiscal realities, the week ahead could be a defining one — especially if tariffs come back into play in a big way.