I'm Colette Auclair, and here is Schwab's early look at the markets for Friday, April 4th:
The market quickly pivots from tariffs to jobs today with the March nonfarm payrolls report at 8:30 a.m. ET. It's expected to show U.S. March jobs growth of 130,000, down from 151,000 in February, with unemployment staying at 4.1%. While jobs growth has slowed from post-pandemic peaks, these figures would show continued solid gains, but the question is how the job market reacts in months ahead as companies grapple with the new tariff regime.

The Federal Reserve also pushes its way into the news cycle today with remarks by Fed Chair Jerome Powell expected at 11:25 a.m. ET. He'll be addressing the economic outlook, and investors will likely listen closely for any new thoughts on how trade wars might affect the path of growth and rates. The Fed has been hesitant to move rates amid so much policy uncertainty. While the new tariffs may represent the highest level and be negotiated down, the Fed arguably has a bit more clarity now. Futures trading at the CME Group builds in heavy odds of three to four rate cuts this year, starting by mid-year.

President Trump's tariffs plunged Wall Street back into correction mode, sending major indexes down 4% to 6% Thursday in the worst session since 2020. . The sweeping tariffs—which include an across-the board 10% tariff on imports and will top 50% for some countries, including China—put U.S. trade barriers at their highest levels since President Howard Taft's administration and far surpassed what most analysts anticipated. Volatility spiked, and recession fears ramped up.

Recession probabilities may now be above 50-50, said Schwab Chief Investment Strategist Liz Ann Sonders.

A bear market, which would mean the S&P 500® index (SPX) falling 20% from its February 19 all-time peak, is also a distinct possibility, Sonders added, especially with many companies expected to adjust 2025 earnings guidance to account for the margin squeeze from tariffs. U.S. assets could also be pressured by investors looking to other markets.

The S&P 500 is down more than 10% since the final session before the inauguration and off 12.1% from the February 19 all-time closing high of 6,144. The SPX closed Thursday back at levels last seen in mid-August and settled near its session lows. The Nasdaq Composite is down more than 17% from its December peak and nearing bear market territory. There wasn't much "buy the dip" as stocks descended yesterday.

Consumer staples were the only U.S. sector to show much positive traction Thursday. Investors piled into perceived "safe havens" like the Japanese yen and U.S. Treasuries, and investors "still view U.S. Treasuries as a reliable port amid the storm," said Kathy Jones, chief fixed income strategist at Schwab.

Somewhat surprisingly, energy turned out to be the hardest-hit sector, though it was dealing with news unrelated to tariffs as OPEC and its allies sped up its production hike to more than 400,000 barrels a day to begin in May. Crude oil (/CL) fell nearly 7% to two-week lows below $67 a barrel. The long-term low below $64 was posted nearly two years ago and a drop under that might signal worries of even more economic weakness.

Treasury yields cratered yesterday to their lowest levels of the year, with the 10-year Treasury note yield falling to just above 4%. It had been 4.8% at its 2025 peak. The drop in yields suggests investors for now sense more recession danger rather than inflation pressure from the new trade regime. A weaker dollar tells the same tale.

Tariffs are taxes on U.S. companies. They'll likely pass along some of the costs to U.S. consumers, who will then lose spending power. Consumer spending is 70% of the economy, and a substantial dip likely means slower growth and possibly recession.

Earnings season unofficially kicks off next week with Delta Air Lines (DAL) number one on the runway Wednesday. The airline industry had a tough quarter due to economic weakness and travelers beginning to boycott U.S. tourism. Many already cut their guidance. Big bank earnings are on deck next Friday and could provide insight into how the broader economy is reacting to the new trade policy.

In non-trade news, initial weekly jobless claims yesterday were tame at 219,000 but continuing claims jumped toward three-year highs above 1.9 million. U.S. Challenger job cuts data for March showed U.S. employers cutting 275,000 jobs, the highest since May 2020 and up from 172,000 in February.

ISM Services PMI for March released yesterday delivered a headline of 50.8, down from 53.5 in February but still above the 50 level needed to indicate expansion. Even so, it was the lowest reading in nine months and was greeted as more evidence of economic slowing. The services sector is far bigger than manufacturing and has generally expanded in recent months even as manufacturing mostly lingered in contraction below 50.

Stocks down the most on Thursday included names like Apple (AAPL), Nike (NKE), Walmart (WMT), and Nvidia (NVDA).

"Tech is under particular pressure given the intricacies of their global supply chains and the input source diversions many companies underwent following 2018's trade war, including to places like Vietnam," said Liz Ann Sonders, chief investment strategist at Schwab. Tariffs on goods imported from Vietnam were set yesterday at 46%.

There's no real investment playbook in this unprecedented situation, but Sonders told Bloomberg yesterday that investors might want to look for companies with stable profit margins, more domestic exposure, lower volatility, and stability in dividend yields. They should also consider diversification outside the United States.

Volatility spiked Thursday but stayed out of the hot zone, which arguably begins at 30 and above near where the Cboe Volatility Index (VIX) topped out in December and March. A move above 30 might suggest more equity weakness, but stability below that figure could mean some of the damage has already been done in the market and less volatility may lie ahead.

Even so, investors seemed to hunker down Thursday in areas like fixed income and the Japanese yen. With the 10-year yield still around 4%, more money could potentially move back into cash, but dividend stocks generally become increasingly competitive with fixed income at levels below that.

Technical support levels for major indexes took a big hit Thursday. The S&P 500 index (SPX) fell well below its March intraday low of 5,488 and finished just below the second support level at 5,400 at its lowest close since last August. Below that is a level near 5,130 to 5,140 that also goes back to last summer's sell-off.

As of late Thursday, there was a 20% chance of rates being lowered at the May Federal Open Market Committee (FOMC) meeting, according to the CME FedWatch tool. That rises to 82% for June.

The Dow Jones Industrial Average® ($DJI) fell 1,679.39 points (–3.98%) Thursday to 40,545.93; the SPX fell 274.45 points (–4.84%) to 5,396.52, and the Nasdaq Composite® ($COMP) dropped 1,050.44 points (–5.97%) to 16,550.60.