CNBC Daily Open: The rally in stocks fizzles out — March’s cool inflation has little impact

Remember when inflation readings were the headline news of the day, and were as feverishly anticipated by investors as Nvidia earnings reports? CNBC Daily Open remembers. If Thursday’s consumer price index report, which showed prices actually dipping month on month and core inflation dropping to the lowest since 2021, had been released prior to the tariff chaos unleashed by U.S. President Donald Trump, stocks would probably have shot up.

Instead, the U.S. stock market fell Thursday, as the previous day’s relief rally quickly lost steam. Investor sentiment was weighed further by the White House’s confirmation that it was imposing a 145% tariff on imports from China — 20% higher than previously thought. That basically closes off all trade between the two countries, according to Erica York, vice president of federal tax policy at the Tax Foundation’s Center for Federal Tax Policy.

To be fair, March’s consumer price index report doesn’t take into account price changes resulting from tariff policies. If companies have to pay more than double for goods from China, it’s hard to imagine them — even one with pockets as deep as Apple’s — absorbing the increased cost. The inflation report for April, then, could have an impact as large as any tariff news.  

Lowest core inflation in years
The U.S. consumer price index fell a seasonally adjusted 0.1% in March, putting the 12-month inflation rate at 2.4%, down from 2.8% in February. Core inflation, which excludes food and energy, increased 0.1% for the month and 2.8% on the year. That was the lowest annual rate for core inflation since March 2021. Wall Street had been looking for headline inflation of 2.6% and core at 3%, according to the Dow Jones consensus.

Short-lived relief rally
U.S. stocks fell Thursday, giving up gains from the previous day’s historic rally, with losses accelerating after the White House confirmed to CNBC on Thursday that the tariff rate on China would actually total 145%. The S&P 500 was down 3.46%, the Dow Jones Industrial Average declined 2.5% and the Nasdaq Composite slumped 4.31%. Asked for his reaction to today’s market sell-off, U.S. President Donald Trump said, “I haven’t seen it,” while Trump’s top trade advisor Peter Navarro told CNN the “retracement” is “no big deal.”

European Union also pauses tariffs
The European Union will pause the adoption of its retaliatory tariffs on a swathe of U.S. goods for 90 days, European Commission President Ursula von der Leyen said, a day after the White House issued a reprieve on most of its own levies. “We want to give negotiations a chance,” von der Leyen said on Thursday. “If negotiations are not satisfactory, our countermeasures will kick in.” The pan-European Stoxx 600 index rose 3.7% Thursday, marking its best session in three years. Germany’s DAX index led gains, adding 4.67%.

Recession is OK, depression is not
Trump privately said he was aware that his broad and steep plan for levies unveiled last week could tip the economy into a recession, but he didn’t want a depression, according to The Wall Street Journal, citing people familiar with the conversations. A depression is considered by economists to take place when a recession becomes more severe and entails higher unemployment and a more prolonged downturn. 

[PRO] Effects of China tariffs on Apple
Trump may have paused tariffs on most of the U.S.’ trading partners, but hiked those on China to a staggering 145%. Apple, which relies on China for an estimated 80% of its production capacity, has seen its stock tumble this week. Analysts are divided over what Apple’s strategy could look like in the future.

Trump dodged a disaster from the bond market, but the damage isn’t over yet

U.S. President Donald Trump’s stunning pivot Wednesday followed massive tumult in the $140 trillion global bond market and particularly in the $47 trillion portion involving U.S. fixed income.

As speculation grew that the ominous surge in Treasury yields was about to create a domino effect of problems for financial markets, the president capitulated. That led to major stock market averages staging a historic rally and bond yields coming off their highs.

But with equities plunging again Thursday, questions remain over market stability, as the course ahead is anything but certain, considering the chaotic events of the past week or so.