MW Talk of a Trump pivot on China tariffs is helping stocks - but U.S. companies want actual trade deals

By Joy Wiltermuth

Bond-market participants worry the damage from President Trump's tariffs could get worse without solid deals

While U.S. stocks scored a second straight day of big gains on Wednesday, bond investors say American companies still need trade deals to overcome deep uncertainty sparked by President Trump's tariff fight.

Friendlier tones out of the White House on China tariffs, as well as reassurances that Trump won't look to fire Federal Reserve Chair Jerome Powell, helped calm some of the anxiety on Wall Street.

The S&P 500 index SPX ended up 1.7% Wednesday, while the popular SPDR Bloomberg High Yield Bond exchange-traded fund JNK for junk bonds briefly headed for its best day since April 9, before giving back some of its early bounce.

Trump abruptly announced a 90-day pause on his sweeping "reciprocal" tariffs on April 9 during a patch of extreme market turmoil, with stocks prone to big daily gains and losses ever since. The White House didn't include China in its partial tariff pause - and tit-for-tat tariffs between the nations followed - but Trump officials now appear willing to dial back some of those duties to foster trade negotiations.

Read: Scott Bessent offers a gentler message, saying 'America First' does not mean 'America alone'

Trump lately appears to be listening to more moderate voices on trade within his administration and responding to feedback from major U.S. retailers. The White House on Tuesday hosted a group that included executives from Home Depot Inc. $(HD)$, Lowe's Cos. $(LOW)$, Target Corp. $(TGT)$ and Walmart Inc. $(WMT)$ for a discussion on tariffs - talks that the companies broadly described as "productive."

"I think they delivered the message that these tariffs are going to raise prices, create shortages of goods and be very politically negative," said Jon Brager, a portfolio manager at Palmer Square Capital Management, an investment firm that specializes in corporate debt.

While the White House's shift was welcomed by stock-market investors, companies still need more certainty on trade or the damage could get worse, Brager said.

Slowing down

Big corporations rely on the ability to sell bonds or take out loans at favorable terms for financing. Both avenues have become tougher in April, with high-yield companies, major buyers of corporate loans and the market for collateralized loan obligations all hit hard.

"We started off the year red-hot," Palmer Square's Brager said of issuance of new CLOs. But activity largely ground to a halt in the past two weeks, he added, noting only a few funding deals being completed recently.

Positive tones from big U.S. bank earnings gave the investment-grade market more confidence in mid-April, but high-yield bond issuance has been slower to bounce back, according to Nicholas Elfner, co-head of research at Breckinridge Capital Advisors.

With nearly a quarter of companies in the S&P 500 having reported their first-quarter earnings, tariffs and economic uncertainty have been a primary focus. Meanwhile, estimates for earnings growth already have been moderating to about 10% for the year, down from 14% coming into 2025, according to Mark Hackett, chief market strategist at Nationwide.

Digging into retail earnings, a scorecard from LSEG's I/B/E/S data shows a sharp contraction within leisure products and luxury goods, but growth in hotels, restaurants and leisure, as well as in the "broadline" category, or places where people shop for a wide range of products under one roof.

Results have been choppier in certain sectors than others, including in consumer discretionary and higher-end products, said Breckinridge's Elfner, adding that has been a theme for some time. "We are only about 20% through, so there's a lot more to see," he said.

Bigger picture, investors in the U.S. Treasury market, which underpins borrowing for households, corporations and the government, appear to need more concrete evidence of progress on the trade front.

"It's funny to see the equity reaction versus the bond reaction," said George Catrambone, head of fixed of income Americas at DWS, of the modest change in the 10-year Treasury yield BX:TMUBMUSD10Y by the end of trade Wednesday. It was down about 2 basis points in the past two days to 4.385%, according to Dow Jones Market Data.

"I think there's headline fatigue in markets, but especially in the bond market at the moment," Catrambone said, calling the biggest source of uncertainty the new administration and its policies.

"You need to get to a conclusion, here, sooner or later," said Brager at Palmer Square about tariffs. "Or, there's going to be some real damage done."

Read: Recession 'inevitable'? Markets say don't be so sure.

-Joy Wiltermuth

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April 23, 2025 17:21 ET (21:21 GMT)

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