MW Stock-market extremes are the norm now. 'The key is to not get emotional.'

By William Watts

Trade-war jitters continue as Trump ramps up tariff on China imports

Emotions are running high in the stock market, and that's usually not a good thing for investors, analysts are noting after Wednesday's historic rally gave way to another punishing rout Thursday.

"The key is to not get emotional at the extremes. We sensed wild optimism yesterday into the close, and immense fear again at today's lows," said Jonathan Krinsky, chief market technician at BTIG, in a Thursday afternoon note. "This is not a time to chase price, it's a time to fade extremes, in our view."

Investors can be forgiven for feeling like extremes are becoming the norm.

After suffering the worst four-day rout since March 2020, the S&P 500 SPX soared 9.5% on Wednesday after President Donald Trump paused big tariff increases on trading partners other than China. It was the biggest one-day jump since October 2008 and the 10th-best day for the large-cap benchmark stretching back to the 1920s.

There was no follow-through Thursday, with stocks suffering a sharp retreat that saw the S&P 500 down more than 6% at its session low, while the Dow Jones Industrial Average DJIA gave up 2,180 points at its nadir. Losses moderated somewhat by the close, but the drop understandably left investors feeling "awful," Krinksy said.

Investors, of course, wonder now if the Monday low from the selloff that was kicked off by Trump's April 2 unveiling of his tariff measures will hold. The process could take a while.

Krinsky flipped the calendar back to August 2011, when the S&P 500 alternated with a fall of 6.66%, a gain of 4.74%, a fall of 4.42% and a gain of 4.63% and remained in a roughly 12% trading range for two months before bottoming with a slight undercut low in October.

"We think this environment will be similar, with wide swings within the 5,000-5,600 range. In fact, it would not surprise us if we largely remain 'inside' yesterday's range (4,948-5,481) for weeks," he said (see chart below).

Other examples of "choppy bottoms" abound, including from declines in 2015-'16 and 1998, he said. That's in contrast to V-shaped bottoms, such as the rally off the March low in 2020.

The White House on Thursday confirmed that the total tariff on China is now 145%. That comes from Wednesday's new "reciprocal" duty of 125% plus a 20% levy that has been in effect for a month and is pinned on stemming the inflow of illegal drugs, specifically fentanyl.

Investors were also weighing the ramifications for the economy from the tariffs Trump left in place, including a 10% universal levy.

Washington Watch: Trump retreats but still puts U.S. tariff rate at its highest level in a century

Still, analysts said the partial climbdown means the market no longer faces a "one-way trade" to the downside, said Chris Zaccarelli, chief investment officer at Northlight Asset Management.

"The trade problems haven't gone away. The tariffs haven't gone away," Zaccarelli told MarketWatch. "However, things are different today than a few days ago."

Fears have eased, he said, around the Trump administration taking a hard-line stance that ignores markets, no matter how much damage it would do. "At least that's off the table," Zaccarelli said.

-Joy Wiltermuth contributed to this article.

-William Watts

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April 10, 2025 18:29 ET (22:29 GMT)

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