Markets have entered a new phase likely to be defined by tariff negotiations between the Trump administration and trade partners around the world.
On Tuesday, hope that President Donald Trump has a plan and knows how to execute it fueled more massive moves for stocks during another volatile session on Wall Street.
After opening with a 60-handle on Monday, the Cboe Volatility Index (VIX) – also known as the "fear gauge" – crept down to the mid-40s early Tuesday.
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Stocks gapped up and held high ground for the first 90 minutes, but the realities of the new uncertainty drew down on the hope that provided the bounce.
And by the last hour of the trading day the VIX was back up to 56.32.
"It has already been reported that many countries have come forward with a willingness to negotiate around the tariff terms," writes LPL Financial Chief Investment Officer Marc Zabicki, citing "the Eurozone (in aggregate), Asia-Pacific, and South America."
Zabicki says such reports are "a good sign" that the Trump administration has a plan. "The U.S. set its tariff marker and compelled affected countries to come to the table," Zabicki observes. "Call it Negotiation 101."
The hope is for an outcome where "tariffs are far less than those outlined last week," including concessions from countries the Trump administration has targeted for their unfair trade practices.
"The biggest and admittedly significant hold-out so far has been China," the analyst concludes, "although that was to be expected."
In 2024, the total value of U.S. trade in goods with China was approximately $582.4 billion, comprising $143.5 billion in exports and $438.9 billion in imports.
That resulted in a trade deficit of $295.4 billion – the largest deficit for the U.S. with any of its other trade partners.
Our local partner to the south, Mexico, is No. 2 ( $171.8 billion). Our perhaps unexpected partner in Southeast Asia, Vietnam, is No. 3 ($123.5 billion). The U.S. had a goods trade deficit of $63.3 billion with Canada, with total trade between the North American neighbors estimated at $762.1 billion.
At the closing bell, the blue-chip Dow Jones Industrial Average slipped 0.8% to 37,645. The broad-based S&P 500 Index fell 1.6% to 4,982. And the tech-heavy Nasdaq Composite tumbled 2.2% to 15,267.
Small firm optimism sinks
The National Federation of Independent Business said its optimism index fell to 97.4 in March from 100.7 in February. That's the steepest month-over-month decline since June 2022, the peak of the COVID-induced global supply crisis.
The consensus expectation was a print of 98.9. The decline leaves the index below the long-term average of 98 for the first time since October 2024.
"The implementation of new policy priorities has heightened the level of uncertainty among small business owners over the past few months," said NFIB Chief Economist Bill Dunkelberg. "Small-business owners have scaled back expectations on sales growth as they better understand how these rearrangements might impact them."
As the NFIB put it, "This year will be one ruled by uncertainty. President Trump's administration is rearranging the deck chairs at a record pace."
Wells Fargo economists Charlie Dougherty, Jackie Benson and Ali Hajibeigi note "dimming economic perceptions and worsening sales expectations" as the driving forces behind March's decline in small firms' collective outlook.
They cite labor quality as firms' top reported problem "as the worsening macroeconomic backdrop spurred a retrenchment in hiring plans."
And though tariffs didn't impact prices in March, "the percent of firms planning to raise prices over the next few months reached the highest share in 12 months."
Good news for health insurers
A subset of health care stocks were up early and late on Tuesday after the federal government said Medicare Advantage payments will increase by $25 billion in 2026.
CVS Health (CVS, +6.0%), Humana (HUM, +10.7%) and UnitedHealth Group (UNH, +5.6%), health insurers that offer Medicare Advantage plans to seniors, surged on the news. UNH was the top intraday performer among the 30 Dow Jones stocks.
The increase, which exceeded both industry and analyst expectations, is meant to account for higher projected costs in the program, according to the Centers for Medicare and Medicaid Services.
UnitedHealth is scheduled to report first-quarter earnings before the opening bell on Thursday, April 17. UNH stock is an anchor for many of the best health care ETFs.
Bad news for Elon
Longtime Tesla (TSLA, -4.9%) bull Dan Ives of Wedbush Securities has cut his price target for shares of the electric vehicle maker.
Ives now sees TSLA stock at $315 12 months from now, down from $550, which was the highest target among Wall Street analysts. The colorful Ives maintained his Outperform rating on Elon Musk's outfit, so it's still a "Buy" for him.
"The economic tariff Armageddon unleashed by the Trump administration is a double whammy for Tesla," Ives writes. While Tesla is less exposed to tariffs than domestic automakers General Motors (GM, -2.4%), Ford Motor (F, -5.9%) and Stellantis (STLA, -7.9%) as well as foreign producers, it still sources parts from outside the U.S., including China.
"A clear cost impact" will "ultimately be passed on to consumers with some demand destruction if these tariffs hold in their current form," Ives finds.
There is a bigger worry for Ives.
"Tesla has essentially become a political symbol globally," Ives says, "and that is a very bad thing for the future of this disruptive tech stalwart." Ives estimates Tesla has lost or destroyed at least 10% of its future customer base.
"We have been one of the biggest supporters of Musk and Tesla over the last decade," the analyst concludes, "but this situation is not sustainable."
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