Tariffs Crush Global Markets… And Volatility Swings Ahead Of Tomorrow’s Jobs Report 4/3/25

23:30Welcome back to Fast Money. Consumer-facing stocks under major pressure today. The S &P retail ETF dropping 8 percent for its worst day in nearly three years as retailers grapple with the impact of tariffs on global supply chains. For more on the sector impact. Courtney Reagan is here on set. Busy day for you, Courtney. A really busy day, extreme. I mean, frankly, the new tariff policy is being described as, quote, a nightmare come true, worst case scenario, beyond imagination. These aren't my words. These are coming from analysts, executives and retail lobby groups. So the losses were deep and they were wide.

24:00RH shed 40 percent of its value. Now, this also was after a disappointing quarter and worry about its sales, but also exposure to manufacturing in the now heavily tariffed countries in Asia. Its CEO cursing on the conference call and a real-time reaction to watching his stock crater. Wayfair, Victoria's Secret, VF Corp, Capri, Kohl's, and so many others losing 20 percent or more. Again, we're just talking about today's session. Some consumer staples names, those were higher. But look at the divergence. I think this is so interesting in just the dollar stores, often looked at as a safe haven. Dollar Tree, though, down more than 13 percent.

24:35Dollar General up almost 5 percent. Why? China sourcing exposure. Almost a third of Dollar Tree's goods are made in China. Only 4 % for Dollar General. So investors may be doing their homework on that one. However, Jeffrey's Randy Koenig tells me retailers actually are more worried about consumers pulling back right now, more so than they are about the higher cost of goods. Retailers, for the most part, staying pretty silent. They don't want to talk. Their stocks are tumbling. They're trying to figure out what to do. American Apparel and Footwear Association's CEO Steve Lamar is kind of doing the talking for some of the members.

25:09And he says that his members are feeling stress, frustration, anger, and even helplessness. Now, Cytex makes jeans in Vietnam and L.A. for names like Ralph Lauren, J. Crew, Madewell, and others. Its CEO and co-founder Sanjeev Ball tells me that at least for now, none of his retail clients are asking him to absorb all of that tariff cost. He says the same pair of jeans, though, does cost him half as much to make in Vietnam purely because of labor costs than it does in L.A. He says he's got an 80%, 20 % hybrid model, and that's as good as he can do. The Dollar Tree, Dollar General divergence is fascinating.

25:44So where are they getting their dollar goods? So if you think about like Dollar General does have more food and beverage. So a lot of that is going to be local. That is a lot of the reason for that. Dollar Tree, remember, for a long time was sticking to that$1 price point. They had to go up to$125. Dollar General rather does have goods that sort of go beyond that$1 threshold and more food and beverage. That's a big reason for the divergence. So different types of goods, but both of them are often lumped together and say, hey, those are safe haven, those are discounters. But if you're talking about exposure, it's vastly different.

26:16How much of this do you think, so we know tariff impact, higher cost of goods sold, higher import costs, whatever that is, but you talked about the consumer. And so we've got, first of all, a consumer that might have already spent too much on a lot of these discretionary items and have more than they needed. And then there's the unknown of the consumer. So there's almost a triple whammy here. If you could break down what's the contribution of each of these three buckets to what's going on here. Because I look at a Lululemon, and we're now a week past or three or four days past their numbers. And we'd see on this test, 20 times Lulu's really cheap, except for the fact that what I heard from this company is they could have negative comps and that actually their CAGR on EPS is going to be 5 % for the next four years.

26:58And I'm not sure it's worth 20 times. Yeah. And Jeffrey's, Randy Koenig also who I spoke to again about sort of the consumer sentiment piece, when he would look at Lululemon, he actually is also really worried that it's potentially a biggest loser for those things. Plus, also, it's exposure to Vietnam. Yeah, he was out there early on that, by the way. It's exposure to Vietnam. Yeah. I mean, this is really tricky. And I've really started to think about if prices go up so substantially, isn't it going to be this consumer pullback that is going to be a bigger problem? That seems to be an issue for me because if you're the retailers now, it's a little bit less about who's more exposed to China and who's not.

27:33There's nowhere to hide. Everybody's being hit. I mean, very few retailers source all or the majority of their goods here in the United States. So that means everybody's costs are going up. And so maybe everybody's cost of business is going up. So it's not me pitted against me if I'm a retailer. But if I'm a consumer, my gosh, to your point, do I really need another blue shirt? I mean, that one looks fine, Tim. Well, thanks. I mean, I know I don't. Yeah, it's pretty new. Courtney, thank you. Courtney Reagan. And the trend is that consumers were sort of pulling back. We saw that in the data most recently throughout the first quarter.

28:07As the first quarter went on and on and on, consumers were getting a little bit more choiceful in how they spend, is I think the nice word of saying they're cutting back. So, Bono, are you looking through this wreckage at all and saying, you know what, there might be some interesting buys, or are you just worried about this sort of overlay of the consumer losing their jobs, of a growth scare, growth, I don't know, pullback, whatever you want to call it? I think you're always looking for an opportunity within the chaos. I mean, you've got to kind of keep your mettle and kind of pick through things.

28:34So, one, it just seems like correlation did really start to approach, Ron, within this XRT kind of cohort. And so when I look at, you know, a Lulu or Restoration Hardware versus like a Ralph Lauren or a Gap, I do think there's some differentiation there. I think Lulu has already gotten hit on the back of earnings, restoration as well. And then you're kind of seeing some taking there. Ultimately, they're really appealing to a higher-end consumer. And then the consumer in general, I'm thinking about what are the spending trends likely to be. It's likely to be more credit card heavy. Now, maybe I don't want exposure to a Capital One, but perhaps a Visa that has a nice mix of your AXP type of clientele and then your middle type of clientele might be an opportunity for more fee generation there.

29:18Yeah, you want to look at the retailers that are coming from a sense of strength. So you go to Costco or you go to Walmart where they can negotiate prices better. But I will tell you, Capri down 24 % catches my attention to start sifting through because there's got to be some buyer at Capri trading with a 14 handle. Coming up, a couple of names managed to book the sell-off today. How French fries and soda help boost the staple sector into the green. that is next. Plus, Trump's tariff plans could put a major wrench in the Fed's rate plans. How yields will respond and what our next guest is hearing from business leaders abroad.

29:54You're watching Fast Money live from the Nasdaq Market Site in Times Square. Back right after this.

30:20Welcome back to Fast Money Stocks. Tanking after President Trump unveiled his 10 % baseline tariff on almost every country. The Dow diving nearly 1 ,700 points. The S &P falling nearly 5%. The Nasdaq down nearly 6%. All three indices seeing their worst days since 2020. Dow transport sinking more than 9 % as airlines, rail stocks and delivery companies like FedEx and UPS all drop in today's sell-off. Crypto also getting crushed. Bitcoin hovering around the$82 ,000 level. Other tokens like Ethereum, Solana, Ripple, all lower as well. But some bright spots in today's drop, investors flocking to the staples sector amid the global sell-off.

30:55Lamb Weston, the French fry maker, jumping 10 % after topping earnings expectations. And beverage stocks like Coke, Pepsi, Molson Coors, helping fuel the staples trade. We've got a news alert. One of Wall Street's biggest firms updating its odds for a recession. Steve Leisman's got the details. Steve. Yeah, Melissa, and not one that is really quick on the trigger to make changes like that. J.P. Morgan upping its recession odds to 60 percent from 40 percent previously, citing obviously the tariffs, the effect on business sentiment, the effect on investment and the effect on and on consumer price.

31:28They said, quote, these policies, if sustained, would likely push the U.S. and possibly global economy into recession this year. And if I could shift gears, Melissa, we just got an email from a study from the Cato Institute. What they did is they looked at the tariffs that the White House says countries charged us versus the actual tariffs they charge. Take a look. Vietnam, they said that President Trump said it's 90 percent. It's actually five point one percent for an 85 percent difference. We'll go down the list. Taiwan, Switzerland, which is known to not charge almost any tariffs at all. 61 percent, the White House said, it's actually 1.7.

32:09Indonesia, where we get a lot of garments from, they're at 5.3. The White House says they're at 64. And very importantly, the European Union. Remember when the president said there was 39? And then we can go down the list. These are important trading partners. Now, of course, there are some non-tariff trade barriers that are difficult to quantify. But the White House basically being accused by people of using a formula that no one has ever used to come up with these tariff rates and then say, oh, we were kind to them and we did half. Melissa? Steve, thank you. Steve Leisman. The 10-year Treasury yield dropping again today, hitting 4 % at its lows at the session.

32:46That was its lowest level since October. Our next guest warns President Trump's tariffs are upsetting the global order. Richard Fisher is the former Dallas Fed president. CNBC contributors also served as deputy trade representative around the time NAFTA was implemented. Richard, great to have you with us. You just returned from a very long trip around Europe. You talked to a bunch of CEOs, investors. And what are they saying here as J.P. Morgan ups his recession odds to 60 percent for this year? Well, my trip ended at the beginning of this week. So they were apoplectic. They were worried. They wanted some certainty.

33:21And I guess they have a little more certainty now after President Trump's announcement on tariffs. So, look, this is just upsetting the current global order. And to make decisions, including at the Federal Reserve, I believe, without having a full sense of what the impact will be, it's too early. It's just too early to make decisions. I don't like this because I was schooled and I believed and I negotiated my duties for USGR. with all the countries that have been talked about on this show. It's just a different approach. And Steve is right when he reports those numbers. Those, for example, the Vietnam number was one that I negotiated.

34:13When we put on the first Nike investments on behalf of the United States, I helped negotiate their opening in Vietnam. So remember, Melissa, consumers are going to pay the price. And one of the meetings I had was with Rolls-Royce, my first meeting in London. And then last weekend in EFT, the successful CEO of Rolls-Royce pointed out that if you're going to make for dramatic change in any organization, in his case, his company, you have to deliver results very quickly to keep your constituents going on your side. We'll see how this affects the farmers, how it affects the consumers, and how it affects the constituents that voted for President Trump.

35:02But my guess is no one is happy having to pay higher prices than they already are paying at a time when the economy is on a downturn. So it's compounding the issues and also challenging all these other countries in terms of their economic welfare. From the Fed perspective, I understand that you have to see what the impacts are going to be, the direct as well as the indirect impacts of these tariffs and how it filters through the economy, etc. There are other economists on the street who, you know, they have to cater to investors and they need to put notes out and they need to figure out how exactly it's going to impact everything right now.

35:38But at the same time, at the same time, Richard, you know, at what point does the Fed or maybe there is no point where the Fed is less passive in its role in the economy in terms of watching to see how things impact the economy and take on a more active role in terms of where the economy should go? Well, first, they have to figure out what's likely to be the impact on inflation and employment. And Melissa, you've heard me say this. We've been friends for a long time. I don't believe in instant analysis. That's an oxymoron. It takes time to figure out what the consequences will be in a very complex economy like the United States.

36:19I do think everybody realizes that tariffs are indeed a tax. It will put price pressure on consumers as businesses struggle to protect their margins with increasing costs. And this is an increase in cost. But I think right now, if you look at what's happened that affects business, rates have come down a little bit. The 10 years hovering just at 4%. percent. So I believe the Federal Reserve only controls the yield curve out to one year. And from then on, on the yield curve, what impacts operating businesses who employ people, who sell products, who buy things from others to make into products and to provide services, the short-term rates aren't as important.

37:04You're right as far as the trading markets are concerned. But let's not overestimate how powerful the Fed can be in terms of affecting the price of money that they depend on, businesses depend on, to finance their operations. And right now, I would say rates come down. The spreads have not widened that dramatically. We're just going to have to see how this works its way through the system. And as we see how it works its way through the system, the Federal Reserve, like any business right now, just has to take their time to understand all the movements that are likely to occur from this dramatic change in the way we approach the world and we approach our own economy.

37:47Not an easy task, Melissa. No, it's not. Richard, thank you for the instant analysis of the situation. I want to tell our good friend on the set, by the way, I am wearing a blue shirt like he is. So looking good, Richard. It looks new. Richard, thank you. Nice to see you, Richard Fisher. So like every other component in the economy in terms of the consumer, businesses, a state of paralysis even at the Fed in terms of what they do, according to Richard, because we have to see how things filter through. And there are two sides to what the Fed sees here. And there is a part of this that they're probably pretty excited about in terms of fiscal restraint.

38:26So I think it's it's tomorrow's payroll number is an important payroll number for the markets, but it's not necessarily going to dictate the world that we see. And I believe that that patience will will be borne out over the next few weeks. If there are cracks, though, in that report tomorrow, Julie, cracks that existed before the tariffs have come into effect, that will really concern investors, I would think. It should. I mean, right, if two-thirds of your economy is based on the health of the consumer and everyone spends every incremental dollar or they have been for the last few years, it's really concerning if they start to lose their jobs.

39:01And more importantly, it's not just the losing of the jobs that really impacts demand, it's the fear of losing your job. That's when you start to really pull back your spend, even though you are still gainfully employed. And I think it's that confidence piece that's not just lacking in businesses, But if it starts to bleed into consumers as well, that is a meaningful impact on demand. And that happens immediately. Coming up, a spike in volatility as Trump tariffs tank equities across the globe. How our next guest is navigating the stock swings and where she sees safety amid the turmoil. That is next.

39:40Welcome back to Fast Money. Today's massive stock market sell-off comes as investors now turn to the March jobs report tomorrow. So how should investors position themselves now? Let's ask CBOE, CBO's Mandy Hsu. She joins us here on set. Mandy, great to have you with us. In terms of today, we saw a big volatility spike. We closed at around 30 or so. But, you know, on the 1230 call, these guys were saying that they expected it to be much higher. Exactly. So as big of an increase in the VIX as we saw today, we would have expected a much bigger increase given the fact that S &P sold off almost 5%, right?

40:11If you recall last August when we had that almost 5 % pre-market sell-off, VIX was 65. So in terms of what's different this time, I think the fact that tariffs, while what was announced yesterday was larger than expected, it was very much an anticipated risk for the market. It wasn't a true shock, right? It wasn't a black swan event. And typically what really produces the kind of type of volatility shocks, you know, we saw last summer was a true black swan event. And that's not what we saw yesterday or today. In terms of volatility in the other asset classes like yields, for instance, was that more in line with what you were expecting or still muted?

40:45No, we did see volatility increase across asset classes. In terms of what stands out on a cross-asset basis, I would say right now credit volatility to us seems fairly contained given this rising concern of a recession. Credit spreads being still fairly tight on a historical basis. In the rates market, in the bond market, what's interesting is that for all the talk about stackflation, the possibility of much higher inflation, the bond market is solely focused on the downside risk to growth. There's almost nothing being priced in for the inflation. So all the positioning is for rates to go lower from here.

41:17Very different from what we saw in 2022 when it was the other way around. Manny, we spend a lot of time talking about the VIX at the index level. Can you kind of tell us what you're seeing under the hood at the individual single stock level and whether that's telling us a different picture or a different story about investor sentiment around fear? Yes. And I say one of the reasons why, you know, the VIX was probably more contained today was that investor focus was actually really idiosyncratic, the stock selection side. People were looking for the winners and losers of tariff policy. So what we saw actually was a fair amount of dispersion.

41:48We had certain sectors, staples, utilities actually up on the day. And even within sectors, I think you guys were talking about in the retail, dollar general versus dollar tree. Exactly. There was quite a bit of dispersion there. So that, to me, suggests that people are still looking at from earnings, from a fundamental perspective and not from a macro perspective. So if there were more fears around recession, more macro fears, you would start to see higher levels of correlation. And that would kind of then you would expect to see higher levels of VIX. So I would say right now, equity investors still focus in terms of stock selection, sector selection, picking out the winners and losers.

42:24Could that change? Certainly. And if it did, we would expect to see higher levels of volatility. So, Mandy, if the VIX is only good for a black swan event or things of that nature, I don't want to put words in your mouth, but that's how you framed it, where you see these spikes in volatility. What should the people watching the show, what should us as traders, when Bono and I asked you about individual names, is there a certain aspect or a certain metric that we can look at as traders that will give us a day-to-day volatility picture versus the black swan events? Yes, absolutely. So to be clear, so VIX, when I say good for black swan, I mean, significant VIX spikes like to 60, 50, 60 type levels.

43:02Typically, you would get, you know, it's on the back of a black swan event. But in terms of what other volatility measures you can look at, we actually released a VIX for single stocks. The ticker is VIX EQ. It's looking at the top 80, 90 stocks in the S &P. That gives you a good measure of kind of average single stock volatility in the market. So if you want to look at the stock side, we also have measures across asset classes, VIX TLT, which looks at bond market volatility, VIX IG, which is credit volatility. So we do have a variety of measures for across asset classes as well as within the equity market.

43:36Bottom line, though, I hear that there's more possibility for downside risk to equities and to a lot of different asset classes because we haven't priced in recession. We haven't gone that last mile. Right now, we're only pricing still a growth scare. I mean, we're still willing to look at fundamentals for stocks. That is my big takeaway in terms of what is currently being priced into the equity options market. Yeah. Do you think we need to price in recession at some point? Well, I think the comment on credit is really important. I think, you know, if I look at what credit markets have done, and I also look at the crowd that's in credit markets, and I look at the lack of liquidity, you know there's not the kind of liquidity to actually unwind a lot of positions for a lot of people.

44:13If you own CDS, yes, it's highly liquid. But the private credit markets are what they are. But if you went up, and you can do this at home, if you look up high-yield OAS spreads, you can see that we've seen essentially in high-yield spreads we've backed up 100 basis points in about three months, four months, really most of it from January. And that's a major, major move. And yet we're still incredibly tight. Mandy's talking about markets only saying lower rates, pretty good for companies, pretty good for owning bonds, right? Lower rates, higher prices. But credit spreads widening is the part that really I'd be careful on.

44:46What are you watching tomorrow? Post jobs report, pre jobs report. Yeah, I think the so heading into this week, the market was putting more emphasis on the economic data than the tariff announcement. That turned out not to be an oversight. Right. But I would say kind of going forward, I could see why the market did that, because the economic outlook is going to be the key driver. Right. In terms of just in terms of both the labor market, as well as consumer spending, you know, those data points I would expect to be much bigger volatility drivers or catalysts for the market. All right. Mandy, thanks for stopping by.

45:17I appreciate it. Mandy Shoe of SIBO. Julie Beal, how are you feeling about tomorrow's jobs report? And do you think we need to price in recession? Are you starting to do that math in terms of S &P earnings, et cetera? I think that what we are trying to do is look at our portfolio companies and have confidence that even if we do hit a recession, that they're going to be OK. That's how we build our portfolios. And And that's why when we have days like today, we tend to do half as bad as the market. The thing that I think is really important for all investors to be looking at is what types of quality businesses do I have?

45:50Am I well positioned? Because if we do have a negative jobs report before the tariffs, that is problematic exactly for as she was saying. The consumer spending aspect of it is so important. All right. Meantime, global markets also hit hard after yesterday's tariff announcements. The Europe stock, 600, down over 2.5%. Germany, an outperformer earlier this year, getting whacked 3%. China's Hang Seng Index down 1.5%. Meantime, the Mexico ETF soaring as our southern neighbor was spared additional tariffs. The EWW saw its best stay since June. Canada not seeing the same enthusiasm today, down more than 2%.

46:26So, Tim, you're known for your MIGA trade, which is, of course, making international great again. How are you feeling about it now? Well, if we think that the dollar is going lower, again, you've got this you've got this buffer when you're investing in foreign markets here that actually if you're investing in a company that sits in Europe, the euro's strength is actually to your benefit. So that's part of what the move was. That's why if you own the EWG, it really outperformed the DAX. The part about I think this trade that investors need to think about is there are foreign investors and some U.S., but really, if you're a foreign investor, you invest in dollars.

46:59So much of that position is unhedged. If some of that money comes repatriating back, I think it's going to be even more powerful for that international trade. So I continue to think that this is a trade that, while it's had a big run, there are structural things that have changed dramatically that mean this is, I think, just the beginning. Just quickly, within international, are there specific areas you like the best now after we know all these tariff announcements? Well, again, it's fascinating how Mexico has kind of carved this out. But I continue to think that Germany, what they're doing in that economy and the industrial nature of that economy and the fiscal spending.

47:33Germany and Spain are kind of the, I think, the most interesting economies in Europe. Up next, final trades.

47:44Time for the final trade. Let's go around the horn. Julie. Enerpac, I'm thinking local and highly specialized. Tim. Unilever. This is a Staples play, but it's an EU food play. It's cheap to its group and I think is actually a bit of a re-rating play on cost improvements. Lever or lever? You know, I don't know. We know what you're talking about. Bono in. You want to focus on the consumer. I really think that, you know, you want to look at the credit card providers. Visa. Steve Grasso. I said before I bought Lucid Motors for the last two days. Took a shot there. They're mostly manufactured in the States and they're backed by the Saudi private investment funds.

48:23So I took a shot at Lucy. All right. Thanks for watching Fast Money. See you back here tomorrow at 5 for more Fast Mad Money with Jim Cramer starts right now.

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