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The NASDAQ index led the declines in trading here today for the second consecutive day. Investors continue to lighten up on the tech/chip stocks.

• Nvidia fell -2.05%
• Meta fell -1.37
• Alphabet fell -1.71%
• Broadcom fell
• AMD fell -3.21%
• Super microcomputers fell -6.26%.
• Palo Alto networks-5.69%
• Taiwan Semi conductors fell -3.03%
• Palantir fell-2.39%

General Motors and Ford Motor Company also fell on increased tariff

• General Motors -7.36%
• Ford Motors -3.79%

Looking at the major indices

• Dow industrial average fell minus 155.09 points or -0.37% at 42299.70.
• S&P index fell -18.89 points or -0.33% and 5693.31.
• NASDAQ index fell -94.90 points or -0.53% at 17804.03.
• Russell 2000 fell -8.13 points or -0.39% at 2065.69.

Both the broader S&P 500 and NASDAQ indices remain above their respective 100-hour moving averages, but they continue to trade comfortably below their 200-hour moving averages—signaling a market that’s holding on, but still under pressure.

For the NASDAQ, the 100-hour moving average is at 17,738.33, while Thursday’s close landed at 17,804.03, just 66 points above that support level. The 200-hour moving average remains well above at 18,402.06, about 600 points away, highlighting the distance bulls need to cover to reclaim stronger technical footing.

The S&P 500 also holds above its 100-hour moving average, currently at 5,657.45, with Thursday’s close at 5,693.00—a 36-point cushion. Its 200-hour moving average is up at 5,802.97, still 109 points away.

If markets see another down day Friday, both indices risk closing the week below their 100-hour moving averages, which would mark a technical shift in favor of sellers heading into next week.

This article was written by Greg Michalowski at www.forexlive.com.

• Prior was -155.5 billion
• Exports +7 billion
• Imports -0.6 billion

The chart is some important context here as this is a small bounce following a huge decline. When you look back to last February when the deficit was $92 billion, exports were at $174B (compared to $178B now) but imports were at $266B (compared to $326B now.

So the whole story here is surging imports and there has been a jump in ‘industrial supplies’ and ‘consumer goods’. I believe the ‘industrial supplies’ line includes gold, which isn’t included in GDP. That should mitigate some of the decline here but it’s all setting up for a poor Q1 GDP report.

Watch out for the update to the Atlanta Fed GDPNow model which will be out around 11 am ET tomorrow.

This article was written by Adam Button at www.forexlive.com.

I had a chance to speak with Dale Pinkert at ForexAnalytix today on tariffs and a dozen other things that are driving markets right now. The people in the webinar were teeing up comments like “wow, he’s so outspoken” so I must have said something notable.

This article was written by Adam Button at www.forexlive.com.

Australian PM set to call a May 3 election

This article was written by Eamonn Sheridan at www.forexlive.com.

I appeared on BNNBloomberg on Wednesday (unfortunately without a chance to shave) and spoke about what’s priced in for US tariffs on Canada and the rest of the world.

If you haven’t read it yet, I did a deep dive on what’s priced in for tariffs earlier today.

This article was written by Adam Button at www.forexlive.com.

• Trump reached out to schedule a call
• Says will speak to business and union leaders to coordinate a response to April 2
• Nothing is off the table when it comes to defending Canada
• It is clear that the US is no longer a reliable trade partner
• There is no silver bullet and no quick fix

This is some inflammatory rhetoric but take it in the context of an election campaign.

This article was written by Adam Button at www.forexlive.com.

• Trump reached out to schedule a call
• Says will speak to business and union leaders to coordinate a response to April 2
• Nothing is off the table when it comes to defending Canada
• It is clear that the US is no longer a reliable trade partner
• There is no silver bullet and no quick fix

This is some inflammatory rhetoric but take it in the context of an election campaign.

This article was written by Adam Button at www.forexlive.com.

A report earlier today said Ontario “expects the US administration to significantly ease the impact of auto tariffs on Canada” in the future after Howard Lutnick called Ontario Premiere Doug Ford yesterday.

Now, we have comments from Ford saying he spoke to Canadian Prime Minister Mark Carney and they agreed to delay counter tariffs until April 2.

At the same time, Ford is saying he didn’t get any assurances from Lutnick but I imagine that comment is just him being diplomatic.

Here’s a thought: All this is coming at the end of the quarter. You wonder if the Trump admin is trying to sewer Q1 GDP in somewhat-artificial ways to set a low bar (and blame it on Biden) only to try and reverse it all in Q2 and goose the numbers.

This article was written by Adam Button at www.forexlive.com.

I have long brushed-aside talk of de-dollarization; around ideas like a BRICS currency, I’ve mocked it.

But a note from Deutsche Bank today has me seeing new ways that that dollar dominance could erode, if not collapse. They call it a nuclear button for the US dollar and it’s the FX swap line system.

It comes after Reuters reported that some European Central Bank officials are questioning whether they can rely on US dollar swap lines in times of market stress.

“The
immediate question is whether Fed liquidity support is withheld at a time of
immediate stress. The consequences would be grave,” DB writes.

The Trump administration has taken an increasingly hostile tone with Europe and the Atlantic leaks showed top officials calling them ‘pathetic’. It’s also increasingly turning to leverage — if not extortion — tactics in negotiations.

The fear is that if foreign banks needed USD liquidity in a crisis, the US might demand something in exchange.

The Swap Market is Huge

At the same time, it’s hard to even fathom the size of the swap and forward market. The BIS estimated it was nearly $100 trillion in 2022 or the equivalent of 100% of global GDP, more than double the size of the US equity market.

It’s dominated by the US dollar and largely facilitates borrowing against safe assets like Treasuries in order to facilitate cross-border flows, including foreign exchange.

The problem is that times of stress — and I wrote about this extensively during covid — bank swap lines are pulled because of counter-party risk and degrossing. Instead, banks must sell collateral and at the time, it led to a brief fire sale in Treasuries that reversed when the Fed announced unlimited QE.

It took the Fed announcing the most-drastic action in its history to put out the fire, along with unlimited FX swap lines directly from the Fed to global central banks. There are 14 central banks with these agreements in place with the Fed.

DB underscores that these agreements are with the supposedly-independent Fed but there are court cases ongoing around the FCC right now that raise questions about the independence of agencies like the Fed.

Now if these lines were pulled in the heat of the moment, the effects would boomerang back into the US and lead to a firesale in Treasuries and MBS, who argues that “the
bar for withdrawing support at a time of systemic financial stress would seem
exceptionally high.”

Still, the ECB is at least discussing it and that may lead to pre-emptive measures to cut reliance on the dollar swap system, which essentially means de-dollarizing in the medium term.

That led to this incredible paragraph from Deutsche Bank:

Doubts
about a commitment from the Fed to maintain dollar liquidity – especially
against major allies – would accelerate efforts by other countries to reduce
their dependence on the US financial system. It would ultimately lead to lower
foreign ownership of US assets and a broad-based weakening of the dollar’s role
in the global financial system. It is instructive that large economic rivals to
the United States like China and Russia do not enjoy swap lines with the Fed
and have shored up their financial systems either by significant official
reserve accumulation or by de-dollarising. Ultimately, where such concerns to
spill over to US allies, it would likely in our view create the most significant
impetus to global dollar de-dollarisation since the creation of the post-war
global financial architecture.

Not coincidentally: Gold hit a record high today and it’s gone parabolic since Trump moved ahead of Biden in polls at this time last year.

This article was written by Adam Button at www.forexlive.com.

The US Congressional Budget Office is out with its latest budget deficit numbers. Note that these are based on current laws and that would mean the expiration of the Trump tax cuts (from 2017) at the end of this year. Those are almost-certainly going to be extended so you can assume these numbers will be worse barring lower spending or higher taxes elsewhere.

• FY 2025 deficit seen at 6.2% of GDP and rising to 7.5% in 2055
• Debt to GDP to rise to 156% of GDP by 2055 from 100% now
• Worseing forecast linked to lower immigration and slowing potential growth
• Sees 2.1% GDP growth in 2025
• Interest costs expected to exceed defense spending this year

This article was written by Adam Button at www.forexlive.com.

We will keep a close eye to see what leaks out.

Hopefully it’s a chance for a reset but I’m not holding my breathe.

This article was written by Adam Button at www.forexlive.com.

• High yield 4.233%
• WI level at the time of the auction 4.227%
• Tail +0.6 basis points vs 6 month average of -1.3 bps
• Bid to cover 2.53X vs six with average of 2.69X
• Dealers 12.67% versus average of 9.05%
• DIrects 26.1% versus six month average of 19.64%
• Indirects 61.2% versus six-month averages 71.31% .

Auction Grade:D+

The US treasury had to pay 0.6 basis points above the WI level at the time of the auction. That compares unfavorably to the -1.3 basis point average seen over the last six month auctions. The bid to cover was below the six-month average as well with the dealers settled with a much higher percentage of the auction versus the average.

Domestic buyers were the only bright spot is a or 26.1% versus 19.64% average. International buyers were much lower at 61.2% versus 71.3% six-month average.

This article was written by Greg Michalowski at www.forexlive.com.