Dow Jones: Safe Havens Crumble as China Retaliates – US 30 Faces Rebalancing Test

Dow Futures Plunge 900+ Points as Trade War Erupts

Dow futures have plunged 906 points (2.4%) in pre-market trading as China announced retaliatory tariffs of 84% on U.S. goods effective April 10. S&P 500 and Nasdaq-100 futures are down 2.1% and 1.7% respectively, extending a four-day market rout that has erased $5.83 trillion in S&P 500 market value.

China Slaps 84% Tariffs as Global Retaliation Spreads

The Chinese government’s response follows U.S. tariffs of 104% on Chinese imports that took effect overnight. Market sentiment deteriorated further after Scott Bessent told Fox Business that China is unwilling to negotiate, calling them “the worst offenders in the international trading system.”

Trade conflicts have expanded beyond China, with Canada confirming 25% retaliatory tariffs on U.S.-made vehicles, specifically targeting those not compliant with USMCA regulations. Piper Sandler analyst Andy Laperriere notes that tariffs will likely remain “at the highest levels of our lifetimes.”

Treasury Yields Spike Despite Recession Fears – Safe Havens Crumble

The 10-year Treasury yield has spiked 19 basis points to 4.45%, reaching its highest level since February despite growing recession fears. The 30-year yield briefly touched 5.02% overnight, a level not seen since November. This unusual bond market action—yields rising during equity market stress—contradicts the typical safe-haven behavior of fixed income assets.

Bond market weakness may indicate foreign holders potentially selling U.S. government debt. Today’s $39 billion 10-year Treasury auction will be closely watched following Tuesday’s weak demand for 3-year notes. Japan, China, and the UK—countries targeted with high tariffs—are among the largest Treasury holders.

Bear Market Looms as VIX Explodes to 57

The S&P 500 is now down 19% from its record high, approaching bear market territory. The CBOE Volatility Index (VIX) has surged to 57.31, near its highest since August, reflecting extreme investor anxiety.

Traders are now pricing in more than 100 basis points of Fed rate cuts by December, equivalent to four 25-basis-point reductions. However, the Fed faces a policy dilemma as global tariffs could raise inflation even as recession risks grow. Today’s release of Fed meeting minutes and tomorrow’s CPI data will be critical in determining near-term market direction.

Trading Strategies Amid Heightened Volatility

Sector rotation has intensified with defensive stocks showing relative outperformance. Utilities and consumer staples have declined less than the broader market, while technology and financial sectors bear the brunt of selling pressure.

Options traders report surging demand for downside protection, with put-call ratios reaching levels not seen since 2022.

Liquidity has deteriorated in both equity and bond markets, with bid-ask spreads widening significantly across asset classes.

More Information in our Economic Calendar.