US stock index futures have begun the week on the front foot, continuing on from Friday’s rally. Investors responded to yet another tariff update.

After Friday’s close, President Trump refined his reciprocal tariffs once again, this time by exempting smartphones and other electronics for now. Yesterday, President Trump said that tariffs on semiconductors would be announced over the next week and a decision on phones would be made "soon."

This has led to a significant bounce back across tech stocks, with Apple being the standout, having jumped 5% this morning on the news. Despite these gains, US stock indices were still below the highs hit during Wednesday’s tumultuous session. This was when equities soared after Mr Trump postponed the vast majority of the reciprocal tariffs announced the previous week.

Source: TN Trader

This meant that levies were held at 10% for most of the US’s trading partners with additional tariffs postponed for three months. Mexico and Canada’s 25% tariffs remain in place. But it is China which is clearly the target for President Trump’s ire, as if we didn’t know.

At the end of last week, the US confirmed tariffs of 145% on Chinese imports, while China imposed 125% tariffs on US goods.

Wednesday’s surprise softening in trade rhetoric suggests that Trump blinked. The speculation is that it wasn’t the sell-off across equities which persuaded him to back down, but concerns amongst his advisors following the extreme volatility and unusual moves in bond markets, especially US Treasuries.

Ten days ago, soon after the original reciprocal tariff announcement, the yield on the key 10-year Treasury Note fell to a seven-month low of 3.86%. But it turned on a sixpence/dime briefly trading at 4.50% on Friday. That is an extraordinarily big move and the reasons for it are still not fully understood.

This does not appear to be a straightforward battle between the ‘slowing growth, therefore Fed rate cuts, therefore lower yields’ outlook versus ‘rising inflation, therefore no rate cuts, therefore higher yields’ outlook. Instead, it feels like something more concerning may be to blame.

There’s a gaggle of Fed members set to deliver speeches over the next few days, culminating in Fed Chair Jerome Powell on Wednesday at the Economic Club of Chicago. Hopefully, these will offer up some illumination during this somewhat gloomy period.

The first quarter earnings season picks up a gear. It seems likely that these will be overshadowed by trade issues. But investors will pay particularly close attention to forward guidance, and how the tariff outlook is seen as affecting future business.