Stocks tank on tariff prospects, vaccine makers plunge on FDA resignation, Liberals polling ahead, Scotiabank downgraded
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Give us liberty: The stock market continues to be liberated from gains this morning. Futures are under pressure ahead of the “Liberation Day” on April 2nd – the day the US plans to announce reciprocal tariffs. News headlines over the weekend suggest the worst case scenario isn’t imaginative enough. The White House is reportedly “scrambling” to determine the specifics of its new tariff agenda, reports the Wall Street Journal. US President Donald Trump is reportedly pushing his team to be “more aggressive” and target “essentially all” US trading partners. The S&P 500 put in its 5th weekly loss in six weeks while the TSX fell for the third time in four weeks. Investors are finding refuge in gold which has hit another record high while bonds are rallying. Japanese equities imploded falling to the lowest level since August 2024. “It would likely take broad tariff increases of more than 25% and aggressive counter tariffs to pull the U.S. economy into recession—and markets now sense we could be headed down that hazardous road,” wrote BMO economist Sal Guateri. If tariff announcements weren’t enough we will also get payrolls on Friday and hear from Fed Chair Jerome Powell. This is a make or break week for equities. If tariffs are even a whiff better than feared, we could be in for a relief rally. Is anyone willing to front run that?
Or give us death: Auto stocks are tumbling after Trump said in an interview he “couldn’t care less” if automakers had to raise prices in the US ahead of 25% tariffs that come into effect Thursday. European automakers like BMW (-3%) and Volkswagen (-3%) are under pressure this morning while shares of Ford (-1.5%) and GM (-2%) are also slightly lower. While autos are in the eye of the tariff storm, don’t ignore stocks that may also be caught up. Of course the auto part makers like Magna and Linamar have been under pressure, but there are also companies that rely on high auto sales. The only part of Blackberry’s business that anyone thinks is worth anything is exposed to the auto sector. “Given challenges facing automakers with respect to potential tariffs, along with ongoing delays for software-defined vehicle programs at major automakers, (internet of things) growth is likely to face headwinds in FY26,” warned RBC’s Paul Treiber in an earnings preview this morning. In other sectors, airlines have come under pressure because of reduced travel demand to the US. Shares of Air Canada hit the lowest level since May 2020. Let that sink in. Several airlines have reduced the number of US flights in April as bookings have declined significantly according to the New York Times. Their story is filled with anecdotes about Canadian travelers boycotting trips to the US. The Magnificent 7 has also been under significant pressure dropping six weeks in a row and officially in a “bear” market with a drop of 20.5% from its December peak. Interestingly, Citi’s chief US equity strategist Scott Chronert is upgrading the tech sector to overweight specifically because of the sell-off in software related names. “The group is relatively well insulated from tariff risks,” he wrote. Tariff exposed stocks aren’t the only sector reeling from US policy. Vaccine makers and gene therapy companies are selling off this morning after the sudden resignation of the FDA’s Peter Marks citing a “misinformation” push by Health and Human Sciences Secretary Robert F. Kennedy Jr. Shares of Moderna (-11%), Novavax (-12%), Pfizer (-1.3%) are all down in the pre-market while gene therapy companies are also taking a hit.
Fourth time is a charm: Polling indicates that the Liberals have an edge over the Conservatives with less than a month until the federal election. This means the Liberals under Prime Minister Mark Carney could be headed to a fourth term. Polymarket, a prediction market, says there is a 71% chance Mark Carney will become the next Prime Minister. In an effort to come back from this setback, Conservative leader Pierre Poilievre said that any company that reinvests their proceeds in Canadian businesses would be able to defer taxes on any capital gains between July 1, 2025 and December 31, 2026. If the measures are successful, the Conservatives would make the changes permanent. “If this passes, it meaningfully changes the math of owning Canadian stocks vs anywhere else in taxable accounts,” wrote Ernest Wong, Head of Research at Baskin Wealth.
Self dealing: X (formerly known has Twitter) has been sold by Elon Musk to Elon Musk. The Tesla founder and CEO has merged his artificial intelligence company xAI with X in a deal that values his AI company at $80 billion and Twitter at $33 billion. Recall, Musk bought Twitter in 2022 for $45 billion. “xAI and X’s futures are intertwined,” wrote Musk in a post on X, “Today, we officially take the step to combine the data, models, compute, distribution and talent.” It is a win for investors in X who have had to writedown their investment after Musk’s purchase. Now they get to participate in the AI upside. The last funding round for xAI valued the company at around $50 billion just a few months ago.
Notable calls: Scotiabank is being downgraded at Bank of America in light of the trade war. The analyst, Ebrahim Poonawala, is downgrading because of a “sea change” resulting from trade tensions that leave Scotiabank on a “relatively narrow path” to outperform given its exposure to Mexico and Latin America. Poonawala also notes the bank has a lower tier-1 capital buffer relative to peers. Price target goes to $70/share. Barclays is downgrading Canada Goose and the stock is falling about 5% in the pre-market. Analyst Adrienne Yih is cutting the stock to underweight on elevated macro pressure. Shares are trading at an all-time low, a coup for the bears with 21% of the shares outstanding short. BMO is shuffling its ratings on steel stocks upgrading Steel Dynamics and downgrading US Steel. BMO says Steel Dynamics should be a winner from tariffs which favour domestic producers while US Steel could suffer if Trump doesn’t looks favourably upon its acquisition by Japan’s Nippon Steel.
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