Dow shot up 485 (near session highs), advancers over decliners 2-1 & NAZ rose 267. The MLP index was off 1+ to the 314s & the REIT index gained 4+ to 420. Junk bond funds remained mixed & Treasuries had more selling which raised yields. Oil fell 1+ to the 66s & gold added 9 to 1929 (more on both below).

Dow Jones Industrials

The White House announced a 1-month tariff exemption for automakers after Pres Trump spoke a day earlier with heads of General Motors (GM), Ford Motor (F) & Stellantis (STLA). Automakers have urged Trump to waive 25% tariffs on Mexico & Canada on vehicles that comply with the US-Mexico-Canada Agreement's rules of origin. “Reciprocal tariffs will still go into effect on April 2, but at the request of the companies associated with USMCA, the president is giving them an exemption for one month so they are not at an economic disadvantage,” Press Secretary Karoline Leavitt said on behalf of Trump. Leavitt confirmed the automakers requested today's call with Trump, who mentioned it during his address to Congress later in the day. The White House said it granted a 1-month delay for tariffs on automakers whose cars comply with USMCA, which was negotiated under Trump's first term in office. It was not immediately clear whether just vehicles will be exempt, or if automotive parts would also be included. The exemption allows for additional preparation & discussions between the White House and automotive industry on tariffs. It also more closely aligns with potential vehicle tariffs on imports from outside of North America. Trump previously said those tariffs would be confirmed on Apr 2, in a push for automakers to invest more in the US for vehicle production.

Trump grants automakers one-month exemption from tariffs

A sharp drop in mortgage interest rates finally lit a fire under loan demand. Both current homeowners & potential homebuyers jumped back into the market, after a lackluster showing for this year so far. Total mortgage application volume jumped 20.4% last week compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index. This was not only the first increase in 3 weeks, but it is an outsized weekly move. Mortgage rates were clearly the culprit. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806K or less, decreased to 6.73% from 6.88%, with points falling to 0.60 from 0.61, including the origination fee, for loans with a 20% down payment. That is the lowest level since last Dec. “Mortgage rates declined last week on souring consumer sentiment regarding the economy and increasing uncertainty over the impact of new tariffs levied on imported goods into the U.S.,” said Joel Kan, an MBA economist. “Those factors resulted in the largest weekly decline in the 30-year fixed rate since November 2024.” Applications to refinance a home loan, which are most sensitive to weekly moves in interest rates, jumped 37% for the week & were 83% higher than the same week 1 year ago. While the vast majority of borrowers today still have loans with rates well below what is being offered today, more recent buyers from the last two years are now able to benefit from a refinance. Applications for a mortgage to purchase a home rose 9% for the week but were still just 2% higher than the same week 1 year ago. “This is a period where we typically see purchase activity ramp up and purchase applications were up over the week and continued to run ahead of last year’s pace, more green shoots as we head into the spring homebuying season,” Kan added. While the weekly jump in purchase volume is certainly positive, it is still historically low. Buyers are up against high home prices, limited inventory & more uncertainty about the overall economy. The new tariffs levied on China, Canada & Mexico are widely expected to raise home prices, especially for new construction. Mortgage rates moved very slightly lower to start this week, according to a separate survey from Mortgage News Daily. Today, when the tariffs went into effect, the stock & bond markets rode a roller coaster, with bond yields, which mortgage rates follow, dropping along with stocks. “As the day progressed, stocks and bonds bounced back in the other direction and the move was big enough for most mortgage lenders to reprice back toward slightly higher rates,” wrote Matthew Graham, COO at Mortgage News Daily.

Weekly mortgage demand surges 20% higher, after interest rates drop to the lowest since last year

"Six Districts reported no change, four reported modest or moderate growth, and two noted slight contractions," the US central bank said in its summary of observations from the commercial & community contacts of each of the Fed's 12 regional banks. "Overall expectations for economic activity over the coming months were slightly optimistic." Known collectively as the "Beige Book," the document provides a snapshot of the nation's economic experience & mood 2 weeks ahead of each Fed policy meeting. Over its 54 pages, there were 47 mentions of uncertainty, up from 17 in the Jan report, with a doubling of references to tariffs since then. With all the data collection complete by Feb 24, it may already be stale. Trump imposed 25% tariffs on most imports from Mexico & Canada, & doubled tariffs on Chinese goods to 20%, actions that many investors & analysts said went far beyond what they expected. Canada & China immediately retaliated with new import taxes on US goods & Mexican Pres Claudia Sheinbaum promised her own response this weekend. Although the White House today said autos coming in thru the US-Mexico-Canada trade agreement would be exempt from the tariffs for a month, some economists say the new levies augur stronger inflation & slower growth, a combination that could present a difficult policy choice for the Fed. That challenging mix is already evident in surveys showing rising consumer inflation expectations, slowing business activity, a drop in new factory orders & an increase in prices paid for manufacturing materials. The central bankers have signaled for now that they will keep the benchmark overnight interest rate in the current 4.25%-4.50% range at their Mar 18-19 meeting. They want to keep downward pressure on inflation that is making slow but bumpy progress toward their 2% goal, & they view the labor market as healthy & not in need of the support that a rate reduction could deliver.

US activity rises slightly and uncertainty also up, Fed survey shows

Gold prices edged lower despite a lower $ as investors held back from making large bets ahead of the release of US payrolls data later this week, although trade war jitters kept prices above the key level of $2900 per ounce. Spot gold was down 0.1% at $2913 an ounce & US gold futures settled 0.2% higher at $2926. There's still buying interest out there now, but there's going to be some measure of caution ahead of Fri's payrolls data although the underlying trend remains favorable. Concerns about Pres Trump's tariff measures have driven up the prices of safe-haven gold to 11 record highs this year, peaking at $2956 on Feb 24 & culminating in an overall year-to-date gain of 11%. In an address to Congress late yesterday, Trump said further tariffs would follow on Apr 2, including "reciprocal tariffs" & non-tariff actions aimed at balancing out years of trade imbalances. That move would follow new 25% tariffs on most imports from Mexico & Canada that took effect yesterday, along with a doubling of duties on Chinese goods to 20%.

Gold takes a breather as focus turns to US jobs data

Oil prices fell for a 3rd day, as investors worried about OPEC+'s plan to continue raising output in Apr & Pres Trump's tariffs on Canada, China & Mexico escalated trade tensions. Brent crude futures fell $1.02 (1.4%) to settle at $70.02 a barrel & US West Texas Intermediate (WTI) crude futures fell $1.33 (1.9%) to settle at $66.93 a barrel. Crude prices closed near their lowest levels in months the previous day, weighed down by expectations that US tariffs & retaliatory tariffs by affected countries would slow economic growth & reduce fuel demand. The US tariffs on China, Canada & Mexico have prompted swift retaliatory action from each country, raising concerns about slowing economic growth & the impact on energy demand. Canada & China quickly retaliated against Trump's tariffs yesterday & Mexican Pres Claudia Sheinbaum said the country would respond, without providing details. Meanwhile, the Organization of the Petroleum Exporting Countries & its allies including Russia (OPEC+) decided on Mon to increase output for the first time since 2022, further pressuring crude prices.

Oil Prices Fall For Third Day On OPEC+ Output Hike, Trump Tariffs

Stocks are rising following positive jobs data & signs of tariff relief, while oil futures drop to a 6-month low due to OPEC+ raising production & tariff concerns. With all the turmoil, gold remains at record levels above 2900.