Apple just had its worst day since March 2020, when a global pandemic roiled markets. Now, a different plague is ripping through Wall Street: President Trump’s “reciprocal tariffs,” which led the iPhone maker to close down more than 9%. Other tech hardware makers like Dell and HP also saw huge drops.

As Morgan Stanley wrote this morning, “reciprocal tariffs are calamitous to IT Hardware,” noting that Apple’s weighted average reciprocal tariff rate would be the highest at 42%.

Wedbush analyst Dan Ives said today that despite diversifying its production, “the hearts and lungs of the Apple supply chain are cemented in Asia.” He added the vast majority of iPhones, as well as more than 50% of Macs and 75% to 80% of iPads, are still produced in China, where the total tax rate would be 54%.

“...we believe Cook and Apple executives themselves are staring at this tariff chart wondering what is next,” he wrote.

As we await further twists and turns in the tariff saga that’s rocked global markets, the damage that’s already been done promises to cause even more damage.

JPMorgan analyst Bram Kaplan noted that because of today’s rout, ETFs that use leverage to juice their returns are going to be big sellers as we approach the end of the day.

“Levered ETFs need to sell ~$5 billion per 1% market move to rebalance. As such, we estimate these funds have ~$22 billion of equity exposure to sell into the close today, ~75% of which is in tech-related exposures (e.g. NDX, the broad Tech sector, and Semiconductors), based on market levels at mid-day,” he wrote.

Using an expansive definition of “midday,” major indexes are flat to down since Kaplan’s calculations.

Many of the popular ETFs that utilize leverage track major indexes, like SPDR S&P 500 Trust and Invesco QQQ Trust, but some are tied to stocks like Nvidia, Tesla, industry groups like chip stocks, or the tech sector as a whole.

Traders are betting that tariffs will turbocharge inflation — but not for long.

One-year inflation swaps have jumped to their highest level since August 2022, the month that Fed Chair Jerome Powell said that “pain” would be needed to bring price pressures to heel. But, when we look at forward inflation rates (that is, what traders think inflation will be from April 2026 to April 2027, and then the 12-month span after that), we actually see that these measures have come down sharply.

Because inflation swaps are based off CPI, you can mentally shave about 40 to 50 basis points off every series to convert to the Fed’s preferred inflation gauge, PCE.

A simple shorthand explanation for all this: the prices of things will go up, so you will buy less. Buying fewer things will put downward pressure on production and jobs. Because tariffs hurt growth by raising prices — and crucially, because they are expected to be a one-time jump in the price level, an assumption that may or may not hold — these measures can’t really contribute to inflationary pressures on an ongoing basis.

The growth impacts being priced in are also quite visibly negative, as traders anticipate the central bank will deliver nearly 100 basis points of easing in 2025, up from about 75 basis points heading into the week.

In other words, the big market bet that inflation will jump and the Fed will cut rates anyway is getting even bigger today.

As the rest of the market deals with Thursday’s sell-off by playing “Everybody Hurts” on the car stereo at max volume, Goodyear investors are doing donuts.

Shares of the tire maker rolled up 9% Thursday. What investors are probably liking: Goodyear isn’t touched by President Trump’s auto tariffs (at least not until next month’s levies on car parts). And some of its competitors likely are.

Goodyear, which was upgraded to “buy” from “hold” by Deutsche Bank on Monday, was joined by other auto parts companies in the green. AutoZone shares climbed more than 2% midday, roughly the same boost seen by O’Reilly.

While Wall Street seems to like the short-term benefit of these companies dodging significant tariffs until Trump’s auto parts tariffs begin May 3, there’s also likely some optimism around the anticipated hike in new vehicle prices.

With levies expected to add up to 11% to US car prices on average according to JPMorgan analysis, it would logically follow that consumers will want to stretch the lifespan of their current car, and that will require replacement parts and repairs.

Appropriately diagnosing what’s happening in markets, as well as the typically arduous task of assigning causality to market moves, are crucial in allowing you to develop a framework for what might happen next. The benefits of what happens when you have a mental map that bears a close resemblance to reality are apparent today.

For weeks, other outlets were telling you that stocks were selling off because of tariff jitters and whatnot. We were focusing more squarely on the momentum unwind as the main cause of the stock market’s newfound ills. Tariffs, as long as they were just rhetoric, were mainly a sideshow, in our view, in that they just reflected the administration’s bias toward policies that are decidedly not pro-growth.

This was never a good-news story, but a bad-news one: this meant there was always more room for us to price in a more tariff-centric shock as these measures emerged. Based on the price action today, we’re doing that in one fell swoop.

A basket of stocks highlighted by Goldman Sachs ahead of the US election as being vulnerable to tariffs President Trump might impose is lagging the S&P 500 by nearly 7 percentage points today, by far its worst relative performance on record. The basket includes the likes of Dollar Tree, Five Below, Best Buy, Nike, and Target.

So it sure doesn’t seem like the market had been efficiently pricing in tariffs from February 19 through April 2. The proof is in the pudding.

Apple tumbled in early trading, putting it on track for its worst day since the early days of the Covid crisis, as other tech hardware makers like Dell and HP are hit by some of the deepest drops in the market.

It makes sense. As a Morgan Stanley analyst wrote in a note published early Thursday morning, “reciprocal tariffs are calamitous to IT Hardware” companies, who rely on “extensive international manufacturing” to produce laptops, phones, and other devices that consumers purchase. Apple, for example, will face additional costs of more than $33 billion annually due to the tariffs, Morgan Stanley estimates. And the broad nature of Trump’s tariffs means even companies who’ve tried to diversify away from China will still get hit.

Morgan Stanley analysts wrote: