Musk also went after trade adviser Peter Navarro’s Tesla comments. (0:16) Stocks still volatile as hopes for fast tariff exceptions and resolutions fade. (1:29) USTR Greer spooks bulls. (2:12) Show NotesApple Stores see iPhone ‘panic selling.’The Curious Case of Rising Treasury YieldsSmall-cap picks that can outperformEpisode transcripts: seekingalpha.com/wsb Sign up for our daily newsletter here and for full access to analyst ratings, stock quant scores, dividend grades, subscribe to Seeking Alpha Premium at seekingalpha.com/subscriptions.
Chapter 1: What is the main story about Elon Musk and tariffs?
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news, and analysis. Good afternoon. Today is Tuesday, April 8th, and I'm your host, Kim Kahn. Our top story so far. Tesla CEO and White House advisor Elon Musk unsuccessfully made personal appeals to President Donald Trump to reverse the sweeping new tariffs. That's according to the Washington Post.
Chapter 2: How did Elon Musk respond to Peter Navarro's comments?
Musk has voiced his disagreement with new tariffs, using social media platform X to criticize White House trade advisor Peter Navarro, and posting a video featuring economist Milton Friedman, who argued the benefits of international trade cooperation.
Today, Musk labeled Navarro, quote, truly a moron, unquote, and, quote, dumber than a sack of bricks, unquote, for claiming on CNBC that Tesla is not a car manufacturer, but a car assembler with components from other countries. Musk said Tesla has the most American-made cars, citing a study by Cars.com, which also included Canada in that definition.
Chapter 3: What is the effect of Trump's tariff strategy on the economy?
Elon Musk's brother, Kimball Musk, a fellow Tesla board member, wrote... Who would have thought that Trump was actually the most high-tax American president in generations? Through his tariff strategy, Trump has implemented a structural, permanent tax on the American consumer. While Trump himself has been steadfast in his recent statement that the goal for the U.S.
is to eliminate trade deficits with every nation it trades with, Wall Street still looks hostage to how advisers and cabinet members see the White House moving toward the goals. In today's trading, stocks got off to a rip-roaring start after avoiding a Black Monday scenario in the previous session.
Chapter 4: How did the stock market react to the current trade discussions?
The S&P 500 climbed as high as 4% after Treasury Secretary Scott Besson said about 70 countries have contacted the White House seeking out to start trade talks. He also said that countries that did not escalate the trade war will get priority in trade talks.
If we put up a tariff wall, the ultimate goal would be to bring jobs back to the U.S., but in the meantime, we will be collecting substantial tariffs, Besant said.
He likened the tariffs to a melting ice cube, because you're taking in revenues as the manufacturing facilities are built in the U.S., and there should be some level of symmetry between the taxes we begin taking in with the new industry from the payroll taxes as the tariffs decline. but the market gains were cut in half after U.S.
Trade Representative Jameson Greer testified before the Senate Finance Committee and downplayed the possibility of a quick resolution. Greer stressed that Trump had been clear that there won't be any tariff exemptions in the near term. They go into effect on Wednesday.
Chapter 5: What did U.S. Trade Representative Jameson Greer say about tariff resolutions?
He said negotiations would be country by country, adding, "...our large and persistent trade deficit has been over 30 years in the making and it will not be resolved overnight." Over in the bond market, the action continued to flout the flight-to-safety narrative. Yields are up again, and the 10-year yield is above 4.2%, while the 2-year is above 3.8%.
Chapter 6: How are rising Treasury yields affecting the bond market?
Apollo asset management economist Torsten Schluck says the unusual sell-off in bonds may be linked to the unwinding of the basis trade, a complex strategy used by hedge funds. The basis trade involves betting on the price differences between Treasury securities and their corresponding futures contracts.
Hedge funds often use significant leverage, sometimes up to 100 times, to profit from the convergence of these prices as futures contracts approach expiration. With around $800 billion invested in the basis trade, it constitutes a large portion of the $2 trillion outstanding in prime brokerage balances. Experts worry that the trade poses risks, especially in the event of a market shock.
Highly leveraged hedge fund positions in Treasury securities could be rapidly unwound, creating instability. Such unwinding would place immense pressure on broker-dealers, potentially disrupting liquidity in Treasury markets and repo funding. Am I active stocks? Several Apple stores have seen instances of panic buying of iPhones amid worries that prices could rise due to tariffs.
Bloomberg said stores across the U.S. were filled with customers at levels akin to the holiday season. One worker said, "...almost every customer asked me if prices were going to go up soon." And El Pollo Loco disclosed that it received an unsolicited, non-binding indication of interest from Biglari Capital Corp. to acquire the rest of the company that it does not already own.
Biglari holds through various entities about 4.5 billion shares of El Pollo Loco, or about 51% of the company. The Restaurant Operators Board of Directors is in the process of carefully evaluating the proposal in consultation with its independent financial and legal advisors to determine the course of action it believes is in the best interests of the company and shareholders.
In other news of note, the U.S. Justice Department recently notified employees that the regulator was scrapping a unit focused on crypto enforcement, aligning with the Trump administration's push for deregulation. Fortune said the National Cryptocurrency Enforcement Unit was disbanded, quote, effective immediately, unquote, according to a memo from U.S. Deputy Attorney General Todd Blanch.
He added that the DOJ is not a digital assets regulator. And in the Wall Street Research Corner, while the attention has been on big names and major averages, small caps have been hit hard as well by the tariff sell-off with the Russell 2000 benchmark tipping into bear market territory.
Morgan Stanley expects to see further underperformance of small cap stocks relative to large caps, partially because they have higher exposure to macro uncertainty and because analysts have been pulling down earnings estimates. That said, small cap opportunities are rich under the surface, strategist Michael Wilson argues.
Companies with positive ROE and momentum have performed well within the small cap space, both on a historical basis and during 2024 through Q1 2025. Morgan Stanley screened for small-cap stocks with positive 12-month momentum and return on equity with either an overweight or equal weight rating from its analysts.
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