US stocks shaky as fall of US dollar and bonds indicate more fear

U.S. stocks are shaky Friday as Wall Street's monstrous week veers toward its close, while the rising price of gold, falling value of the U.S. dollar and moves in other financial markets indicate more fear as President Donald Trump's trade war with China escalates even further.

The S&P 500 was up 0.4% in morning trading after swinging between small gains and losses. It's coming off a sharp slide that gave back a big chunk of its historic gains from the middle of the week, which came after Trump paused tariffs on many countries outside of China. The Dow Jones Industrial Average was up 123 points, or 0.3%, as of 10:10 a.m. Eastern time, and the Nasdaq composite was 0.6% higher.

Such modest moves, though, are hardly assured to last through the day. Stocks have been swinging not just day to day but hour to hour as investors struggle to make out where Trump's trade war is heading and whether it will cause a global recession.

China announced on Friday that it was boosting its tariffs on U.S. products to 125% as the latest tit-for-tat increase following Trump's escalations on imports from China.

"The U.S. alternately raising abnormally high tariffs on China has become a numbers game, which has no practical economic significance, and will become a joke in the history of the world economy," a Finance Ministry spokesman said in a statement announcing the new tariffs. "However, if the US insists on continuing to substantially infringe on China's interests, China will resolutely counter and fight to the end."

Such rising tensions between the world's two-largest economies can cause widespread damage for the world, even after Trump announced a 90-day pause on some of his tariffs for other countries. All the uncertainty caused by the trade war is also eroding confidence among U.S. shoppers, which could affect their spending and translate into real damage for the economy, which came into this year running at a solid rate.

A preliminary survey by the University of Michigan suggested that sentiment among U.S. consumers is falling even more sharply than economists expected. "This decline was, like the last month's, pervasive and unanimous across age, income, education, geographic region, and political affiliation," according to the survey's director, Joanne Hsu.

"We remain in the early innings of this global trade regime change, and while the 90-day pause on reciprocal tariffs temporarily reversed the market selloff, it does prolong uncertainty," according to Darrell Cronk, president of Wells Fargo Investment Institute.

The price of gold rose more than 2% following China's latest escalation. It's one of the areas of the market that investors have instinctually herded to when fear is high.

Other areas that have historically been seen as safe havens aren't seeing the same wave, though. The value of the U.S. dollar fell again against everything from the euro to the Japanese yen to the Canadian dollar.

Prices for longer-term Treasury bonds, which are essentially IOUs from the U.S. government, also fell. That's counter to their history. Treasurys have long been seen as one of the safest possible investments.

The drop in prices for Treasurys in turn sent their yields higher, because investors are essentially demanding to get paid more for the risk of holding them. The yield on the 10-year Treasury rose to 4.53% from 4.40% late Thursday and from just 4.01% at the end of last week.

Several reasons could be behind the rise in yields, including investors outside the United States selling their U.S. bonds because of the trade war, expectations for higher inflation and hedge funds selling their Treasurys to raise cash. Regardless of the reason for their rise, higher yields crank up pressure on the stock market and raise rates for mortgages and other loans going to U.S. households and businesses.

The market's swings came following a solid set of stronger-than-expected profit reports from some of the biggest U.S. banks, which traditionally help kick off each earnings reporting season.

JPMorgan Chase, Morgan Stanley and Wells Fargo all reported stronger profit for the first three months of the year than analysts expected. JPMorgan Chase rose 2.3%, Morgan Stanley added 0.3% and Wells Fargo fell 3.7%.

Another report on inflation also came in better than expected. That could give the Federal Reserve more leeway to cut interest rates if it feels the need to support the economy. Lower rates would help make mortgages and other loans cheaper to get.

But Friday's report on inflation at the wholesale level was backward looking, measuring March's price levels. The worry is that inflation will rise in coming months as Trump's tariffs make their way through the economy. And that could tie the Fed's hands.

The University of Michigan's survey suggested U.S. consumers are bracing for inflation of 6.7% in the year ahead, up from last month's forecast of 5.0%. That's the highest since 1981, and such high expectations can cause a feedback loop that only pushes inflation higher.

In stock markets abroad, indexes were scattershot around the world. Germany's DAX lost 0.7%, but the FTSE 100 in London added 0.9% as the government reported the economy, the world's sixth largest, enjoyed a growth spurt in February. Japan's Nikkei 225 dropped 3%, while Hong Kong's Hang Seng climbed 1.1%.