Stocks Settle Higher as Chipmakers Rally

The S&P 500 Index ($SPX) (SPY) on Tuesday closed up +0.79%, the Dow Jones Industrial Average ($DOWI) (DIA) closed up +0.26%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.68%.  September E-mini S&P futures (ESU26) rose +0.63%, and September E-mini Nasdaq futures (NQU26) rose +1.55%. 

Stock indexes settled higher on Tuesday, with the S&P 500 and Nasdaq 100 posting 1-week highs.  Stocks extended Monday’s sharp rally on Tuesday, the last trading day of Q2.  Demand for technology stocks, especially chipmakers, led the overall market higher as investors anticipate another strong earnings season beginning next month, driven by the investment boom in artificial intelligence. 

Stock gains accelerated on Tuesday amid signs of economic resilience from mostly better-than-expected US economic news.  The May JOLTS job openings unexpectedly increased by +9,000 to a 2-year high of 7.594 million, signaling a stronger labor market than expectations of a decline to 7.296 million.  Also, Apr S&P Cotality composite-20 home price index rose +1.14% y/y, stronger than expectations of +0.90% y/y.  In addition, the Jun MNI Chicago PMI fell -6.0 to 56.7, a smaller decline than expectations of 55.1.  On the negative side, the Conference Board’s Jun consumer confidence index rose +0.6 to 91.2, which was weaker than expectations of 94.4.

Signs of strength in China's economy are supportive of global growth prospects, as China's June manufacturing PMI rose by 0.3 to 50.3, above expectations of 50.1.  Also, the Jun non-manufacturing PMI unexpectedly rose by 0.1 to 50.2, stronger than expectations of a decline to 49.9.

The outlook for strong Q2 earnings is a bullish factor for stocks. Forecasts compiled by Bloomberg Intelligence suggest Q2 earnings may increase by 23%, close to Q1’s blowout earnings of 30%, which was more than double the 12% analysts had expected.  AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2.   

WTI crude oil (CLQ26) fell more than -1% on Tuesday, giving back half of Monday’s +2% surge.  Tensions remain high in the Middle East, with Iran insisting it has control over traffic through the Strait of Hormuz, a move opposed by the US, Europe, and Gulf Arab nations.  The markets are awaiting the results of expected negotiations in Doha on Tuesday between the US and Iran.  Energy supplies are picking up as Morgan Stanley said 35 oil and gas tankers exited the Persian Gulf through the Strait of Hormuz last Thursday, the first time the level returned to the 30-to-40 range typical before the US-Iran war started in February.

The markets are discounting a 32% chance of a +25 bp rate hike at the next FOMC meeting on July 28-29.

Overseas stock markets settled higher on Tuesday.  The Euro Stoxx 50 climbed to a 1-week high and closed up +1.55%.  China's Shanghai Composite closed up +0.50%.  Japan's Nikkei-225 Stock Average closed up +0.86%.

Interest Rates

September 10-year T-notes (ZNU6) on Tuesday closed down -9.5 ticks, and the 10-year T-note yield rose +4.6 bp to 4.420%.  T-notes gave up a slight advance and retreated on Tuesday, and the 10-year T-note yield rebounded from a 7-week low of 4.359%.  The strength in stocks on Tuesday curbed safe-haven demand for government debt securities and weighed on T-notes.  T-notes extended their losses on Tuesday after the May JOLTS job openings report showed an unexpected increase to a 2-year high, a hawkish factor for Fed policy.

European government bond yields finished higher on Tuesday.  The 10-year German bund yield recovered from a 3.5-month low of 2.831% and finished up +0.2 bp to 2.860%.  The 10-year UK gilt yield rose +4.1 bp to 4.757%.

German May retail sales rose +1.1% m/m, stronger than expectations of no change and the biggest increase in eleven months.

The German Jun unemployment change unexpectedly fell -1,000, showing a stronger labor market than expectations of a +5,000 increase.

German Jun CPI (EU harmonized) fell -0.2% m/m and rose +2.4% y/y, weaker than expectations of no change m/m and +2.5% y/y.

Swaps are discounting a 5% chance of a +25 bp ECB rate hike at its next policy meeting on July 23.

US Stock Movers

The strength in chipmakers and AI infrastructure stocks was a supportive factor for the overall market on Tuesday. SanDisk (SNDK) closed up more than +10% to lead gainers in the S&P 500 and Nasdaq 100, and KLA Corp (KLAC) closed up more than +8%.  Also, Advanced Micro Devices (AMD) and Marvell Technology (MRVL) closed up by more than +7%, and ON Semiconductor (ON) and Intel (INTC) closed up by more than +6%. In addition, Lam Research (LRCX) and ASML Holdings NV (ASML) closed up more than +5%, and Applied Materials (AMAT), and Texas Instruments (TXN) closed up more than +4%.  Finally, ARM Holdings Plc (ARM) closed up more than +3%. 

Strength in the Magnificent Seven technology stocks was a bullish factor for the broader market on Tuesday.  Apple (AAPL), Nvidia (NVDA), and Tesla (TSLA) closed up more than +2%, and Microsoft (MSFT) and Alphabet (GOOGL) closed up more than +1%.  Also, Meta Platforms (META) closed up +0.12%, and Amazon.com (AMZN) bucked the trend, closing down 0.75%.

Cryptocurrency-exposed stocks were under pressure on Tuesday as Bitcoin (^BTCUSD) fell more than -2%.  Strategy (MSTR) closed down more than -6% to lead losers in the Nasdaq 100, and Galaxy Digital Holdings (GLXY) closed down more than -4%.  Also, Coinbase Global (COIN) closed down more than -3%, and MARA Holdings (MARA) and Riot Platforms (RIOT) closed down more than -1%.

AeroVironment (AVAV) closed up more than +18% after reporting Q4 revenue of $641.6 million, well above the consensus of $556.4 million, and forecasting 2027 revenue of $2.13 billion to $2.23 billion, the midpoint above the consensus of $2.16 billion. 

Avex Corp (AVEX) closed up more than +16% after being awarded a $50 million contract from the US Air Force to continue expanding unmanned mission support capabilities for current operations.

Air Products and Chemicals (APD) closed up more than +8% after the company scrapped plans for a multibillion-dollar clean energy project in Louisiana.

Tradeweb Markets (TW) closed up more than +8% after Goldman Sachs upgraded the stock to buy from neutral with a price target of $146.

MKS Inc (MKSI) closed up more than +6% after BMO Capital Markets initiated coverage on the stock with a buy recommendation and a price target of $453. 

Nebius Group NV (NBIS) closed up more than +5% after President Capital Management initiated coverage on the stock with a buy recommendation and a price target of $307. 

Concentrix (CNXC) closed down more than -11% after reporting Q2 revenue of $2.46 billion, weaker than the consensus of $2.47 billion, and cutting its full-year revenue forecast to $9.93 billion-$10.03 billion from a previous forecast of $10.04 billion-$10.18 billion, below the consensus of $10.11 billion. 

Digital Realty (DLR) closed down more than -5% to lead losers in the S&P 500 after Blackstone affiliates priced an underwritten public offering of 12.3 million shares of DLR’s common stock at $185 per share, below Monday’s close of $190.58. 

Trade Desk (TTD) closed down more than -3% after Arete Research Services LLP downgraded the stock to sell from neutral with a price target of $11.60.

Fortinet (FTNT) closed down more than -1% after HSBC downgraded the stock to reduce from hold with a price target of $102.

Morgan Stanley (MS) closed down more than -1%, and Goldman Sachs (GS) closed down -0.82% after Oppenheimer downgraded the stocks to underperform from market perform.

Earnings Reports(7/1/2026)

FactSet Research Systems Inc (FDS), Franklin Covey Co (FC), General Mills Inc (GIS), Greenbrier Cos Inc/The (GBX), MSC Industrial Direct Co Inc (MSM), UniFirst Corp/MA (UNF).