Stocks Settle Higher as Magnificent Seven Stocks Climb

The S&P 500 Index ($SPX) (SPY) Tuesday closed up +0.16%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.01%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.53%.  June E-mini S&P futures (ESM25) are up +0.23%, and June E-mini Nasdaq futures (NQM25) are up +0.63%. 

Stock indexes on Tuesday settled higher, with the S&P 500, the Dow Jones Industrials, and the Nasdaq 100 posting 2-week highs. Stocks extended Monday's sharp gains in hopes that next week's upcoming US reciprocal tariffs would be more targeted than previously stated and narrower than initially planned, with Mr. Trump saying, "I may give a lot of countries breaks." Tuesday's strength in the Magnificent Seven stocks supported gains in the broader market.  Stock indexes fell back from their best levels after US Mar consumer confidence fell more than expected to a 4-year low, boosting concerns about an economic slowdown. 

The US Jan S&P CoreLogic composite-20 home price index rose +4.67% y/y, below expectations of +4.80% y/y but the fastest pace of increase in 5 months.

US Feb new home sales rose +1.8% m/m to 676,000, weaker than expectations of 680,000.

The Conference Board's US Mar consumer confidence index fell -7.2 to a 4-year low of 92.9, weaker than expectations of 94.0.

The US Mar Richmond Fed manufacturing survey of current conditions fell -10 to -4, weaker than expectations of 1.

Hawkish comments Tuesday from Fed Governor Kugler were bearish for stocks and bonds when she said she is "paying close attention to the acceleration of price increases and higher inflation expectations, especially given the recent bout of inflation in the past few years" and that she supports holding interest rates steady for "some time."

This week's attention will focus on Wednesday's Feb capital goods new orders nondefense ex-aircraft and parts report (expected +0.2% m/m). On Thursday, Q4 GDP is expected to be unrevised at +2.3% (q/q annualized), and Mar pending home sales are expected to be +1.0% m/m.  On Friday, Feb personal spending is expected to be +0.5% m/m, and Feb personal income is expected +0.4% m/m.  Also, the Feb core PCE price index, the Fed's preferred inflation gauge, is expected +0.3% m/m and +2.7% y/y.  Finally, on Friday, the revised Mar University of Michigan consumer sentiment index is expected to remain unchanged at 57.9.

Heightened geopolitical risks in the Middle East are negative for stocks.  Israel continues its airstrikes across Gaza, ending a two-month ceasefire with Hamas, and Israeli Prime Minister Netanyahu vowed to act "with increasing military strength" to free hostages and disarm Hamas.  Also, the US continues to launch strikes on Yemen's Houthi rebels. US Defense Secretary Hegseth said strikes would be "unrelenting" until the group stops attacking vessels in the Red Sea.  The Houthi rebels said they would respond by attacking US vessels in the Red Sea. 

Stocks have been under pressure over the past three weeks due to fears that US tariffs will weaken economic growth and corporate earnings.  On March 4, President Trump imposed 25% tariffs on Canadian and Mexican goods and doubled the tariff on Chinese goods to 20% from 10%.  On March 8, Mr. Trump reiterated that he would impose reciprocal tariffs and additional sector-specific tariffs on foreign nations on April 2. 

The markets are discounting the chances at 16% for a -25 bp rate cut after the May 6-7 FOMC meeting.

Overseas stock markets on Tuesday settled mostly higher.  The Euro Stoxx 50 closed up +1.09%.  China's Shanghai Composite Index closed unchanged.  Japan's Nikkei Stock 225 closed up +0.46%.

Interest Rates

June 10-year T-notes (ZNM25) Tuesday closed up +6.5 ticks.  The 10-year T-note yield fell -2.9 bp to 4.306%.  June T-notes Tuesday recovered from a 1-month low and moved higher, and the 10-year T-note yield fell from a 1-month high of 4.366% and moved lower. T-notes recovered early losses Tuesday and turned higher as short-covering emerged as weaker-than-expected US economic news on Feb new home sales and Mar consumer confidence bolstered expectations for the Fed to keep cutting interest rates.  T-notes posted their highs Tuesday afternoon on solid demand for the Treasury's $69 billion auction of 2-year T-notes that had a bid-to-cover ratio of 2.66, just above the 10-auction average of 2.65. 

T-notes initially moved lower on Tuesday on negative carryover from a slide in 10-year UK gilts to a 2-1/2 week low.  Also, hawkish comments Tuesday from Fed Governor Kugler weighed on T-notes when she said she supports holding interest rates steady for "some time." In addition, supply pressures are weighing on T-notes as the Treasury will auction $211 billion of T-notes and floating-rate notes this week.   

European bond yields on Tuesday moved higher.  The 10-year German bund yield rose +2.7 bp to 2.798%.  The 10-year UK gilt yield rose to a 2-1/2 week high of 4.762% and finished up +4.1 bp to 4.753%.

Eurozone Feb new car registrations fell -3.4% y/y to 854,000 units, the largest decline in 5 months.

The German Mar IFO business climate survey rose +1.4 to an 8-month high of 86.7, right on expectations.

ECB Governing Council member Kazimir said the ECB "is already now in the neutral rate zone," and he can't rule out a pause in interest rate cuts.

ECB Governing Council member Muller said he "can't rule out a pause in the ECB's rate cutting," and any further rate cuts will depend on the nature of the tariffs that the US is due to announce soon.

ECB Governing Council member Villeroy de Galhau said the ECB has scope for further interest rate cuts due to a "solid trend" of disinflation in Europe.

Swaps are discounting the chances at 68% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

Strength in the Magnificent Seven stocks Tuesday boosted the broader market.  Tesla (TSLA) closed up more than +3%.  Also, Meta Platforms (META), Alphabet (GOOGL), Apple (AAPL), and Amazon.com (AMZN) closed up more than +1%.  In addition, Microsoft (MSFT) closed up +0.53%. 

Mining stocks rose Tuesday as the price of copper soared to a 10-month high.  Freeport McMoRan (FCX) closed up more than +3%, and Newmont (NEM) and Southern Copper (SCCO) closed up more than +1%.  

International Paper (IP) closed up more than +6% to lead gainers in the S&P 500 after forecasting 2025 total revenue of about $27 billion, better than the consensus of $24.6 billion.

Crowdstrike Holdings (CRWD) closed up more than +3% to lead gainers in the Nasdaq 100 after BTIG LLC upgraded the stock to buy from neutral with a price target of $431.

Mobileye Global (MBLY) closed up more than +8% after Volkswagen Group said it was working with the company to upgrade the advanced driver assistance systems in its upcoming new vehicles. 

Carvana (CVNA) closed up more than +3% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $280.

Cloudflare (NET) closed up more than +2% after Bank of America Global Securities double-upgraded the stock to buy from underperform with a price target of $160. 

Trump Media and Technology Group (DJT) closed up more than +8% after signing a non-binding agreement to partner with Crypto.com for a series of ETFs through its Truth.Fi brand. 

Fertilizer producers fell Tuesday after the US restored Russian access to the market for fertilizer exports.  As a result, CF Industries Holdings (CF) closed down more than -2%, Mosaic (MOS) closed down more than -1%, and Intrepid Potash (IPI) closed down -0.86%.

United Parcel Service (UPS) closed down more than -5% to lead losers in the S&P 500 after Bank of America cut its Q1 EPS estimate for the stock to $1.31 from $1.55, citing "volume pullbacks amid tariff uncertainty and winter weather."

KB Home (KBH) closed down more than -4% after reporting Q1 revenue of $1.39 billion, below the consensus of $1.50 billion, and cutting its full-year housing revenue estimate to $6.60 billion-$7.00 billion from a prior estimate of $7.00 billion-$7.50 billion, weaker than the consensus of $7.07 billion. 

UniFirst (UNF) closed down more than -14% after Cintas terminated discussions to acquire the workplace uniform rental company. 

Crown Castle (CCI) closed down more than -3% after unexpectedly terminating CEO Moskowitz and appointing CFO Schlanger as interim CEO effective immediately.

American Electric Power (AEP) closed down more than -1% after announcing the pricing of an underwritten offering of about 19.6 million shares of common stock at $102 a share, below Monday's closing level of $104.18.

Earnings Reports (3/26/2025)

Cintas Corp (CTAS), Concentrix Corp (CNXC), Dollar Tree Inc (DLTR), Jefferies Financial Group Inc (JEF), Paychex Inc (PAYX).