Strength in Banks and Lower Bond Yields are Boosting Stocks

The S&P 500 Index ($SPX) (SPY) today is up +0.45%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.34%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.60%.  June E-mini S&P futures (ESM25) are up +0.42%, and June E-mini Nasdaq futures (NQM25) are up +0.58%. 

Stock indexes today are moderately higher, with the Dow Jones Industrials posting a 1-1/2 week high.   Bank stocks are climbing today to boost the broader market, led by a +3% jump in Bank of America after reporting better-than-expected Q1 net interest income.  Also, lower T-note yields today support stocks, with the 10-year T-note yield down -3.9 bp to 4.335%. 

Stocks are also climbing today in hopes that President Trump will adopt a softer stance toward his tariff policies.  On Monday, President Trump said he is exploring possible temporary exemptions to tariffs on imported vehicles and parts to give auto companies more time to set up US manufacturing. 

Today’s US economic news was better than expected and bullish for stocks.  The Apr Empire manufacturing survey general business conditions rose +11.9 to -8.1, stronger than expectations of -13.5.  Also, the Mar import price index ex-petroleum was unchanged m/m, weaker than expectations of +0.3% m/m.

Stocks fell back from their best levels after European Union (EU) trade chief Sefvovic said the EU and US had made little progress in bridging trade differences.  The EU has offered that both sides remove all tariffs on industrial goods, including cars. However, the US has so far rejected that proposal. 

Gains in stocks are also limited on US-China trade war concerns.  Boeing is down more than -2% after Bloomberg reported that China had ordered its airlines not to take any further deliveries of Boeing’s jets.  Also, the US Commerce Department said late Monday that it had initiated probes into the national security impact of semiconductor and pharmaceutical imports, a precursor to imposing tariffs.

Comments Monday evening from Atlanta Fed President Bostic suggest he favors the Fed keeping monetary policy steady when he said, “The specific place that the economy will land depends critically on the details of where policy lands.” Therefore, the Fed must wait for further clarity on President Trump’s policies before adjusting interest rates.

Last Friday, President Trump said he would temporarily exempt consumer electronics from reciprocal tariffs and the baseline 10% global tariffs. However, a 20% tariff still applies to electronics shipped from China.  Last Wednesday, President Trump announced a 90-day pause on higher reciprocal tariffs on 56 nations but left the new 10% baseline tariff on virtually all nations in place.  Meanwhile, the EU last Thursday said it will delay for 90 days the implementation of 25% tariffs on 21 billion euros worth of US goods sent to Europe.

Stocks have been under pressure over the past five 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 April 2, President Trump signed a proclamation to implement a 25% tariff on US auto imports.  The tariffs will initially target vehicles fully assembled outside the US and, by May 3, will expand to include automobile parts made outside the US.  Mr. Trump said the tariffs were “permanent,” and he was not interested in negotiating any exceptions.  On April 5, a 10% baseline tariff for virtually all nations took effect. Last Friday, China raised tariffs on all US goods to 125% from 84% in retaliation for the US raising tariffs on Chinese goods to 145%. 

The US tariff turmoil has undercut the dollar and boosted gold.  The dollar index last Friday sank to a 3-year low, and gold prices soared to an all-time high.  The markets are concerned about the effects of US trade policies, which have caused consumer confidence to plummet and have prompted many companies to suspend their capital spending plans, a negative factor for GDP growth.  Also, the dollar is facing a confidence crisis as the US weaponizes tariffs, diminishing the dollar’s reserve-currency status and prompting some foreign investors to liquidate their dollar assets. 

The markets will focus on US trade policy news during this holiday-shortened week.  On Wednesday, US March retail sales are expected to climb +1.4% m/m, and March retail sales ex-autos are expected to climb +0.4% m/m.  Also, on Wednesday, March manufacturing production is expected to be up +0.3% m/m.  Finally, on Wednesday, Fed Chair Powell will speak before the Economic Club of Chicago about the economic outlook.  On Thursday, Mar housing starts are expected to fall -5.7% m/m to 1.416 million, and Mar building permits are expected -0.6% m/m to 1.450 million.

The markets are discounting the chances at 19% for a -25 bp rate cut after the May 6-7 FOMC meeting.

Q1 earnings reporting season began last Friday as big US banks reported their results.  According to data compiled by Bloomberg Intelligence, the market consensus is for Q1 year-over-year earnings growth of +6.7% for the S&P 500 stocks, down from expectations of +11.1% in early November.  Full-year 2025 corporate profits for the S&P 500 are seen rising +9.4%, down from the forecast of +12.5% in early January. 

Overseas stock markets today are higher.  The Euro Stoxx 50 is up +1.21%.  China’s Shanghai Composite closed up +0.15%.  Japan’s Nikkei Stock 225 closed up +0.84%.

Interest Rates

June 10-year T-notes (ZNM25) today are up +7 ticks.  The 10-year T-note yield is down -3.9 bp to 4.335%.  June T-notes today are posting modest gains.  Signs of easing price pressures gave T-notes a boost today after the US Mar import price index ex-petroleum rose less than expected. However, gains in T-notes are limited due to carryover weakness in 10-year German bunds.  Also, Monday night’s comments from Atlanta Fed President Bostic weighed on T-notes when he said he favored keeping interest rates at current levels due to the uncertainties of US trade policies. 

European bond yields today are mixed.  The 10-year German bund yield is up +2.6 bp to 2.537%.  The 10-year UK gilt yield is down -1.0 bp to 4.650%.

Eurozone Feb industrial production rose +1.1% m/m, stronger than expectations of +0.3% m/m and the largest increase in 6 months.

The German Apr ZEW survey expectations of economic growth fell -65.6 to a 1-3/4 year low of -14.0, weaker than expectations of 10.0.

Swaps are discounting the chances at 96% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

Bank stocks are climbing today, led by a +3% jump in Bank of America (BAC) after reporting Q1 net interest income of $14.44 billion, better than the consensus of $14.36 billion.  Also, Citigroup (C), Wells Fargo (WFC), Huntington Bancshares (HBAN), and M&T Bank (MTB) are up more than +2%.  In addition, Goldman Sachs (GS) is up more than +2% to lead gainers in the Dow Jones Industrials.  

Chip makers are moving higher today, supporting the broader market. As a result, Marvell Technology (MRVL) is up more than +2%, and Advanced Micro Devices (AMD), Analog Devices (ADI), and ASML Holding NV (ASML) are up more than +1%.  In addition, Lam Research (LRCX) is up +0.85%, and KLA Corp (KLAC) is up +0.71%.

Netflix (NFLX) is up more than +5% to lead gainers in the S&P 500 and Nasdaq 100 after a Wall Street Journal report said the company aims to double its revenue and reach a $1 trillion market capitalization by 2030. 

Rocket Lab (RKLB) is up more than +7% after it was selected to provide hypersonic test launch capability through development programs in the US and UK. 

Hewlett Packard Enterprise (HPE) is up more than +4% after Elliott Investment Management said it has built a $1.5 billion stake in the company.

KKR & Co (KKR) is up more than +1% after HSBC upgraded the stock to buy from hold with a price target of $119. 

Allegro Microsystems (ALGM) is down more than -10% after ON Semiconductor withdrew its $6.9 billion bid to acquire the company.

Boeing (BA) is down more than -1% to lead losers in the Dow Jones Industrials after Bloomberg reported that China had ordered its airlines not to take any further deliveries of Boeing’s jets. 

Dow Inc (DOW) is down more than -2% after Bank of America Global Research double-downgraded the stock to underperform from buy with a price target of $28. 

Howmet Aerospace (HWM) is down more than -1% after Wells Fargo Securities downgraded the stock to equal weight from overweight.

Bristol Myers Squibb (BMY) is down more than -1% after announcing a late-stage trial evaluating its drug Camzyos for a non-obstructive form of a heart disease failed.

Air Products & Chemicals (APD) is down more than -1% after Bank of America Global Research downgraded the stock to underperform from neutral.

Earnings Reports (4/15/2025)

Albertsons Cos Inc (ACI), Bank of America Corp (BAC), Citigroup Inc (C), Interactive Brokers Group Inc (IBKR), JB Hunt Transport Services Inc (JBHT), Johnson & Johnson (JNJ), Omnicom Group Inc (OMC), PNC Financial Services Group Inc (PNC), Sandisk Corp/DE (SNDK), United Airlines Holdings Inc (UAL).