Stocks Retreat on Weakness in Chip Makers

The S&P 500 Index ($SPX) (SPY) today is down -1.24%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.64%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.98%.  June E-mini S&P futures (ESM25) are down -1.25%, and June E-mini Nasdaq futures (NQM25) are down -2.01%. 

Stock indexes today are trading lower, weighed down by losses in chip stocks.  ASML Holding NV is down more than -6% after reporting that Q1 bookings were below consensus.  Also, Nvidia is down more than -7% after the US government barred the sale of its H20 chips to China, with Nvidia saying the ban will cost it $5.5 billion in Q1 tied to inventory and commitments for the chip.  Stock losses deepened today after the WTO cut its 2025 global trade estimates.

Today’s US economic news was mostly better than expected and was a supportive factor for stocks.  Stocks also found some support from a Bloomberg report that said China wants to see a number of steps from the Trump administration before it will agree to trade talks, including showing more respect by reining in disparaging remarks by members of his cabinet.

US MBA mortgage applications fell -8.5% in the week ended April 11, with the purchase mortgage sub-index down -4.8% and the refinancing mortgage sub-index down -12.4%.  The average 30-year fixed rate mortgage rose +20 bp to 6.81% from 6.61% in the prior week.

US March retail sales rose +1.4% m/m, right on expectations and March retail sales ex-autos rose +0.5% m/m, stronger than expectations of +0.4% m/m.

US March manufacturing production rose +0.3% m/m, slightly stronger than expectations of +0.2% m/m.

The World Trade Organization (WTO) cut its 2025 global trade forecast to a -0.2% decline from a November forecast of up +3.0% and warned if the US pushes ahead with reciprocal tariffs, global trade will contract -1.5% this year. 

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.  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.  Later today, 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 mixed.  The Euro Stoxx 50 is down -0.48%.  China’s Shanghai Composite rose to a 1-1/2 week high and closed up +0.26%.  Japan’s Nikkei Stock 225 closed down -1.01%.

Interest Rates

June 10-year T-notes (ZNM25) today are up +3 ticks.  The 10-year T-note yield is down -1.2 bp to 4.321%.  June T-notes today are slightly higher, garnering carryover support from rallies in European government bonds after UK March consumer prices rose less than expected.  T-notes also have support from Tuesday when US Deputy Treasury Secretary Faukender said a rule change was under consideration that could lower trading costs for banks, which could boost liquidity in the Treasury market.  Gains in T-notes are limited today after US March retail sales rose as expected and March manufacturing production rose more than expected.  Also, supply pressures are weighing on T-notes as the Treasury will auction $13 billion of 20-year T-bonds later today. 

European bond yields today are moving lower.  The 10-year German bund yield fell to a 1-week low of 2.479% and is down -3.3 bp to 2.502%.  The 10-year UK gilt yield slid to a 1-week low of 4.571% and is down -4.2 bp to 4.606%.

UK Mar CPI rose 2.6% y/y, weaker than expectations of +2.7% y/y. Mar core CPI rose +3.4% y/y, right on expectations.

Swaps are discounting the chances at 99% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

Chip stocks are falling today and are weighing on the broader market. Advanced Micro Devices (AMD) is down more than -5% to lead losers in the S&P 500 and Nasdaq 100.  Nvidia (NVDA) is down more than -5% to lead losers in the Dow Jones Industrials after the US government banned it from selling its H20 chip to China.  Also, ASML Holding NV (ASML) is down more than -5% after reporting weaker-than-expected Q1 bookings.  Applied Materials (AMAT), Lam Research (LRCX), Marvell Technology (MRVL), and Broadcom (AVGO) are down more than -3%, and ARM Holdings Plc (ARM), KLA Corp (KLAC), Intel (INTC), GlobalFoundries (GFS), and Micron Technology (MU) are down more than -2%.

The Magnificent Seven stocks are falling today and are pressuring the broader market.  Apple (AAPL), Meta Platforms (META), Alphabet (GOOGL), Tesla (TSLA), and Microsoft (MSFT) are down more than -2%. 

Also, Amazon.com (AMZN) is down more than -1%. 

Today’s +1% gain in WTI crude oil is lifting energy producers. Marathon Petroleum (MPC) is up more than +3%, and Diamondback Energy (FANG) is up more than +2% to lead gainers in the Nasdaq 100.  Also, Devon Energy (DVN), Occidental Petroleum (OXY), and Valero Energy (VLO) are up more than +2%.  In addition, Exxon Mobil (XOM), Phillips 66 (PSX), Conoco Phillips (COP), Haliburton (HAL), and Schlumberger (SLB) are up more than +1%.

Interactive Brokers Group (IBKR) is down more than -6% after reporting Q1 total net interest income of $770 million, below the consensus of $794.3 million. 

JB Hunt Transport Services (JBHT) is down more than -4% after reporting Q1 Final Mile Services revenue of $200.7 million, weaker than the consensus of $220 million. 

AGCO Corp (AGCO) is down more than -2% after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $75. 

Omnicom Group (OMC) is down more than -2% after reporting a Q1 operating profit of $452.6 million, weaker than the consensus of $485.1 million. 

Travelers Cos (TRV) is up more than 3% to lead gainers in the Dow Jones industrials after reporting Q1 core EPS of $1.91, well above the consensus of 74 cents.

Autoliv (ALV) is up more than +5% after reporting Q1 adjusted EPS of $2.15, well above the consensus of $1.65. 

Newmont (NEM) is up more than +3% after BMO Capital Markets reinstated coverage on the stock with a recommendation of outperform with a price target of $63.

Lockheed Martin (LMT) is up more than +1% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $575.

Earnings Reports (4/16/2025)

Abbott Laboratories (ABT), Alcoa Corp (AA), Bank OZK (OZK), Citizens Financial Group Inc (CFG), Commerce Bancshares Inc/MO (CBSH), CSX Corp (CSX), First Horizon Corp (FHN), First Industrial Realty Trust (FR), FNB Corp/PA (FNB), Kinder Morgan Inc (KMI), Progressive Corp/The (PGR), Prologis Inc (PLD), Rexford Industrial Realty Inc (REXR), Synovus Financial Corp (SNV), Travelers Cos Inc/The (TRV), US Bancorp (USB).