Stocks Settle Mixed as Energy Producers Rally and Health Insurers Fall

The S&P 500 Index ($SPX) (SPY) Thursday closed up +0.13%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.33%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed unchanged.  June E-mini S&P futures (ESM25) are up +0.19%, and June E-mini Nasdaq futures (NQM25) are up +0.10%. 

Stock indexes on Thursday settled mixed.  Stocks found some support Thursday on positive signals from initial US-Japan trade talks that spurred hopes that trade agreements can be reached with US trading partners.  President Trump said late Wednesday that there was "big progress" in talks to strike a deal for Japan and expressed confidence that the US would reach a trade deal with the EU.  Strength in energy stocks led gains in the broader market on Thursday after WTI crude oil rallied more than +3% to a 1-1/2 week high.

Stocks also garnered support Thursday after US weekly jobless claims unexpectedly fell to a 2-month low.  Other US economic news was mixed as housing starts fell, but building permits rose, and the Philadelphia Fed business outlook survey fell to a 2-year low.

Thursday's weakness in health insurance companies weighed on the Dow Jones Industrials and limited gains in the overall market.  Health insurance stocks were under pressure as UnitedHealth Group slumped more than -22% after cutting its full-year earnings outlook.  Also, chip stocks fell for a second day Thursday, led by a -2% fall in Nvidia to add to Wednesday's -6% slump after the US government barred the sale of Nvidia's H20 chips to China.

US weekly initial unemployment claims unexpectedly fell -9,000 to a 2-month low of 215,000, showing a stronger labor market than expectations of an increase to 225,000.

US March housing starts fell -11.4% m/m to 1.324 million, weaker than expectations of 1.420 million.  However, March building permits, a proxy for future construction, unexpectedly rose +1.6% m/m to 1.482 million, stronger than expectations of a decline to 1.450 million.

The US Apr Philadelphia Fed business outlook survey plunged -38.9 to a 2-year low of -26.4, weaker than expectations of 2.2.

New York Fed President Williams said the US economy is in a very good place, and he doesn't see the need to change the fed funds rate anytime soon.

The markets are discounting the chances at 11% 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 on Thursday settled mixed.  The Euro Stoxx 50 closed down -0.63%.  China's Shanghai Composite climbed to a 2-week high and closed up +0.13%.  Japan's Nikkei Stock 225 closed up +1.35%.

As a summary of recent tariff developments, President Trump last Friday 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.

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%. Tit-for-tat retaliation worsened US-China trade tensions after China on Tuesday ordered its airlines not to take any further deliveries of Boeing's jets, and the US government barred Nvidia from selling its H20 chips to China on Wednesday.

Interest Rates

June 10-year T-notes (ZNM25) Thursday closed down -8 ticks.  The 10-year T-note yield rose +4.8 bp to 4.325%.  June T-notes posted moderate losses Thursday on reduced safe-haven demand on hopes that trade agreements can be reached with US trading partners.  President Trump said there was "big progress" in talks to strike a deal for Japan, and he expressed confidence that the US would reach a trade deal with the EU.  T-notes were also under pressure from Wednesday when Fed Chair Powell warned that trade tensions could spur inflation and slow growth, and that the Fed was in no hurry to cut interest rates.  Losses in T-notes were limited due to carryover support from a rally in European government bonds after the ECB cut interest rates.

European bond yields on Thursday moved lower.  The 10-year German bund yield fell to a 1-1/2 week low of 2.452% and finished down -3.7 bp to 2.472%.  The 10-year UK gilt yield dropped to a 1-1/2 week low of 4.547% and finished down -3.7 bp to 4.566%.

German Mar PPI fell -0.2% y/y, weaker than expectations of +0.4% y/y and the biggest decline in 5 months.

As expected, the ECB cut the deposit facility rate by -25 bp to 2.25% from 2.50% on Thursday.  The post-meeting statement dropped the word "restrictive" to describe monetary policy and said, "The Eurozone economy has been building up some resilience against global shocks, but the outlook for growth has deteriorated owing to rising trade tensions."

ECB President Lagarde said downside risks to economic growth have increased, and most indicators of underlying inflation are pointing to a sustained return of inflation to our 2% medium-term target.

Swaps are discounting the chances at 92% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

US Stock Movers

Energy producers rallied Thursday after the price of WTI crude jumped more than +3% to a 1-1/2 week high.  Diamondback Energy (FANG) closed up more than +5% to lead gainers in the Nasdaq 100.  Also, APA Corp (APA) and Haliburton (HAL) closed up more than +4%, and Conoco Phillips (COP), Devon Energy (DVN), and Occidental Petroleum (OXY) closed up more than +3%.  In addition, Exxon Mobil (XOM), Marathon Petroleum (MPC), Phillips 66 (PSX), Valero Energy (VLO), and Schlumberger (SLB) closed up more than +2%.

Health insurance stocks sold off Thursday, led by a -22% slump in UnitedHealth Group (UNH) after cutting its full-year earnings outlook to $26.00-$26.50 from $29.50-$30.00, well below the consensus of $29.73.  Also, Humana (HUM) closed down more than -7%, and Molina Healthcare (MOH) closed down more than -3%.  In addition, Elevance Health (ELV), CVS Health (CVS), and Centene (CNC) closed down more than -2%. 

Thursday's weakness in chip stocks was a drag on the overall market. Nvidia (NVDA), Lam Research (LRCX), and Broadcom (AVGO) closed down more than -2%.  Also, Intel (INTC) and LA Corp (KLAC) closed down more than -1%.  In addition, Advanced Micro Devices (AMD) closed down -0.89%, and Micron Technology (MU) closed down -0.76%. 

Eli Lilly (LLY) closed up more than +14% to lead gainers in the S&P 500 after saying a late-stage trial of its oral GLP-1 drug, orforglipron, met key efficacy goals and could become the first approved oral diabetes and weight-loss treatment.

Fidelity National Information (FIS) closed up more than +8% after selling its stake in Worldpay to Global Payments for $6.6 billion.

Nike (NKE) closed up more than +4% to lead gainers in the Dow Jones Industrials after Jeffries said the stock should "aggressively" be bought at these levels with a price target of $115.

Trade Desk (TTD) closed up more than +3% after a federal judge ruled that Google illegally monopolized online advertising markets for advertising exchanges and tools used by websites to sell ad space.

Huntington Bancshares (HBAN) closed up more than +2% after reporting Q1 net interest margin of 3.10%, above the consensus of 2.97%.

HB Fuller (FUL) closed up more than +2% after Baird upgraded the stock to outperform from neutral with a price target of $60. 

Global Payments (GPN) closed down more than -17% after acquiring Worldpay for $24.3 billion.

QXO Inc (QXO) closed down more than -8% after announcing it intends to offer $500 million of shares of its common stock. 

Snap-on Inc (SNA) closed down -8% after reporting Q1 net sales of $1.14 billion, weaker than the consensus of $1.20 billion.

Alcoa (AA) closed down more than -7% after saying the 25% tariff on metal imports has already cost it $20 million since the tariffs went into effect.

AngloGold Ashanti Plc (AU) closed down more than -5% after HSBC downgraded the stock to reduce from hold with a price target of $35.

Earnings Reports (4/21/2025)

AGNC Investment Corp (AGNC), BOK Financial Corp (BOKF), Comerica Inc (CMA), Equity LifeStyle Properties Inc (ELS), Hexcel Corp (HXL), Medpace Holdings Inc (MEDP), W R Berkley Corp (WRB), Western Alliance Bancorp (WAL), Wintrust Financial Corp (WTFC), Zions Bancorp NA (ZION).