Stocks Climb on Trade Deal Optimism and Strong Q1 Earnings

The S&P 500 Index ($SPX) (SPY) today is up +1.82%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.91%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +2.13%.  June E-mini S&P futures (ESM25) are up +1.98%, and June E-mini Nasdaq futures (NQM25) are up +2.25%. 

Stock indexes today are sharply higher, recovering some of Monday’s plunge.  Stocks found support today on trade deal optimism after US trade negotiators said they have made “significant progress” toward a bilateral trade deal with India following talks between Vice President Vance and Indian Prime Minister Modi.  Also, stocks are seeing support after the 10-year T-note yield fell from a 1-week high and is down -2.7 bp to 4.383%.

Better-than-expected Q1 corporate earnings results are also lifting stocks today.  Equifax is up more than +11% after reporting better-than-expected Q1 operating revenue. Also, 3M Co is up more than +7% after reporting Q1 adjusted EPS continuing operations above consensus and maintaining its full-year earnings guidance.  In addition, Danaher is up more than +4% after reporting stronger-than-expected Q1 sales. 

Limiting the upside in stocks is concern over the independence of the Federal Reserve, with President Trump contemplating the possible firing of Fed Chair Powell over the Fed’s interest rate decisions.  The dollar sank to a 3-year low Monday, and gold rallied to a new record high today as the prospect of firing Powell further reduces confidence in the dollar and may spark foreign investors to liquidate their dollar holdings, including stocks and Treasuries.

Today’s US economic news was negative for stocks after the Apr Richmond Fed manufacturing survey of current conditions index fell -9 to a 5-month low of -13, weaker than expectations of -7. 

Today, the International Monetary Fund (IMF) cut its global 2025 GDP forecast to +2.8% from a January estimate of +3.3% and warned that the outlook could deteriorate further due to US tariffs sparking a global trade war.   The IMF cut its 2025 US GDP forecast to +1.8% from a January estimate of +2.7% and cut its Eurozone 2025 GDP forecast to +0.8% from a January estimate of +1.0%.  The IMF also cut its 2025 China GDP estimate to +4.0% from +4.6% in January and cut its Japan 2025 GDP estimate to +0.6% from +1.1% in January.

Bitcoin (^BTCUSD) is up more than +3% today at a 6-week high as this week’s plunge in the dollar to a 3-year low bolstered demand for cryptocurrencies as President Trump’s criticism of Fed Chair Powell and threats to fire him raises concerns about the Fed’s independence and weighs on the dollar and dollar assets.

The markets are discounting the chances at 11% for a -25 bp rate cut after the May 6-7 FOMC meeting.

This week’s market focus will be on Q1 corporate earnings results and any changes to US trade policies.  On Wednesday, March new home sales are expected to climb +0.7% m/m to 681,000.  The Fed Beige Book will also be released on Wednesday.  Thursday brings the March capital goods new orders nondefense ex-aircraft and parts report (expected +0.1% m/m).  Also, March existing home sales on Thursday are expected to fall -2.8% m/m to 4.14 million.  Friday brings the revised University of Michigan April consumer sentiment index (expected no change at 50.8).

Q1 earnings reporting season is in full swing.  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 -0.12%.  China’s Shanghai Composite climbed to a 2-1/2 week high and closed up +0.25%.  Japan’s Nikkei Stock 225 closed down -0.17%.

As a summary of recent tariff developments, President Trump said on April 4 that 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. On April 9, 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 on April 10 said it would 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. 

On April 4, 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 last 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 last Wednesday.

Interest Rates

June 10-year T-notes (ZNM25) today are up +3 ticks.  The 10-year T-note yield is down -2.7 bp to 4.383%.  June T-notes today recovered from a 1-week low and moved higher, and the 10-year T-note yield fell from a 1-week high of 4.434% and turned lower.  Short covering in T-notes emerged today after 10-year European government bonds rallied to 2-week highs.  Also, today’s action by the IMF to cut its 2025 global GDP forecast supported T-notes.  T-notes maintained modest gains after the Apr Richmond Fed manufacturing survey of current conditions fell more than expected to a 5-month low, a dovish factor for Fed policy.

T-notes today initially moved lower on concerns that President Trump may move to seek the removal of Fed Chair Powell, which would question the Fed’s independence, raise inflation expectations, erode confidence in the dollar, and could spark foreign selling of dollar assets, including Treasuries. Also, supply pressures are bearish for T-notes as the Treasury will auction $69 billion auction of 2-year T-notes later today as part of this week’s $213 billion auction package of T-note and floating-rate notes.

European government bond yields today are moving lower.  The 10-year German bund yield fell to a 2-week low of 2.442% and is down -2.8 bp to 2.443%.  The 10-year UK gilt yield slid to a 2-week low of 4.540% and is down -1.6 bp to 4.550%.

The Eurozone Apr consumer confidence index fell -2.2 to a 17-month low of -16.7, weaker than expectations of -15.1.

ECB Governing Council member Rehn said Eurozone inflation is stabilizing at the 2% target, and he sees the total tariff impact on Eurozone inflation as “modest.”

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

Magnificent Seven stocks are moving higher today and are supporting gains in the broader market.  Tesla (TSLA) is up more than +4%, and Apple (AAPL) and Amazon.com (AMZN) are up more than +3%.  Also, Nvidia (NVDA), Alphabet (GOOGL), Meta Platforms (META) and Microsoft (MSFT) are up more than +1%. 

Chip stocks are climbing today and boosting the overall market.  Intel (INTC), Micron Technology (MU), ARM Holdings Plc (ARM), and ASML Holding NV (ASML) are up more than +3%.  Also, ON Semiconductors (ON), Marvell Technology (MRVL), and KLA Corp (KLAC) are up more than +2%.  In addition, Microchip Technology (MCHP), Applied Materials (AMAT), NXP Semiconductors NV (NXPI), Analog Devices (ADI), Lam Research (LRCX), and Qualcomm (QCOM) are up more than +1%. 

Equifax (EFX) is up more than +11% after reporting Q1 operating revenue of $1.44 billion, above the consensus of $1.42 billion. 

Invesco Ltd (IVZ) is up more than +10% after reporting Q1 operating revenue of $1.53 billion, stronger than the consensus of $1.41 billion.

Pentair Plc (PNR) is up more than +8% after reporting Q1 adjusted EPS of $1.11, better than the consensus of $1.01.

Quest Diagnostics (DGX) is up more than +8% after reporting Q1 net revenue of $2.65 billion, above the consensus of $2.63 billion. 

3M Co (MMM) is up more than +7% to lead gainers in the Dow Jones Industrials after reporting Q1 adjusted EPS continuing operations of $1.88, better than the consensus of $1.77 and maintaining its full-year guidance.

Danaher (DHR) is up more than +4% after reporting Q1 sales of $5.74 billion, stronger than the consensus of $5.59 billion. 

Northrop Grumman (NOC) is down more than -11% to lead losers in the S&P 500 after cutting its full-year adjusted EPS forecast to $24.95 to $25.35 from a previous estimate of $27.85 to $28.25, well below the consensus of $28.12. 

RTX Corp (RTX) is down more than -8% after forecasting full-year adjusted sales of $83 billion to $84 billion, below the consensus of $84.21 billion.

Halliburton (HAL) is down more than -6% after reporting Q1 adjusted operating income of $787 million, weaker than the consensus of $815.2 million.

Kimberly-Clark (KMB) is down more than -2% after reporting Q1 net sales of $4.84 billion, weaker than the consensus of $4.90 billion.

Zions Bancorp (ZION) is down more than -2% after reporting Q1 total deposits of $75.69 billion, below the consensus of $76.41 billion.

Earnings Reports (4/22/2025)

3M Co (MMM), Baker Hughes Co (BKR), Capital One Financial Corp (COF), Chubb Ltd (CB), Danaher Corp (DHR), Elevance Health Inc (ELV), Enphase Energy Inc (ENPH), EQT Corp (EQT), Equifax Inc (EFX), General Electric Co (GE), Genuine Parts Co (GPC), Halliburton Co (HAL), Intuitive Surgical Inc (ISRG), Invesco Ltd (IVZ), Kimberly-Clark Corp (KMB), Lockheed Martin Corp (LMT), Moody’s Corp (MCO), MSCI Inc (MSCI), Northern Trust Corp (NTRS), Northrop Grumman Corp (NOC), NVR Inc (NVR), Packaging Corp of America (PKG), Pentair PLC (PNR), PulteGroup Inc (PHM), Quest Diagnostics Inc (DGX), RTX Corp (RTX), Steel Dynamics Inc (STLD), Synchrony Financial (SYF), Tesla Inc (TSLA), Verizon Communications Inc (VZ).