Stocks Settle Higher as Trump Eases Rhetoric on Tariffs and Fed Independence

The S&P 500 Index ($SPX) (SPY) Wednesday closed up +1.67%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.07%, and the Nasdaq 100 Index ($IUXX) (QQQ) close up +2.28%.  June E-mini S&P futures (ESM25) are up +1.70%, and June E-mini Nasdaq futures (NQM25) are up +2.35%. 

Stock indexes on Wednesday rallied for the second session, with the S&P 500 posting a 2-week high and the Nasdaq 100 posting a 1-week high.   Stocks rose Wednesday in hopes of better US-Chinese trade relations after President Trump said he plans to be "very nice" to China in any talks and that tariffs will drop if the two countries can reach a trade deal.  Stocks also rose after President Trump said late Tuesday that he had no intention of firing Fed Chair Powell, boosting confidence in the dollar and reducing the prospects that foreign investors would liquidate their dollar holdings, including stocks and Treasuries.

However, stocks fell back from their best levels Wednesday after comments from Treasury Secretary Bessent dampened hopes of an imminent trade deal with China when he said the US hadn't offered to cut tariffs on China on a unilateral basis.

Wednesday's better-than-expected economic reports on US new home sales and manufacturing PMI were supportive of stocks.

The Fed Beige Book was neutral for stocks as it said that US economic activity was little changed in the month before April 14 from the prior report, with employment little changed to slightly up in most districts and price increases modest to moderate.

US MBA mortgage applications fell -12.7% in the week ended April 18, with the purchase mortgage sub-index down -6.6% and the refinancing sub-index down -20.0%.  The average 30-year fixed rate mortgage rose +9 bp to 6.90% from 6.81% in the prior week.

The US Apr S&P manufacturing PMI unexpectedly rose +0.5 to 50.7, stronger than expectations of a decline to 49.0.

US Mar new home sales rose +7.4% m/m to a 6-month high of 724,000, stronger than expectations of 685,000.

Comments Tuesday evening from Fed Governor Kugler were negative for stocks when she said tariffs would likely put upward pressure on prices and have a bigger economic effect than previously expected.  She also said that she supports holding interest rates steady until inflation risks abate.

Bitcoin (^BTCUSD) rose more than +2% to a 7-week high as this week's plunge in the dollar to a 3-year low bolstered demand for cryptocurrencies as a store of value. Also, the global trade turmoil has fueled safe-haven demand for cryptocurrencies. 

The markets are discounting the chances at 8% 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.  The Fed Beige Book will be released later today.  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 on Wednesday settled mixed.  The Euro Stoxx 50 climbed to a 2-1/2 week high and closed up +2.77%.  China's Shanghai Composite closed down -0.10%.  Japan's Nikkei Stock 225 rallied to a 3-week high and closed up +1.89%.

Interest Rates

June 10-year T-notes (ZNM25) Wednesday closed down -3.5 ticks.  The 10-year T-note yield fell -1.2 bp to 4.381%.  June T-notes Wednesday gave up an early advance and posted modest losses.  On Wednesday, stronger-than-expected US economic reports on new home sales and manufacturing PMI weighed on T-notes.  Also, an increase in inflation expectations is bearish for T-notes after the 10-year breakeven inflation rate Wednesday rose to a 1-1/2 week high of 2.307%.

T-notes on Wednesday initially moved higher after President Trump said late Tuesday he had no intention of firing Fed Chair Powell, easing concerns over the Fed's independence, which could have sparked foreign selling of dollar assets, including Treasuries.  Decent demand for the Treasury's $70 billion auction of 5-year T-notes also supported T-note prices as the auction had a bid-to-cover ratio of 2.41, above the 10-auction average of 2.39.  

European government bond yields on Wednesday moved higher.  The 10-year German bund yield rose +5.4 bp to 2.497%.  The 10-year UK gilt yield rebounded from a 2-week low of 4.469% and finished up +0.7 bp to 4.552%.

The Eurozone Apr S&P manufacturing PMI unexpectedly rose +0.1 to a 2-1/4 year high of 48.7, stronger than expectations of a decline to 47.4.  However, the Apr S&P composite PMI fell -0.8 to 50.1, weaker than expectations of 50.2.

ECB Governing Council member and Bundesbank President Nagel said Europe "is in a stagnating situation" due to fallout from US tariffs with a "risk of recession for Germany."

ECB Governing Council member Villeroy de Galhau said, "There is currently no inflationary risk in Europe, and it is therefore both fair and appropriate that compared to the Federal Reserve and Bank of England, the ECB has started cutting interest rates earlier, faster, and likely further this year." 

Swaps are discounting the chances at 86% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

US Stock Movers

Magnificent Seven stocks rallied on Wednesday and supported gains in the broader market.  Tesla (TSLA) closed up more than +5%, and Meta Platforms (META) and Amazon.com (AMZN) closed up more than +4%.  Also, Nvidia (NVDA) closed up more than +3%, and Apple (AAPL) and Alphabet (GOOGL) closed up more than +2%.  In addition, Microsoft (MSFT) closed up more than +1%. 

Chip stocks soared Wednesday on an easing of US-China trade tensions after President Trump said China tariffs will drop if the two countries can reach a trade deal.  As a result, Marvell Technology (MRVL) closed up more than +6%, and Lam Research (LRCX) closed up more than +5%.  Also,  Advanced Micro Devices (AMD), ARM Holdings Plc (ARM), Microchip Technology (MCHP), and GlobalFoundries (GFS) closed up more than +4%.  In addition, Micron Technology (MU), ON Semiconductor (ON), KLA Corp (KLAC), Applied Materials (AMAT), NXP Semiconductors NV (NXPI), and Texas Instruments (TXN) closed up more than +3%.  

Cryptocurrency-linked stocks moved higher on Wednesday after the price of Bitcoin rose more than +2% to a 7-week high.  Riot Platforms (RIOT) closed up +6%, and Coinbase Global (COIN) closed up more than +3%.  In addition, MicroStrategy (MSTR) and MARA Holdings (MARA) closed up more than +1%.

Amphenol Corp (APH) closed up more than +8% to lead gainers in the S&P 500 after reporting Q1 net sales of $4.80 billion, stronger than the consensus of $4.25 billion.

Boeing (BA) closed up more than +6% to lead gainers in the Dow Jones Industrials after reporting Q1 revenue of $19.50 billion, better than the consensus of $19.37 billion.

Boston Scientific (BSX) closed up more than +4% after boosting its full-year net sales forecast to +15% to +17% from a prior view of +12.5% to +14.5%. 

Vertiv Holdings (VRT) closed up more than +9% after raising its full-year net sales forecast to $9.33 billion-$9.58 billion from a previous estimate of $9.13 billion-$9.28 billion, well above the consensus of $9.20 billion.

Intel (INTC) closed up more than +6% after Bloomberg reported the company plans to cut more than 20% of its staff to streamline operations. 

Phillip Morris (PM) closed up more than +3% after reporting Q1 adjusted EPS of $1.69, above the consensus of $1.61, and raising its full-year adjusted EPS forecast to $7.36-$7.49 from a previous estimate of $7.04-$7.17, better than the consensus of $7.23. 

Lennox International (LII) closed down more than -8% after reporting Q1 earnings that missed the high end of analyst expectations and said higher prices would offset lower volume. 

Baker Hughes (BKR) closed down more than -6% to lead losers in the Nasdaq 100 after reporting Q1 revenue of $6.43 billion, weaker than the consensus of $6.49 billion and forecast Q2 revenue of $6.30 billion-$7.00 billion, the midpoint below the consensus of $6.86 billion. 

Otis Worldwide (OTIS) closed down more than -6% after reporting Q1 net sales of $3.35 billion, below the consensus of $3.37 billion. 

AngloGold Ashanti Plc (AU) closed down more than -5% to lead gold mining stocks lower as the price of gold fell sharply by more than -3%.  Also, Newmont (NEM) closed down more than -2%.

Bristol-Myers Squibb (BMY) closed down more than -2% after its drug, Cobenfy, a treatment for schizophrenia, missed its primary goal in a trial testing whether it could improve symptoms in patients who weren't adequately responding to older medicines. 

Chubb Ltd (CB) closed down more than -2% after reporting Q1 net premiums written of $12.65 billion, below the consensus of $13.03 billion.

CME Group (CME) closed down more than -1% after reporting Q1 revenue of $1.60 billion, weaker than the consensus of $1.65 billion. 

Earnings Reports (4/24/2025)

Allegion plc (ALLE), Alphabet Inc (GOOGL), Ameriprise Financial Inc (AMP), Bristol-Myers Squibb Co (BMY), CBRE Group Inc (CBRE), CenterPoint Energy Inc (CNP), CMS Energy Corp (CMS), Comcast Corp (CMCSA), Digital Realty Trust Inc (DLR), Dover Corp (DOV), Dow Inc (DOW), Eastman Chemical Co (EMN), Erie Indemnity Co (ERIE), Fiserv Inc (FI), Freeport-McMoRan Inc (FCX), Gilead Sciences Inc (GILD), Hartford Insurance Group Inc/The (HIG), Hasbro Inc (HAS), Healthpeak Properties Inc (DOC), Intel Corp (INTC), Interpublic Group of Cos Inc/The (IPG), Keurig Dr Pepper Inc (KDP), L3Harris Technologies Inc (LHX), LKQ Corp (LKQ), Merck & Co Inc (MRK), Nasdaq Inc (NDAQ), PepsiCo Inc (PEP), PG&E Corp (PCG), Pool Corp (POOL), Principal Financial Group Inc (PFG), Procter & Gamble Co/The (PG), Republic Services Inc (RSG), Southwest Airlines Co (LUV), Textron Inc (TXT), T-Mobile US Inc (TMUS), Tractor Supply Co (TSCO), Union Pacific Corp (UNP), Valero Energy Corp (VLO), VeriSign Inc (VRSN), West Pharmaceutical Services Inc (WST), Weyerhaeuser Co (WY), Willis Towers Watson PLC (WTW), Xcel Energy Inc (XEL).