Stocks Fall on Signs of Trade War Damage

The S&P 500 Index ($SPX) (SPY) today is down -0.74%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.76%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.06%.  June E-mini S&P futures (ESM25) are down -1.00%, and June E-mini Nasdaq futures (NQM25) are down -1.33%. 

Stock indexes are moderately lower today after recent comments by various US companies bolstered concern about economic damage from the trade war.  In the latest such comment, Ford Motor late Monday pulled its full-year financial guidance due to President Trump’s tariff plans and said the tariffs will reduce 2025 adjusted earnings by about $1.5 billion this year on a net basis, citing “industrywide supply chain disruption.” 

Stock indexes extended their losses on today’s news that the March US trade deficit was a record -$140.5 billion, wider than expectations of -$137.2 billion and a negative factor for Q1 GDP.

The FOMC begins its 2-day policy meeting today and is expected to keep its federal funds target range unchanged at 4.25%-4.50%.  Recent economic news has been better than expected, reducing expectations for a rate cut this week.  Swap markets now have priced in three 25 bp Fed rate cuts by year-end, down from the four they had priced in a week ago. 

This week, the market will focus on tariffs and any changes to US trade policy.  On Wednesday, the FOMC is expected to keep its federal funds target range unchanged at 4.25%-4.50%.  Post-FOMC comments on Wednesday from Fed Chair Powell will also be studied for any clues as to the future of Fed policy.  Thursday brings weekly initial unemployment claims, Q1 nonfarm productivity (expected 0.7%), and Q1 unit labor costs (expected +5.2%).

The markets are discounting the chances at 2% for a -25 bp rate cut after the 2-day FOMC meeting that ends on Wednesday.

Q1 earnings reporting season remains in progress.  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.  So far, of the 365 companies in the S&P 500 companies that have reported quarterly results, 78% have beaten estimates.  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 fell from a 1-month high and is down -0.57%.  China’s Shanghai Composite climbed to a 1-month high and closed up +1.13%.  Japan’s Nikkei Stock 225 was closed for a National holiday.

Interest Rates

June 10-year T-notes (ZNM25) today are up +3 ticks.  The 10-year T-note yield is down -0.6 bp to 4.343%.  June T-notes today recovered from a 1-1/2 week low and moved higher, and the 10-year T-note yield fell from a 1-1/2 week high of 4.375% and moved lower.  Today’s slump in stocks has boosted safe-haven demand for T-notes.  Also, today’s US economic news showed that the Mar trade deficit widened to a record high, which was negative for Q1 GDP and dovish for Fed policy.

T-note prices today initially moved lower due to supply pressures, as the Treasury will auction $42 billion of 10-year T-notes later today as part of this week’s $125 quarterly refunding.  An increase in inflation expectations is also bearish for T-notes after the 10-year breakeven inflation rate climbed to a 1-week high of 2.293%. In addition, T-notes have a negative carryover from today’s weakness in European government bonds.

European government bond yields today are moving higher.  The 10-year German bund yield rose to a 3-week high of 2.554% and is up +1.5 bp to 2.532%.  The 10-year UK gilt yield rose to a 2-week high of 4.575% and is up +1.3 bp to 4.522%.

Eurozone Mar PPI fell -1.6% m/m and rose +1.9% y/y, weaker than expectations of -1.4% m/m and +2.5% y/y.

The Eurozone Apr S&P composite PMI was revised upward by +0.3 to 50.4 from the previously reported 50.1.

Swaps are discounting the chances at 96% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

US Stock Movers

The Magnificent Seven stocks are under pressure today and are weighing on the broader market.  Tesla (TSLA) is down more than -2% after reporting UK April new vehicle sales fell -62% y/y.  Also, Nvidia (NVDA) is down more than -2%, and Meta Platforms (META) is down more than -1%.  In addition, Alphabet (GOOGL) is down -0.86%, Amazon.com (AMZN) is down -0.75%, Microsoft (MSFT) is down -0.63% and Apple (AAPL) is down -0.59%. 

Chip stocks are sliding today and pressuring the overall market. Advanced Micro Devices (AMD) and Marvell Technology (MRVL) are down more than -2%.  Also, ARM Holdings Plc (ARM), Broadcom (AVGO), KLA Corp (KLAC), Intel (INTC), Micron Technology (MU), ON Semiconductor (ON), and Texas Instruments (TXN) are down more than -1%.

Palantir Technologies (PLTR) is down more than -9% to lead losers in the S&P 500 after reporting Q1 adjusted EPS of 13 cents, right on expectations and disappointing investors who had been looking for an earnings beat. 

Vertex Pharmaceuticals (VRTX) is down more than -10% after reporting Q1 adjusted net income of $1.05 billion, weaker than the consensus of $1.12 billion. 

DoorDash is down more than -7% after reporting Q1 revenue of $3.03 billion, weaker than the consensus of $3.10 billion, and after it purchased SevenRooms for $1.2 billion and Deliveroo for $3.9 billion.

Fabrinet (FN) is down more than -5% after forecasting Q4 adjusted EPS of $2.55 to $2.70, the midpoint below the consensus of $2.67. 

Clorox (CLX) is down more than -4% after reporting Q3 net sales of $1.67 billion, weaker than the consensus of $1.72 billion, and cut its full-year organic sales estimate to up +4% to +5% from a previous estimate of +4% to +7%, below the consensus of +5.42%.

Datadog (DDOG) is down more than -3% after forecasting Q2 adjusted EPS of 40 cents to 42 cents, weaker than the consensus of 42 cents. 

Archer-Daniels-Midland (ADM) is up more than +3% after reporting Q1 adjusted EPS of 70 cents, above the consensus of 66 cents.

Mariott International (MAR) is up more than +2% after reporting Q1 revenue of $6.26 billion, better than the consensus of $6.20 billion.

AngloGold Ashanti Plc (AU) is up more than +3% to lead gold-mining stocks higher with COMEX gold prices up more than +2% at a 2-week high.  Also, Newmont (NEM) is up more than +1%.

Celanese (CE) is up more than +7% after reporting Q1 net sales of $2.39 billion, better than the consensus of $2.27 billion. 

Ingredion (INGR) is up more than +4% after reporting Q1 adjusted EPS of $2.97, above the consensus of $2.41, and raised its full-year adjusted EPS forecast to $10.90-$11.60 from a previous forecast of $10.75-$11.55, stronger than the consensus of $10.99. 

Earnings Reports (5/6/2025)

Advanced Micro Devices Inc (AMD), American Electric Power Co Inc (AEP), Archer-Daniels-Midland Co (ADM), Arista Networks Inc (ANET), Assurant Inc (AIZ), Ball Corp (BALL), Constellation Energy Corp (CEG), Corpay Inc (CPAY), Devon Energy Corp (DVN), DoorDash Inc (DASH), Duke Energy Corp (DUK), Electronic Arts Inc (EA), Expeditors International of Washington (EXPD), Fidelity National Information (FIS), Gartner Inc (IT), Gen Digital Inc (GEN), Global Payments Inc (GPN), International Flavors & Fragrances (IFF), IQVIA Holdings Inc (IQV), Jack Henry & Associates Inc (JKHY), Jacobs Solutions Inc (J), Leidos Holdings Inc (LDOS), Marathon Petroleum Corp (MPC), Marriott International Inc/MD (MAR), Mosaic Co/The (MOS), Super Micro Computer Inc (SMCI), TransDigm Group Inc (TDG), Waters Corp (WAT), WEC Energy Group Inc (WEC), Wynn Resorts Ltd (WYNN), Zoetis Inc (ZTS).