Stocks See Support as US-UK Trade Deal Bolsters Trade Optimism

The S&P 500 Index ($SPX) (SPY) today is up +0.17%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.24%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.34%.  June E-mini S&P futures (ESM25) are up +0.23%, and June E-mini Nasdaq futures (NQM25) are up +0.34%. 

Stock indexes are moderately higher today after President Trump announced a "major" trade deal with the UK, bolstering optimism the US was making headway in tariff negotiations.  The announcement raised hopes that President Trump’s tariffs will be negotiated down, averting lasting economic damage to economic growth and corporate profits. 

Semiconductor stocks today are extending Wednesday's rally on a Bloomberg report that said the Trump administration plans to rescind Biden-era AI chip curbs as part of a broader effort to revise semiconductor trade restrictions.

The weakness in drug makers and pharmaceutical stocks today is limiting gains in the broader market.  Politico reported that President Trump plans to revive an effort to cut drug costs dramatically by tying the amount the government pays for some medicines to lower prices abroad. 

Today's US economic news pushed bond yields higher and was negative for stocks after weekly initial unemployment claims fell more than expected, a sign of labor market strength.  Meanwhile, Q1 nonfarm productivity declined for the first time in almost 3 years, and Q1 unit labor costs rose by the most in a year. 

US weekly initial unemployment claims fell -13,000 to 228,000, showing a stronger labor market than expectations of 230,000.

US Q1 nonfarm productivity fell -0.8%, right on expectations and the first decline in 2-3/4 years.  Q1 unit labor costs rose +5.7%, more than expectations of +5.1% and the most in a year.

The markets are discounting the chances at 20% for a -25 bp rate cut after the June 17-18 FOMC meeting.

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 386 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 higher.  The Euro Stoxx 50 climbed to a 5-week high and is up +1.00%.  China's Shanghai Composite rallied to a 5-week high and closed up +0.28%.  Japan's Nikkei Stock 225 rose to a 1-1/4 month high and closed up +0.41%.

Interest Rates

June 10-year T-notes (ZNM25) today are down -10 ticks.  The 10-year T-note yield is up +4.5 bp to 4.314%.  June T-notes are under pressure today on reduced safe-have demand as stocks rallied on signs of easing trade tensions after President Trump announced a trade deal with the UK.  T-notes also have some negative carryover from Wednesday when Fed Chair Powell said the Fed was in no hurry to adjust interest rates.  In addition, supply pressures are weighing on T-note prices as the Treasury will auction $25 billion of 30-year T-bonds today to conclude this week's quarterly refunding.  T-notes remained lower after US weekly jobless claims fell more than expected and Q1 unit labor costs rose more than expected, hawkish factors for Fed policy.

European government bond yields today are moving higher.  The 10-year German bund yield is up +3.7 bp to 2.511%. The 10-year UK gilt yield is up +4.6 bp to 4.506%.

German Mar industrial production rose +3.0% m/m, stronger than expectations of +1.0% m/m and the biggest increase in almost 3-1/2 years.

German trade news was mixed as German Mar exports rose +1.1% m/m, stronger than expectations of +1.0% m/m.  However, Mar imports unexpectedly fell -1.4% m/m versus expectations of a +0.4% m/m increase.

The BOE, as expected, cut the official bank rate by -25 bp to 4.25% from 4.50%, and BOE Governor Bailey said, "Inflationary pressures have continued to ease, so we've been able to cut rates again today."

Swaps are discounting the chances at 94% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

US Stock Movers

Chip stocks today are extending Wednesday's gains on a Bloomberg report that said the Trump administration plans to rescind Biden-era AI chip curbs.  Advanced Micro Devices (AMD), Marvell Technology (MRVL), Intel (INTC), and Microchip Technology (MCHP) are up more than +2%.  Also, Micron Technology (MU), ON Semiconductor (ON), NXP Semiconductors NV (NXPI), Analog Devices (ADI), and GlobalFoundries (GFS) are up more than +1%.

Energy stocks are climbing today with the price of WTI crude oil up more than +2%.  As a result, Occidental Petroleum (OXY) and Devon Energy (DVN) are up more than +4%, and Marathon Petroleum (MPC) is up more than +3%.  Also, Diamondback Energy (FANG), Haliburton (HAL), Phillips 66 (PSX), Schlumberger (SLB), ConocoPhillips (COP), and Valero Energy (VLO) are up more than +2%.

Cryptocurrency-exposed stocks are moving higher today, with the price of Bitcoin rising more than +2% to a 3-month high.  Coinbase Global (COIN), MicroStrategy (MSTR), MARA Holdings (MARA), and Riot Platforms (RIOT) are up more than +4%.  

EPAM Systems (EPAM) is up more than +15% to lead gainers in the S&P 500 after reporting Q1 adjusted EPS of $2.41, better than the consensus of $2.27, and raising its full-year adjusted EPS forecast to $10.70-$10.95 from a previous forecast of $10.45-$10.75, above the consensus of $10.50.

AppLovin (APP) is up more than +12% to lead gainers in the Nasdaq 100 after reporting Q1 revenue of $1.48 billion, stronger than the consensus of $1.38 billion.

Axon Enterprises (AXON) is up more than +12% after boosting its full-year revenue estimate to $2.60 billion to $2.70 billion from a prior view of $2.55 billion to $2.65 billion. 

Carvana (CVNA) is up more than +11% after reporting Q1 revenue of $4.23 billion, stronger than the consensus of $3.95 billion.

MercadoLibre (MELI) is up more than +6% after reporting Q1 adjusted Ebitda of $935.0 million, well above the consensus of $804.9 million. 

Tapestry (TPR) is up more than +3% after reporting Q3 net sales of $1.58 billion, stronger than the consensus of $1.53 billion.

Drug makers and pharmaceutical stocks are under pressure today following a Politico report that said President Trump plans to revive an effort to dramatically cut drug costs by tying the amount the government pays for some medicines to lower prices abroad.  As a result, Regeneron Pharmaceuticals (REGN) is down more than -5%, and Eli Lilly (LLY) is down more than -4%.  Also, Gilead Sciences (GILD), AbbVie (ABBV), Vertex Pharmaceuticals (VRTX), and Amgen (AMGN) are down more than -2%.  In addition, Merck & Co (MRK) and Bristol-Meyers Squibb (BMY)are down more than -1%. 

Fortinet (FTNT) is down more than -10% to lead losers in the S&P 500 and Nasdaq 100 after forecasting full-year billings between $7.20 billion and $7.40 billion, the midpoint below the consensus of $7.35 billion. 

Match Group (MTCH) is down more than -7% after forecasting Q2 adjusted operating income of $295 million-$300 million, below the consensus of $309.4 million, and announced a -13% reduction in its workforce.

Arm Holdings (ARM) is down more than -5% after forecasting Q1 adjusted EPS of 30 cents to 38 cents, weaker than the consensus of 42 cents. 

Molson Coors Beverage (TAP) is down more than -6% after reporting Q1 underlying EPS of 50 cents, much weaker than the consensus of 81 cents.

Genpact Ltd (G) is down more than -14% after cutting its full-year revenue forecast to $4.86 billion-$5.01 billion from a previous forecast of $5.03 billion-$5.13 billion, weaker than the consensus of $5.08 billion.

Earnings Reports (5/8/2025)

Akamai Technologies Inc (AKAM), Alliant Energy Corp (LNT), ConocoPhillips (COP), EPAM Systems Inc (EPAM), Evergy Inc (EVRG), Expedia Group Inc (EXPE), Federal Realty Investment Trust (FRT), Insulet Corp (PODD), Kenvue Inc (KVUE), Match Group Inc (MTCH), McKesson Corp (MCK), Microchip Technology Inc (MCHP), Molson Coors Beverage Co (TAP), Monster Beverage Corp (MNST), News Corp (NWSA), Paramount Global (PARA), Sempra (SRE), Solventum Corp (SOLV), Tapestry Inc (TPR), TKO Group Holdings Inc (TKO), Viatris Inc (VTRS), Warner Bros Discovery Inc (WBD).