Stocks Climb on Optimism Before US-China Trade Talks

The S&P 500 Index ($SPX) (SPY) today is up +0.27%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.45%.  June E-mini S&P futures (ESM25) are up +0.28%, and June E-mini Nasdaq futures (NQM25) are up +0.45%. 

Stock indexes today are pushing higher on optimism ahead of weekend trade talks between the US and China.  Stocks rallied Thursday after President Trump announced a "major" trade deal with the UK although there are still details to work out.  The announcement raised hopes that President Trump's tariffs will be negotiated down, averting lasting damage to economic growth and corporate profits.  Stocks fell back from early highs on comments on social media from President Trump, who said an 80% tariff on China "seems right" and that the right level of tariff on China would be up to Treasury Secretary Bessent.

Earnings results today are mixed for stocks.  On the positive side, Microchip Technology is up more than +12% to lead chip stocks higher after reporting better-than-expected Q4 net sales and forecasting Q1 net sales above consensus.  Also, Lyft is up more than +19% after forecasting Q2 gross bookings above consensus.  In addition, Insulet is up more than +17% after reporting stronger-than-expected Q1 revenue and raised its full-year revenue forecast.  On the negative side, Expedia Group is down more than -7% after reporting weaker-than-expected Q1 revenue and cutting its 2025 revenue forecast. Also, Akamai Technologies is down more than -6% after forecasting full-year adjusted EPS below consensus.

T-note prices are higher today on comments from Japanese Finance Minister Kato, who said the Japanese government is not considering the sale of US Treasuries as part of its trade negotiation with the US.  According to US Treasury data, Japan held $1.13 trillion in Treasury Securities at the end of February, making it the biggest foreign holder of US debt.  If Japan were to start aggressively selling Treasury securities, there could be an upward spike in Treasury yields that would damage the US economy and perhaps cause a systemic crisis for the US financial system.

Comments today from Fed Governor Kugler were bearish for stocks and bonds when she said the Fed should hold interest rates steady for now, citing a stable US economy and uncertainty around President Trump's tariffs policy.

The markets are discounting the chances at 17% 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 mixed.  The Euro Stoxx 50 rose to a 5-week high and is up +0.50%.  China's Shanghai Composite closed down -0.30%.  Japan's Nikkei Stock 225 rose to a 6-week high and closed up +1.56%.

Interest Rates

June 10-year T-notes (ZNM25) today are up +3 ticks.  The 10-year T-note yield is down -1.2 bp to 4.367%.  June T-notes today are slightly higher, and the 10-year T-note yield fell from a 2-1/2 week high of 4.396%.  Comments from Japanese Finance Minister Kato boosted T-notes today when he said the Japanese government is not considering the sale of US Treasuries as part of its trade negotiation with the US.  In addition, short covering is supporting T-notes as bond dealers lift short hedges they put on against this week’s $125 billion quarterly refunding. 

T-note prices are being undercut by negative carryover from weakness in European government bonds.  T-note prices are also being undercut by easing global trade tensions and higher stocks. In addition, hawkish comments from Fed Governor Kugler undercut T-note prices when she said the Fed should hold interest rates steady for now.  Finally, an increase in inflation expectations is bearish for T-notes as the 10-year breakeven inflation rate rose to a 5-week high today of 2.319%.

European government bond yields today are moving higher.  The 10-year German bund yield rose to a 4-week high of 2.588% and is up +2.9 bp to 2.563%.  The 10-year UK gilt yield climbed to a 2-1/2 week high of 4.603% and is up +2.6 bp to 4.572%.

ECB Governing Council member Simkus said, "Another interest rate cut by the ECB in June is needed" as the Eurozone is yet to feel the full force of US tariffs, and inflation is expected to continue to slow. 

ECB Governing Council member Rehn said the ECB should cut interest rates next month if its new financial forecasts confirm an outlook of disinflation and waning growth momentum.

Swaps are discounting the chances at 93% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

US Stock Movers

Insulet (PODD) is up more than +17% to lead gainers in the S&P 500 after reporting Q1 revenue of $569.0 million, better than the consensus of $543.5 million, and raising its forecast for full-year revenue to a range of +19% to +22% from a previous range of +16% to +20%.

Microchip Technology (MCHP) is up more than +12% to lead chip stocks higher after reporting Q4 net sales of $970.5 million, stronger than the consensus of $962.7 million, and forecasting Q1 net sales of $1.02 billion-$1.07 billion, well above the consensus of $983.5 million.  Also, ON Semiconductor (ON) and Marvell Technology (MRVL) are up more than +4%.  In addition, Texas Instruments (TXN) and Analog Devices (ADI) are up more than +2%, and NXP Semiconductors NV (NXPI), Lam Research (LRCX), and Qualcomm (QCOM) are up more than +1%.

Trade Desk (TTD) is up more than +24% to lead gainers in the Nasdaq 100 after reporting a Q1 adjusted Ebitda margin of 34%, above the consensus of 33%, and forecast Q2 adjusted Ebitda of $259 million, stronger than the consensus of $254.6 million.

Pinterest (PINS) is up more than +10% after reporting Q1 revenue of $855.0 million, stronger than the consensus of $846.3 million, and forecasting Q2 revenue of $960 million-$980 million, the midpoint above the consensus of $963.7 million.

Lyft (LYFT) is up more than +19% after forecasting Q2 gross bookings of $4.41 billion to $4.57 billion, the midpoint above the consensus of $4.48 billion.

Cloudflare (NET) is up more than +6% after reporting Q1 revenue of $479.1 million, above the consensus of $470 million.

Globus Medical (GMED) is down more than -19% after reporting Q1 net sales of $598.1 million, well below the consensus of $627.2 million, and forecast full-year adjusted EPS of $3.00-$3.30, weaker than the consensus of $3.40.  

Expedia Group (EXPE) is down more than -7% to lead losers in the S&P 500 after reporting Q1 revenue of $2.99 billion, below the consensus of $3.02 billion, and cut its 2025 revenue forecast to up +2% to +4% from a previous estimate of up +4% to +6%. 

HubSpot (HUBS) is down more than -8% after forecasting Q2 adjusted EPS of $2.10 to $2.12, weaker than the consensus of $2.13.

Affirm Holdings (AFRM) is down more than -8% after forecasting full-year revenue of $3.16 billion-$3.19 billion, the midpoint below the consensus of $3.18 billion.

Akamai Technologies (AKAM) is down more than -6% after forecasting full-year adjusted EPS of $6.10-$6.40, the midpoint below the consensus of $6.27. 

Crowdstrike Holdings (CRWD) is down more than -3% after US prosecutors and regulators said they are investigating the $32 million deal between Crowdstrike and Carahsoft Technology on what senior company executives may have known about the deal and other transactions made by the firm. 

Earnings Reports (5/9/2025)

Starwood Property Trust Inc (STWD), Ubiquiti Inc (UI).