Stocks are Sharply Higher as Global Trade Tensions Ease

The S&P 500 Index ($SPX) (SPY) today is up +2.59%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +2.34%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +3.14%.  June E-mini S&P futures (ESM25) are up +2.68%, and June E-mini Nasdaq futures (NQM25) are up +3.25%. 

Stock indexes today are sharply higher, with the S&P 500 and Nasdaq 100 posting 2-1/4 month highs and the Dow Jones Industrials posting a 1-1/4 month high.  Stocks, the dollar, and asset markets are soaring today after China and the US agreed to cut tariffs and de-escalate their trade war.  Today, risk-on sentiment returned to asset markets after Treasury Secretary Bessent said trade talks with China were "very robust and productive." The US and China agreed to temporarily lower tariffs on each other's products for three months, with the US reducing its tariffs on China from 145% to 30% and China reducing its duties from 125% to 10%.  Treasury Secretary Bessent Said that neither nation wants to "decouple" and that further talks might lead to "purchasing agreements" by China.

Easing geopolitical risks also supports stocks as India and Pakistan agreed to an immediate ceasefire.  Also, Ukraine President Zelenskiy said he would travel to Istanbul on Thursday to conduct direct negotiations with Russian President Putin.

Today's comments from Fed Governor Kugler were negative for stocks, especially when she said that US tariff policies are likely to boost inflation and weigh on economic growth, even with the recently announced reduction to tariffs on China.  She added that there could also be "significant effects" on productivity since businesses may cut back on investment and make other less efficient moves to navigate the tariffs.

This week, the markets will focus on tariff news and the prospects for additional trade deals.  On Tuesday, Apr CPI is expected +0.3% m/m and +2.4% y/y, with Apr CPI es-food and energy up +0.3% m/m and +2.8% y/y.  On Thursday, Apr retail sales are expected to be +0.1% m/m, and Apr retail sales ex-autos are expected to be +0.3% m/m.  Also, on Thursday, Apr PPI final demand is expected +0.2% m/m and +2.5% y/y, with Apr PPI ex-food and energy expected +0.3% m/m and +3.1% y/y.  Finally, on Thursday, Apr manufacturing production is expected to fall by 0.4% m/m.  On Friday, Apr housing stars are expected to be +3.1% m/m to 1.365 million, and Apr building permits are expected to be -1.2% m/m to 1.450 million.  Also, on Friday, the preliminary May University of Michigan US consumer sentiment index is expected +1.1 to 53.3. 

The markets are discounting the chances at 8% 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 412 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 rallied to a 1-1/2 month high and is up +0.86%.  China's Shanghai Composite rose to a 6-week high and closed up +0.82%.  Japan's Nikkei Stock 225 rose to a 6-week high and closed up +0.38%.

Interest Rates

June 10-year T-notes (ZNM25) today are down -17 ticks.  The 10-year T-note yield is up +5.5 bp to 4.433%.  June T-notes today tumbled to a 4-week low, and the 10-year T-note yield rose to a 4-week high of 4.467%.  The easing of US-China trade tensions sparked a rally in global equity markets and reduced safe-haven demand for T-notes after the US and China agreed to temporarily lower some tariffs for 90 days.  Also, 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 2.360%.

European government bond yields today are moving higher.  The 10-year German bund yield rose to a 1-month high of 2.650% and is up +7.5 bp to 2.637%.  The 10-year UK gilt yield rose to a 3-1/2 week high of 4.655% and is up +7.0 bp to 4.638%.

Swaps are discounting the chances at 84% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

US Stock Movers

Magnificent Seven stocks surged today after the US and China agreed to slash tariffs.  Amazon.com (AMZN) is up more than +7%, and Tesla (TSLA) and Meta Platforms (META) are up more than +6%.  Also, Apple (AAPL) and Nvidia (NVDA) are up more than +4%.  In addition, Alphabet (GOOGL) is up more than +2%, and Microsoft (MSFT) is up more than +1%.

Chip stocks are soaring today as US-China trade tensions ease.  Microchip Technology (MCHP) is up more than +9%, and ON Semiconductor (ON), Micron Technology (MU), Lam Research (LRCX), and Texas Instruments (TXN) are up more than +8%.  Also, Applied Materials (AMAT), KLA Corp (KLAC), NXP Semiconductors NV (NXPI) are up more than +7%, and Marvell Technology (MRVL), Analog Devices (ADI), and GlobalFoundries (GFS) are up more than +6%. 

Travel and cruise stocks are climbing today as the easing of global trade tensions spurs optimism in the economic outlook.  Carnival (CCL) is up more than +8%, and Norwegian Cruise Line Holdings (NCLH) and Expedia Group (EXPE) are up more than +6%.  Also, Host Hotels & Resorts (HST), American Airlines Holdings (AAL), and Delta Air Lines (DAL) are up more than +5%.  In addition, United Airlines Holdings (UAL) and Royal Caribbean Cruises (RCL) are up more than +3%.

Trucking stocks are rallying today due to the easing of US-China trade tensions.  XPO Inc (XPO) is up more than +14%, and Saia Inc (SAIA) is up more than +10%.  Also, JB Hunt Transport Services (JBHT) is up more than +9%, and Old Dominion Freight Line (ODFL) is up more than +8%. 

Energy stocks are moving higher today, with the price of WTI crude up more than +2% to a 2-week high.  As a result, Phillips 66 (PSX) is up more than +6%, and Haliburton (HAL), Diamondback Energy (FANG), Schlumberger (SLB), Marathon Petroleum (MPC), and Occidental Petroleum (OXY) are up more than +4%.  Also, Devon Energy (DVN) is up more than +3%, and Exxon Mobil (XOM), Baker Hughes (BKR), and Hess Corp (HES) are up more than 2%.

Utility stocks are under pressure today due to rising T-note yields.  Exelon Corp (EXC) is down more than -3% to lead losers in the Nasdaq 100.  Also, Alliant Energy (LNT), Consolidated Edison (ED), Duke Energy (DUK), Xcel Energy (EXL), DTE Energy (DTE), and American Electric Power (AEP) are down more than -2%. 

Cigna Group (CI) is down more than -5% to lead losers in the S&P 500 after President Trump proposed a plan to "cut out" the drug industry middlemen as a way to reduce health costs.  CVS Health (CVS) is also down more than -2% on the news. 

Mining stocks are sliding today as easing global trade tensions hammer gold prices down more than -3% to a 1-week low.  AngloGold Ashanti Plc (AU) and Gold Fields Ltd (GFI) are down more than -9%, and Newmont (NEM) is down more than -4%. 

NRG Energy (NRG) is up more than +23% to lead gainers in the S&P 500 after reporting Q1 adjusted Ebitda of $1.13 billion, well above the consensus of $891 million, and acquiring the nat-gas assets from LS Power Equity Advisors for about $12 billion, including debt.

Shopify (SHOP) is up more than +12% after Nasdaq announced late last Friday that the stock will replace MongoDB in the Nasdaq 100 Index before trading begins on May 19. 

Earnings Reports (5/12/2025)

Acadia Healthcare Co Inc (ACHC), DaVita Inc (DVA), Essential Utilities Inc (WTRG), Fortrea Holdings Inc (FTRE), Fox Corp (FOXA), New Fortress Energy Inc (NFE), NRG Energy Inc (NRG), Seaport Entertainment Group In (SEG), Simon Property Group Inc (SPG), Standardaero Inc (SARO), ZoomInfo Technologies Inc (ZI).