Stocks Soar as Trade Tensions Ease and Bond Yields Fall

The S&P 500 Index ($SPX) (SPY) today is up +1.59%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.25%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.93%.  June E-mini S&P futures (ESM25) are up +1.58%, and June E-mini Nasdaq futures (NQM25) are up +1.92%. 

Stock indexes today are trading higher after President Trump over the weekend extended the deadline for the European Union to face 50% tariffs until July 9 after threatening to impose a 50% tariff on EU goods starting June 1. Stocks also garnered support from today's comments from National Economic Council Director Hasset, who said, "We'll probably see a few more trade deals, even this week," with India among the countries that are close to securing a deal.  Gains in stocks accelerated today after the Conference Board US May consumer confidence index rose more than expected to a 3-month high.

Stocks also found support on a slide in bond yields spurred on by speculation that Japan could change its debt sales plans, which could lead to stronger demand for US debt securities if Japan cuts its debt issuance. The 10-year T-note yield is down -5 bp to 4.46%.  Bloomberg News reported that Japan's Finance Ministry sent a questionnaire to market participants regarding the appropriate issuance amounts for government bonds, a sign that the ministry may seek to reduce debt issuance.

US Apr capital goods new orders nondefense ex-aircraft and parts fell -1.3% m/m, weaker than expectations of -0.2% m/m and the biggest decline in 6 months.

The US Mar S&P CoreLogic composite-20 home price index rose +4.07% y/y, weaker than expectations of 4.50% y/y and the smallest increase in 1-1/2 years.

The Conference Board US May consumer confidence index rose +12.3 to a 3-month high of 98.0, stronger than expectations of 87.1.

The US May Dallas Fed manufacturing survey general business activity rose +20.5 to -15.3, stronger than expectations of -23.1.

Minneapolis Fed President Kashkari said he favors maintaining the fed funds rate at current levels until there is more clarity on the path of tariffs and their impact on prices.

The markets are discounting the chances at 2% for a -25 bp rate cut at the next FOMC meeting on June 17-18.

The markets this week will focus on any tariff news or signs of new trade deals.  On Wednesday, the minutes of the May 6-7 FOMC meeting will be released.  Also, after Wednesday's close, Nvidia will report its quarterly earnings.  On Thursday, weekly initial unemployment claims are expected to climb +3,000 to 230,000. Also, Q1 GDP is expected unchanged at -0.3% (q/q annualized).  In addition, Apr pending home sales on Thursday are expected to fall -1.0% m/m. On Friday, Apr personal spending is expected up +0.2% m/m, and Apr personal income is expected up +0.3% m/m. Also, the Apr core PCE price index, the Fed's preferred inflation gauge, is expected to rise +0.1% m/m and +2.5% y/y.  Finally, on Friday, the University of Michigan May consumer sentiment index is expected to be revised upward by +0.2 points to 51.0 from the previously reported 50.8.

Q1 earnings reporting season is winding down.  So far, more than 90% of companies in the S&P 500 have reported quarterly results, and 77% have beaten estimates, the highest percentage since Q2 of 2024.  Earnings growth in Q1 is running at +13.1%, compared with just +6.6% expected before the start of the season.  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 is up by +0.70%.  China's Shanghai Composite fell to a 2-1/2 week low and closed down -0.18%.  Japan's Nikkei Stock 225 closed up +0.51%.

Interest Rates

June 10-year T-notes (ZNM25) today are up by +8 ticks.  The 10-year T-note yield is down -5.0 bp to 4.461%.  June T-notes are climbing today on positive carryover from strength in 10-year German bunds.  T-notes also have support after Bloomberg News reported that Japan's finance ministry sent a questionnaire to market participants regarding appropriate issuance amounts for government bonds, which could lead to stronger demand for US debt securities if Japan cuts its debt issuance.  Weaker-than-expected US economic news today, including April capital goods new orders nondefense ex-aircraft and parts, and the March S&P CoreLogic composite-20 home price index, also gave T-notes a boost.

Today's soaring stocks are reducing safe-haven demand for government debt and limiting gains in T-notes.  Also, supply pressures are weighing on T-notes as the Treasury will auction $69 billion of 2-year T-notes later today as part of this week's slate of $211 billion of T-note and floating-rate note auctions. 

European government bond yields today are mixed.  The 10-year German bund yield fell to a 2-1/2 week low of 2.513% and is down -1.8 bp at 2.543%.  The 10-year UK gilt yield rebounded from a 2-week low of 4.602% and is up +0.4 bp to 4.684%.

The Eurozone May economic confidence indicator rose +1.0 to 94.8, stronger than expectations of 94.1. 

Eurozone Apr new car registrations rose +1.3% y/y to 925,000 units, the first increase in four months.

ECB Governing Council member Holzmann said the ECB moving interest rates "further south would be more risky than staying where we are and waiting until September."

Swaps are discounting the chances at 97% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

US Stock Movers

The Magnificent Seven stocks are rallying today and are lifting the overall market.  Tesla (TSLA) is up more than +4%, and Nvidia (NVDA) is up more than +3%.  Also, Alphabet (GOOGL) is up more than +2%.  In addition, Meta Platforms (META), Amazon.com (AMZN), Apple (AAPL), and Microsoft (MSFT) are up more than +1%.

Chip stocks are climbing today and supporting the broader market.  Marvel Technology (MRVL) is up more than -5%, and Advanced Micro Devices (AMD), Microchip Technology (MCHP), ON Semiconductor (ON), and ARM Holdings Plc (ARM) are up more than +4%.  Also, ASML Holding NV (ASML), KLA Corp (KLAC), and NXP Semiconductors NV (NXPI) are up more than +3%.  In addition, Lam Research (LRCX), Analog Devices (ADI), Micron Technology (MU),  Applied Materials (AMAT), GlobalFoundries (GFS), Broadcom (AVGO), and Qualcomm (QCOM), and Texas Instruments (TXN) are up more than +2%. 

Travel stocks and cruise line operators are moving higher today. United Airlines Holdings (UAL) is up more than +6%, and Carnival (CCL), Southwest Airlines (LUV), and Royal Caribbean Cruises Ltd (RCL) are up more than +5%.  Also, Norwegian Cruise Line Holdings (NCLH) and Delta Air Lines (DAL) are up more than +4%, and Expedia Group (EXPE), Host Hotels and Resorts (HST) and Hilton Worldwide Holdings (HLT) are up more than +3%.

Informatica (INFA) is up more than +5% after Salesforce Inc. agreed to buy the company for about $8 billion. 

Block Inc. (XYZ) is up more than +5% after BNP Paribas Exane upgraded the stock to outperform from neutral with a price target of $72. 

Vertiv Holdings (VRT) is up more than +4% after Evercore ISI raised its price target on the stock to $150 from $100. 

Gold mining stocks are sliding today, with the price of gold down more than -2%.  As a result, Gold Fields Ltd (GFI) is down more than -3%, and Anglogold Ashanti Plc (AU) and Newmont (NEM) are down more than -1%.

PDD Holdings (PDD) is down more than -15% to lead losers in the Nasdaq 100 after reporting Q1 adjusted operating margin declined to -19.1%, the lowest since Q1 of 2022.

Fair Isaac (FICO) is down more than -7% to lead losers in the S&P 500 after FHFA Director Pulte said he is "still not happy with FICO" and his agency will be making some decisions on the rising cost of credit score reports in the next one to three weeks.

AutoZone (AZO) is down more than -2% after reporting a Q3 gross margin of 52.7%, weaker than the consensus of 53.4%.

Leidos Holdings (LDOS) is down more than -1% after Baird downgraded the stock to neutral from outperform, citing concerns about the bookings environment.

National Storage Affiliates Trust (NSA) is down -0.54% after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $30. 

Earnings Reports (5/27/2025)

American Vanguard Corp (AVD), AutoZone Inc (AZO), Box Inc (BOX), Champion Homes Inc (SKY), Critical Metals Corp (CRML), Golar LNG Ltd (GLNG), Golden Matrix Group Inc (GMGI), HEICO Corp (HEI), Okta Inc (OKTA), Semtech Corp (SMTC).