Stocks Pressured as Bond Yields Climb

The S&P 500 Index ($SPX) (SPY) today is down -0.25%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.26%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.13%.  June E-mini S&P futures (ESM25) are down -0.26%, and June E-mini Nasdaq futures (NQM25) are down -0.10%. 

Stock indexes today gave up an early advance and turned lower as an increase in bond yields undercut support for equities.  The 10-year T-note yield today is up +5 bp at 4.49%.  Stocks today initially moved higher, with the S&P 500 and Dow Jones Industrials posting 1-week highs and the Nasdaq 100 posting a 3-month high.

Stocks have carryover support from President Trump’s action over the weekend to extend the deadline for a 50% tariff on US imports from the EU until July 9 after threatening to impose that tariff starting June 1.  The markets are awaiting Nvidia’s earnings results after the close today to gauge the impact of the trade war and the outlook for artificial intelligence.

US MBA mortgage applications fell -1.2% in the week ended May 23, with the purchase mortgage sub-index up +2.7% and the refinancing sub-index down -7.1%.  The average 30-year fixed rate mortgage rose +6 bp to 6.98% from 6.92% in the prior week.

The US May Richmond Fed manufacturing survey rose by +4 to -9, right on expectations.

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.  Later today, the minutes of the May 6-7 FOMC meeting will be released.  Also, after today’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 to be unrevised 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 mostly lower.  The Euro Stoxx 50 is down -0.50%.  China’s Shanghai Composite closed down -0.02%.  Japan’s Nikkei Stock 225 fell from a 2-week high and closed unchanged.

Interest Rates

June 10-year T-notes (ZNM25) today are down -11 ticks.  The 10-year T-note yield is up +5.4 bp to 4.497%.  June T-notes today are under pressure from carryover weakness in European government bonds.  Also, supply pressures are undercutting T-notes as the Treasury later today will auction $28 billion of 2-year floating-rate notes and $70 billion of 5-year T-notes. 

European government bond yields today are moving higher.  The 10-year German bund yield is up +1.3 bp at 2.545%. The 10-year UK gilt yield is up +4.2 bp to 4.707%.

The ECB Apr 1-year CPI expectations rose +3.1% y/y, stronger than expectations of +2.8% y/y and the highest in 14 months.  The ECB Apr 3-year CPI expectations were unchanged from Mar at +2.5% y/y, right on expectations.

German May unemployment rose by +34,000, higher than expectations of +12,000 and the most in 2-3/4 years.  The May unemployment rate was unchanged at 6.3%, right on expectations.

The German Apr import price index fell -1.7% m/m, a bigger decline than expectations of -1.4% m/m and the largest drop in more than two years.

Swaps are discounting the chances at 98% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

US Stock Movers

Okta (OKTA) is down more than -12% after forecasting its Q2 current remaining performance obligation of $2.20 billion to $2.21 billion, below the consensus of $2.23 billion. 

Galaxy Digital (GLXY) is down more than -12% after announcing an underwritten offering of 29 million shares of its Class A common stock.

PDD Holdings (PDD) is down more than -3% to lead losers in the Nasdaq 100 after UOB double-downgraded the ADRs to sell from buy with a price target of $90.

Homebuilding stocks and homebuilding suppliers are under pressure today due to higher T-note yields, a negative factor for housing demand.  As a result, DR Horton (DHI), Lennar (LEN), PulteGroup (PHM), Mohawk Industries (MHK), and Toll Brothers (TOL) are down more than -2%.  Also, Builders FirstSource (BLDR) is down more than -1%.

Booze Allen Hamilton Holding (BAH) is down more than -1% after Goldman Sachs downgraded the stock to sell from neutral with a price target of $94.

Elevance Health (ELV) is up more than +1% to lead managed healthcare stocks higher after it reaffirmed its full-year adjusted profit forecast.  Also, Humana (HUM), CVS Health (CVS), and UnitedHealth Group (UNH) are up more than +1%. 

Fair Isaac (FICO) is up more than +7% to lead gainers in the S&P 500 after Baird upgraded the stock to outperform from neutral with a price target of $1,900.

Abercrombie & Fitch (ANF) is up more than +25% after reporting Q1 net sales of $1.10 billion, above the consensus of $1.07 billion, and boosted the high-end of its full-year net sales forecast to +3% to +6% from a previous estimate of +3% to +5%.

Box Inc (BOX) is up more than +17% after boosting its full-year revenue forecast to $1.17 billion from $1.16 billion, stronger than the consensus of $1.15 billion.   

Vail Resorts (MTN) is up more than +12% after reaffirming its fiscal 2025 guidance and saying it reappointed Rob Katz as CEO, succeeding Kirsten Lynch, who has stepped down from the role. 

Noble Corp (NE) is up more than +1% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $30. 

Earnings Reports (5/28/2025)

Agilent Technologies Inc (A), Capri Holdings Ltd (CPRI), Dick’s Sporting Goods Inc (DKS), elf Beauty Inc (ELF), HP Inc (HPQ), Macy’s Inc (M), nCino Inc (NCNO), Nordson Corp (NDSN), Nutanix Inc (NTNX), NVIDIA Corp (NVDA), Pure Storage Inc (PSTG), Salesforce Inc (CRM), SentinelOne Inc (S), Synopsys Inc (SNPS), U-Haul Holding Co (UHAL), Veeva Systems Inc (VEEV).