Stocks Pressured by US-China Trade Tensions

The S&P 500 Index ($SPX) (SPY) today is down -0.25%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.11%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.25%.  June E-mini S&P futures (ESM25) are down -0.24%, and June E-mini Nasdaq futures (NQM25) are down -0.25%. 

Stock indexes today are seeing downward pressure as concern about US trade policy weighs on market sentiment.  Late Thursday, US Treasury Secretary Bessent said that trade talks with China were “a bit stalled” and that a call between President Trump and Chinese President Xi Jinping may be needed to reach a deal.  Stocks added to their losses today when President Trump today accused China of violating an agreement with the US to ease tariffs but did not specify how China had violated the agreement.

US economic news today was mainly supportive for stocks as Apr personal spending rose as expected and Apr personal income rose more than expected. Also, the Apr core PCE price index, the Fed’s preferred inflation gauge, eased to its lowest level in more than 4 years, a dovish factor for Fed policy.

Stocks recovered from their worst levels after US consumer sentiment was revised higher and inflation expectations were revised lower.

US Apr personal spending rose +0.2% m/m, right on expectations. Apr personal income rose +0.8% m/m, stronger than expectations of +0.3% m/m and the biggest increase in 15 months. 

The US Apr core PCE price index, the Fed’s preferred inflation gauge, rose +0.1% m/m and +2.5% y/y, right on expectations.  The +2.5% y/y report was the smallest year-on-year advance in more than 4 years.

The US May Chicago PMI unexpectedly fell -4.1 to 40.5, weaker than expectations of an increase to 45.0.

The University of Michigan US May consumer sentiment index was revised upward by +1.4 to 52.2, stronger than expectations of 51.5.

The University of Michigan US May 1-year inflation expectations indicator was revised lower to +6.6% from the previously reported +7.3%, weaker than expectations of +7.1%.  Also, the May 5-10 year inflation expectations indicator was revised lower to +4.2%, weaker than expectations of no change at +4.6%.

Comments Thursday evening from Dallas Fed President Logan signaled the Fed could keep interest rates unchanged in the medium term when she said it might be “quite some time” before Fed officials know how the economy will respond to tariffs and other policy changes, and the Fed adjusts interest rates.

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

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 +0.22%.  China’s Shanghai Composite closed down -0.47%.  Japan’s Nikkei Stock 225 closed down -1.22%.

Interest Rates

June 10-year T-notes (ZNM25) today are up +3 ticks.  The 10-year T-note yield is down -0.2 bp to 4.416%.  June T-notes today climbed to a 3-week high and are slightly higher, and the 10-year T-note fell to a 2-week low of 4.396%.  T-notes today recovered from early losses and moved higher on the increase in safe-haven demand for government debt when stocks fell after President Trump accused China of violating the tariff agreement with the US. T-notes also have support after the US Apr core PCE price index, the Fed’s preferred inflation gauge, posted its smallest year-on-year advance in more than four years, and after inflation expectations were revised lower, dovish factors for Fed policy. 

Today’s weakness in European government bonds is a negative factor for T-notes.  Also, hawkish comments from Dallas Fed President Logan undercut T-note prices when she said it may be “quite some time” before the Fed adjusts interest rates. In addition, concerns about rising wage pressures are weighing on T-notes after today’s news that US Apr personal income posted its largest increase in 15 months.   

European government bond yields today are moving higher.  The 10-year German bund yield rebounded from a 3-week low of 2.497% and is up +1.5 bp at 2.523%.  The 10-year UK gilt yield is up +1.2 bp to 4.661%.

Eurozone Apr M3 money supply rose +3.9% y/y, stronger than expectations of +3.7% y/y.

German Apr retail sales unexpectedly fell -1.1% m/m, weaker than expectations of a +0.2% m/m increase and the biggest decline in more than 1-1/2 years.

German May CPI (EU harmonized) rose +0.2% n/n and +2.1% y/y, stronger than expectations of +0.1% m/m and +2.0% y/y.

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

Marvell Technology (MRVL) is down more than -5% to lead chip stocks lower after forecasting Q2 adjusted gross margin of 59% to 60%, with the midpoint slightly below the consensus of 59.6%.  Also, Micron Technology (MU) and Intel (INTC) are down more than -2%.  In addition, Nvidia (NVDA), GlobalFoundries (GFS), Applied Materials (AMAT), Lam Research (LRCX), Advanced Micro Devices (AMD), NXP Semiconductors NV (NXPI), ON Semiconductor (ON), and Qualcomm (QCOM) are down more than -1%.

Regeneron Pharmaceuticals (REGN) is down more than -17% to lead losers in the S&P 500 and Nasdaq 100 after its itepekimab, an experimental drug jointly developed with Sanofi for chronic obstructive pulmonary disease, showed disappointing results in late-stage trial.

Cooper Cos (COO) is down more than -14% after cutting its full-year organic growth forecast to 5%-6% from a previous forecast of 6%-8%.

The Gap (GAP) is down more than -20% after forecasting Q2 net sales about flat y/y and warning of a $250 million to $300 million hit to earnings should tariffs remain at current levels of 30% for most goods from China and 10% for other countries. 

Elastic NV (ESTC) is down more than -11% after forecasting 2026 revenue of $1.66 billion to $1.67 billion, below the consensus of $1.68 billion.

Eastman Chemical (EMN) is down more than -2% after the Trump administration canceled a $375 million award to the company for a molecular recycling project in Texas.

Ulta Beauty (ULTA) is up more than +12% to lead gainers in the S&P 500 after reporting Q1 EPS of $6.70, well above the consensus of $5.80, and raised its 2026 EPS forecast to $22.65-$23.20 from a previous estimate of $22.50-$22.90, stronger than the consensus of $22.95. 

Zscaler (ZS) is up more than +8% to lead gainers in the Nasdaq 100 after reporting Q3 revenue of $678.0 million, better than the consensus of $666.3 million, and raising its full-year revenue forecast to $2.66 billion from a previous forecast of $2.64 billion-$2.65 billion, above the consensus of $2.65 billion.

Palantir Technologies (PLTR) is up more than +6 after the New York Times reported that President Trump is expanding the use of the company’s technology platform to the IRS, HHS, and DHS. 

Unity Software (U) is up more than +12% after Jeffries upgraded the stock to buy from hold with a price target of $29.

Costco Wholesale (COST) is up more than +2% after reporting Q3 EPS of $4.28, better than the consensus of $4.24.

Dexcom (DXCM) is up more than +1% after Goldman Sachs initiated coverage on the stock with a buy recommendation and a price target of $104. 

Earnings Reports (5/30/2025)

B Riley Financial Inc (RILY), Compass Diversified Holdings (CODI), Roadzen Inc (RDZN), Shoe Carnival Inc (SCVL), Sunnova Energy International Inc (NOVA).