Stocks Erase Early Gains on US Labor Market Concerns

The S&P 500 Index ($SPX) (SPY) today is down -0.25%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.34%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.13%.  June E-mini S&P futures (ESM25) are down -0.23%, and June E-mini Nasdaq futures (NQM25) are down -0.11%. 

Stock indexes today gave up early gains and turned lower on concerns about the US labor market after weekly jobless claims unexpectedly rose to a 7-3/4 month high.  Stocks initially moved higher on hopes that trade tensions will ease between the US and China after China’s state media Xinhua News Agency reported that US President Trump and Chinese President Xi Jinping spoke by telephone today.  Stocks also garnered support from today’s economic news that showed the US trade deficit in April shrank to a 20-month low, a positive factor for Q2 GDP.

Expectations for Fed rate cuts this year are supportive for stocks after the 10-year T-note yield fell to a 4-week low of 4.31% today.

US weekly initial unemployment claims unexpectedly rose +8,000 to a 7-3/4 month high of 247,000, showing a weaker labor market than expectations of a decline to 235,000.

The US Apr trade deficit shrank to a 20-month low of -$61.6 billion, narrower than expectations of -$66.0 billion.

US Q1 nonfarm productivity was revised lower to -1.5% from -0.8%.  Q1 unit labor costs were revised upward to 6.6% from the previously reported 5.7%.

Comments Wednesday evening from Minneapolis Fed President Kashkari signal he favors keeping interest rates steady when he said, “The economy is seeming like it’s pretty resilient so far, and so for me right now is the time to get data, see how the tariff negotiations shake out before we reach any firm conclusions about the direction of interest rates.”

The markets are discounting the chances at 1% for a -25 bp rate cut at the next FOMC meeting on June 17-18.

The markets this week will focus on any fresh trade or tariff news. On Friday, May nonfarm payrolls are expected to climb +125,000, and the May unemployment rate is expected to remain unchanged at 4.2%.  Finally, May average hourly earnings are expected to rise +0.3% m/m and +3.7% y/y. 

Overseas stock markets today are mixed.  The Euro Stoxx 50 is down -0.18%.  China’s Shanghai Composite climbed to a 1-1/2 week high and closed up +0.23%.  Japan’s Nikkei Stock 225 closed down -0.51%.

Interest Rates

September 10-year T-notes (ZNU25) today are unchanged.  The 10-year T-note yield is down -0.2 bp to 4.353%.  Sep T-notes today rose to a 4-week high, and the 10-year T-note yield fell to a 4-week low of 4.310%.  T-notes gave up early gains today and are little changed as stocks rallied on hopes of easing US-Chian trade tensions after the Xinhua news agency reported that President Trump and President Xi Jinping spoke by telephone today.  Also weighing on T-notes was today’s news that showed US Q1 nonfarm productivity was revised downward and Q1 unit labor costs were revised higher.

T-notes initially moved higher on carryover support from strength in European government bonds after the ECB cut interest rates by -25 bp. T-notes jumped to their highs today when weekly US jobless claims unexpectedly rose to a 7-3/4 month high, a sign of labor market weakness and a dovish factor for Fed policy. 

European government bond yields today are mixed.  The 10-year German bund yield rebounded from a 4-week low of 2.476% and is up +2.2 bp to 2.550%.  The 10-year UK gilt yield dropped to a 3-1/2 week low of 4.554% and is down -1.7 bp to 4.589%.

Eurozone Apr PPI fell -2.2% m/m and rose +0.7% y/y, weaker than expectations of -2.1% m/m and +1.1% y/y.

German Apr factory orders unexpectedly rose +0.6% m/m, stronger than expectations of -1.5% m/m.

The ECB, as expected, cut the deposit facility rate by -25 bp to 2.00% from 2.25% and said, “Inflation is currently at around the Governing Council’s 2% medium-term target.”

ECB President Lagarde said risks to growth “tilted to the downside” as recent survey data points to weaker near-term prospects for the Eurozone economy.  However, a stronger labor market and rising incomes will help the economy, and she wouldn’t exclude further upward revisions to growth.  She added that the ECB is getting toward the end of its rate cut cycle with today’s rate cut.

Swaps are discounting the chances at 42% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

Brown-Forman (BF.B) is down more than -15% to lead losers in the S&P 500 after reporting Q4 net sales of $894 million, well below the consensus of $968.4 million.

PVH Corp (PVH) is down more than -17% after cutting its 2026 adjusted EPS forecast to $10.75-$1.00 from a previous forecast of $12.40-$12.75, well below the consensus of $12.46. 

Ciena Corp (CIEN) is down more than -14% after reporting Q2 adjusted EPS of 42 cents, weaker than the consensus of 52 cents. 

Tesla (TSLA) is down more than -5% to lead losers in the Nasdaq 100, adding to Wednesday’s -4% slide, after reporting its May vehicle shipments from China fell -15% y/y to 61,662 units, the eighth straight monthly decline.

Costco Wholesale (COST) is down more than -2% after reporting May total comparable sales rose +4.3%, weaker than the consensus of +4.7% 

Life Time Group Holdings (LTH) is down more than -2% after announcing it intends to sell 20 million shares of its common stock in an underwritten public offering. 

The strength of chip makers is supportive of the broader market. Micron Technology (MU) is up more than +3% to lead gainers in the Nasdaq 100.  Also, ASML Holding NV (ASML) and Microchip Technology (MCHP) are up more than +1%.  In addition, KLA Corp (KLAC) and Texas Instruments (TXN) are up more than +0.70%.

Mining stocks are climbing today as the price of gold rose to a 4-week high and silver prices soared to a 13-year high.  As a result, Freeport-McMoRan (FCX) is up more than +3%, Anglogold Ashanti Plc (AU) is up more than +2%, and Newmont (NEM) is up more than +1%. 

MongoDB (MDB) is up more than +15% after reporting Q1 adjusted EPS of $1.06, well above the consensus of 67 cents, and raising its 2026 adjusted EPS forecast to $2.94-$3.12 from a previous estimate of $2.44-$2.62, stronger than the consensus of $2.60. 

Five Below (FIVE) is up more than +9% after reporting Q1 comparable sales rose +7.1%, better than the consensus of +6.37%, and forecast 2026 comparable sales will climb +3% to +5%, the midpoint above the consensus of +3.78%. 

Dollar Tree (DLTR) is up more than +3% to lead gainers in the S&P 500 after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $111. 

Verint Systems (VRNT) is up more than +5% after reporting Q1 adjusted EPS of 29 cents, better than the consensus of 19 cents. 

Earnings Reports (6/5/2025)

Broadcom Inc (AVGO), Brown-Forman Corp (BF/B), Ciena Corp (CIEN), Docusign Inc (DOCU), Lululemon Athletica Inc (LULU), Toro Co/The (TTC), Vail Resorts Inc (MTN).