Stocks Slightly Higher as Bond Yields Decline

The S&P 500 Index ($SPX) (SPY) today is up +0.07%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.06%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.10%.  June E-mini S&P futures (ESM25) are up +0.10%, and June E-mini Nasdaq futures (NQM25) are up +0.11%. 

Stock indexes today are slightly higher, with most investors on the sidelines ahead of the results of the 2-day FOMC meeting later this afternoon.  Expectations are for the Fed to keep interest rates unchanged, and the markets will focus on the Fed's dot plot and latest projections for growth, unemployment, and interest rates.  Post-FOMC meeting comments from Fed Chair Powell will be dissected for clues to future Fed policy intentions.  Stock indexes maintained modest gains after US weekly jobless claims fell as expected, although bond yields fell on weaker-than-expected US news on May housing starts and building permits.  The 10-year T-note yield is down -2 bp to 4.36%.

Gains in stocks are limited by geopolitical risks as hostilities between Israel and Iran entered a sixth day Tuesday with no signs of easing.  An overnight meeting between President Trump and his national security team has bolstered speculation the US is close to joining Israel's attacks on Iran after President Trump called for Iran's "unconditional surrender." The US has announced a meeting today with Pakistan's army chief, a key ally of Iran, to discuss mediation.  Iran showed no signs of backing down and reiterated an intention to respond with force if the US were to get directly involved in Israeli attacks.

So far, there's been no closure of the vital Strait of Hormuz that handles about 20% of the world's daily crude shipments, although navigational signals from over 900 vessels moving through the strait have been disrupted due to "extreme jamming" of signals from the Iranian port of Bandar Abbas, which caused a collision of two tankers Tuesday near the Strait of Hormuz.   

US MBA mortgage applications fell -2.6% in the week ended June 13, with the purchase mortgage sub-index down -3.0% and the refinancing mortgage sub-index down -2.1%. The average 30-year fixed rate mortgage fell -9 bp to 6.84% from 6.93% the prior week.

US weekly initial unemployment claims fell -5,000 to 245,000, right on expectations.

Today's US housing news was weaker than expected.  May housing starts fell -9.8% m/m to a 5-year low of 1.256 million, weaker than expectations of 1.350 million.  May building permits, a proxy for future construction, unexpectedly fell -2.0% m/m to a 4-3/4 year low of 1.393 million, weaker than expectations of no change at 1.422 million.

Investors are bracing for negative tariff news within the next week or so following President Trump's announcement last Wednesday that he intends to send letters to dozens of US trading partners within one to two weeks, setting unilateral tariffs ahead of the July 9 deadline that came with his 90-day pause. 

The markets are discounting the chances at 0% for a -25 bp rate cut at the Tue-Wed FOMC meeting.

Overseas stock markets on today are mixed.  The Euro Stoxx 50 fell to a 3-1/2 week low and is down -0.46%.  China's Shanghai Composite closed up +0.04%.  Japan's Nikkei Stock 225 rose to a 3-3/4 month high and closed up +0.90%.

Interest Rates

September 10-year T-notes (ZNU25) today are up +4 ticks.  The 10-year T-note yield is down -2.4 bp to 4.365%.   T-notes today are moving higher on carryover support from strength in European government bonds.  T-notes added to their gains after US May housing starts and building permits fell more than expected, dovish factors for Fed policy.  T-notes are still supported from safe-haven demand after President Trump met his national security team, fueling speculation that the US may be on the verge of joining the attack against Iran.

Gains in T-notes were limited due to an increase in inflation expectations after the 10-year breakeven inflation rate rose to a two-week high today of 2.336%.

European government bond yields today are moving lower.  The 10-year German bund yield is down -1.4 bp to 2.521%.  The 10-year UK gilt yield is down -2.2 bp to 4.529%.

ECB Governing Council member Panetta said the Eurozone's economic prospects face "substantial" risks due to US tariffs and the fighting in the Middle East.

UK May CPI eased to +3.4% y/y from 3.5% y/y in April, stronger than expectations of +3.3% y/y. May core CPI eased to +3.5% y/y from +3.8% y/y in April, right on expectations.

Swaps are discounting the chances at 6% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

Nucor (NUE) is up more than +5% to lead gainers in the S&P 500 after forecasting Q2 EPS of $2.55-$2.65, stronger than the consensus of $2.30. 

Marvell Technology (MRVL) is up more than +6% to lead gainers in the Nasdaq 100 after the company raised its overall data center total addressable market to $94 billion by 2028, up from a previous estimate of $75 billion. 

JPMorgan Chase (JPM) is up more than +1% to lead gainers in the Dow Jones Industrials and bank stocks higher on reports that US regulators plan to ease a capital rule limiting banks' Treasury trades. 

Wells Fargo & Co (WFC) is up more than +1% after Raymond James raised its price target on the stock to $84 from $78.

Analog Devices (ADI) is up more than +1% after Cantor Fitzgerald upgraded the stock to overweight from neutral with a price target of $270. 

Oracle (ORCL) is up more than +1% after Guggenheim Securities raised its price target on the stock to $250 from $220. 

Pharmaceutical companies are moving lower for a second consecutive day after Bloomberg reported on Tuesday that the Trump administration is considering policies that would restrict pharmaceutical companies' ability to advertise directly to patients.  As a result, Merk & Co (MRK), Bristol-Meyers Squibb (BMY), Eli Lilly (LLY), Amgen (AMGN), Baxter International (BAX), and Moderna (MRNA) are down more than -1%.

Bitdeer Technologies (BTDR) is down more than -8% after announcing it was offering $300 million in convertible senior notes due 2031 in a private placement.  

Zoetis Inc (ZTS) is down more than -3% to lead losers in the S&P 500 after Stifel downgraded the stock to hold from buy, citing "developing headwinds" for the company.

Allstate (ALL) is down more than -1% after reporting May catastrophe losses rose +31% m/m to $777 million. 

Earnings Reports (6/18/2025)

GMS Inc (GMS), Korn Ferry (KFY), LiveOne Inc (LVO), Smith & Wesson Brands Inc (SWBI).