Stocks Erase Early Gains on Weakness in Chip Makers

The S&P 500 Index ($SPX) (SPY) today is down -0.26%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.09%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.59%.  September E-mini S&P futures (ESU25) are down -0.16%, and September E-mini Nasdaq futures (NQU25) are down -0.48%. 

Stock indexes today gave up an early advance and turned lower on weakness in chip makers after a report from The Wall Street Journal stated that a top US official told top global semiconductor makers the US might revoke waivers for allies with semiconductor plants in China.   

Stocks today initially moved higher on signs of easing tensions in the Middle East.  WTI crude prices erased gains and moved lower after Reuters reported that the Iranian government said it is ready to discuss limitations on its uranium enrichment.

Stocks have support on speculation that the US will give negotiations a chance before deciding to enter the Israel-Iran war, following the White House's announcement on Thursday that President Trump would decide within two weeks on any US involvement in the conflict, and there is still a "substantial chance" of a negotiated settlement.

Stocks also have support from dovish comments today from Fed Governor Waller, who said, "I think we have room to bring interest rates down as early as July, and then we can see kind of see what happens with inflation."

Trading activity today may be more volatile than usual due to the expiration of approximately $6.5 trillion in June options, futures, and derivatives contracts, an event known as "triple witching."

Today's US economic news was negative for stocks.  The June Philadelphia Fed business outlook survey was unchanged at -4.0, weaker than expectations of an increase to -1.5.  Also, May index of leading economic indicators fell -0.1% m/m, right on expectations, and the sixth consecutive month the LEI has declined.

Stocks still have some negative carryover from Wednesday when Fed Chair Powell warned that tariff-driven economic uncertainty and inflation risk continue to complicate the Fed's chances to ease monetary policy.  Also, the FOMC cut its US GDP forecast and raised its inflation forecast for this year.

Hostilities between Israel and Iran entered an eighth day today with no signs of easing. Israel struck more of Iran's nuclear and missile production sites today and warned it could bring down Iran's leadership.  Meanwhile, Iran said it won't negotiate with the US while Israel's assault continues.  Iranian President Pezeshkian said the only way to end the imposed war is to "unconditionally stop" the enemy's aggression.  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 a French naval liaison group said that navigational signals from about 1000 vessels a day moving through the strait are being 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.   

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 15% for a -25 bp rate cut at the July 29-30 FOMC meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is up by +0.70%.  China's Shanghai Composite closed down -0.07%.  Japan's Nikkei Stock 225 closed down -0.22%.

Interest Rates

September 10-year T-notes (ZNU25) today are down -4 ticks.  The 10-year T-note yield is up +2.8 bp to 4.419%.  T-notes today are under pressure on negative carryover from weakness in European government bonds.  Also, rising inflation expectations are bearish for T-notes after the US 10-year breakeven inflation rate today rose to a 2-week high at 2.337%.

T-notes recovered from their worst levels on the weaker-than-expected Philadelphia Fed business outlook survey.  Also, dovish comments from Fed Governor Waller were bullish for T-notes when he said, "I think we have room to bring interest rates down as early as July." T-notes are still supported by safe-haven demand on concern the US may be on the verge of joining the attack against Iran.

European government bond yields today are higher.  The 10-year German bund yield is up +0.9 bp to 2.530%.  The 10-year UK gilt yield is up +1.8 bp to 4.548%.

The Eurozone Jun consumer confidence index unexpectedly fell -0.1 to -15.3, weaker than expectations of an increase to -14.9.

The German May PPI fell -1.2% y/y, right on expectations and the biggest decline in 8 months.

UK May retail sales ex-auto fuel fell -2.8% m/m, weaker than expectations of -0.7% m/m and the biggest decline in nearly 1-1/2 years.

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

Chip makers turned lower today and are weighing on the broader market.  Lam Research (LRCX), KLA Corp (KLAC), and Applied Materials (AMAT) are down more than -3%.  Also, Broadcom (AVGO), ASML Holding NV (ASML), Marvell Technology (MRVL), and Intel (INTC) are down more than -2%.  In addition, Qualcomm (QCOM), GlobalFoundries (GFS), Analog Devices (ADI), and NXP Semiconductors NV (NXPI) are down more than -1%. 

Weakness in the Magnificent Seven stocks is a negative factor for the overall market. Alphabet (GOOGL) is down more than -2%. Also, Nvidia (NVDA), Amazon.com (AMZN), Meta Platforms (META), and Tesla (TSLA) are down more than -1%.  Microsoft (MSFT) is down -0.10%, but Apple (AAPL) is buckling the trend and is up +0.34%. 

Accenture (ACN) is down more than -5% to lead losers in the S&P 500 after lowering its full-year operating margin forecast to 15.6% from a previous forecast of 15.6%-15.7%. 

Smith & Wesson Brands (SWBI) is down more than -15% after reporting Q4 adjusted EPS of 20 cents, weaker than the consensus of 23 cents.

Jack in the Box (JACK) is down more than -1% after Stifel downgraded the stock to hold from buy. 

Kroger (KR) is up more than +7% to lead gainers in the S&P 500 after reporting Q1 adjusted EPS of $1.49, better than the consensus of $1.45.

CarMax (KMX) is up more than +5% after reporting Q1 net sales of $7.55 billion, stronger than expectations of $7.52 billion.

Fair Isaac Co (FICO) is up more than +2% after its Board of Directors approved a stock repurchase program to acquire up to $1 billion of the company's outstanding common stock. 

GMS Inc (GMS) is up more than +29% after the Wall Street Journal reported that Home Depot had made an offer for the company, potentially setting off a bidding war with QXO Inc, which made a $5 billion offer for the company earlier this week.   

Circle Internet Group (CRCL) is up more than +12%, adding to Wednesday's +34% surge after the US Senate passed stablecoin legislation setting up regulatory rules for cryptocurrencies pegged to the dollar. 

Mondelez International (MDLZ) is up more than +3% to lead gainers in the Nasdaq 100 after Wells Fargo Securities upgraded the stock to overweight from neutral with a price target of $78. 

Darden Restaurants (DRI) is up more than 1% after reporting that Q4 comparable same-store sales rose 4.60%, stronger than the consensus of 3.46%. 

Earnings Reports (6/20/2025)

Accenture PLC (ACN), CarMax Inc (KMX), Darden Restaurants Inc (DRI), Kroger Co/The (KR).