Stocks Settle Mostly Lower as Chip Makers Fall

The S&P 500 Index ($SPX) (SPY) Friday closed down -0.22%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.43%.  September E-mini S&P futures (ESU25) are down -0.21%, and September E-mini Nasdaq futures (NQU25) are down -0.40%. 

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

Negative trade news also pressured stocks after the Financial Times reported that Japan had canceled a top-level trade meeting with the US, set for July 1, following a request from the Trump administration for Japan to increase its defense spending. Investors are bracing for more 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. 

Stocks initially moved higher on Friday, driven by a Reuters report that the Iranian government said it is ready to discuss limitations on its uranium enrichment.

Stocks were supported Friday by 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 had support from dovish comments on Friday 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."

Friday'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, the May index of leading economic indicators (LEI) fell -0.1% m/m, right on expectations, and the sixth consecutive month the LEI has declined.

Hostilities between Israel and Iran entered an eighth day Friday with no signs of easing. Israel struck more of Iran's nuclear and missile production sites Friday 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, Iran has not tried to close the vital Strait of Hormuz that handles about 20% of the world's daily crude shipments.  However, 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.   

The markets are discounting the chances at 17% for a -25 bp rate cut at the July 29-30 FOMC meeting.

Overseas stock markets on Friday settled mixed.  The Euro Stoxx 50 closed 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) Friday closed up +6 ticks.  The 10-year T-note yield fell -1.6 bp to 4.375%.  T-notes on Friday recovered from early losses and moved higher on the weaker-than-expected Philadelphia Fed business outlook survey.  Also, dovish comments from Fed Governor Waller pushed T-note prices higher 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 due to the possibility that the US might bomb Iran’s Fordow nuclear complex. T-note prices also saw support from weakness in stocks.

T-notes on Friday initially moved lower on reduced safe-haven demand after President Trump vowed to seek a diplomatic solution on Iran’s nuclear program over the next two weeks. Also, rising inflation expectations are bearish for T-notes after the US 10-year breakeven inflation expectations rate Friday rose to a 2-week high at 2.34%.

European government bond yields on Friday were mixed.  The 10-year German bund yield fell -0.4 bp to 2.517%.  The 10-year UK gilt yield rose +0.7 bp to 4.537%.

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 7% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

Chip makers turned lower on Friday and weighed on the broader market.  Lam Research (LRCX) and KLA Corp (KLAC) closed down more than -2%.  Also, Applied Materials (AMAT), Intel (INTC), Qualcomm (QCOM), NXP Semiconductors NV (NXPI), Broadcom (AVGO), and Marvell Technology (MRVL) closed down by more than -1%. 

Weakness in the Magnificent Seven stocks Friday was a negative factor for the overall market.  Alphabet (GOOGL) closed down more than -3%.  Also, Meta Platforms (META), Nvidia (NVDA), and Amazon.com (AMZN) closed down more than -1%.  In addition, Microsoft (MSFT) closed down -0.59%.  However, Apple (AAPL) bucked the trend and closed up more than +2%.  Tesla (TSLA) closed up +0.03%. 

Accenture (ACN) closed down more than -6% 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) closed down more than -19% after reporting Q4 adjusted EPS of 20 cents, weaker than the consensus of 23 cents.

Sarepta Therapeutics (SRPT) closed down more than -3% after William Blair downgraded the stock to market perform from outperform. 

Johnson Controls International (JCI) closed down more than -1% after Oppenheimer downgraded the stock to perform from outperform.

Kroger (KR) closed up more than +9% 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) closed up more than +6% after reporting Q1 net sales of $7.55 billion, stronger than expectations of $7.52 billion.

GMS Inc (GMS) closed up more than +24% 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) closed up more than +20%, 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) closed up more than +2% to lead gainers in the Nasdaq 100 after Wells Fargo Securities upgraded the stock to overweight from neutral with a price target of $78. 

Fair Isaac Co (FICO) closed 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. 

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

Earnings Reports (6/23/2025)

Commercial Metals Co (CMC), FactSet Research Systems Inc (FDS), KB Home (KBH).