Stocks See Support as Reduced Middle East Tensions Sparks Risk-on

The S&P 500 Index ($SPX) (SPY) today is up +0.16%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.09%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.34%.  September E-mini S&P futures (ESU25) are up +0.10%, and September E-mini Nasdaq futures (NQU25) are up +0.34%. 

Stock indexes today are mostly higher, with the S&P 500 posting a 4-month high and the Nasdaq 100 posting a new all-time high.  Reduced geopolitical risks in the Middle East have boosted market sentiment and prompted a risk-on for asset markets as the ceasefire between Israel and Iran appears to be holding.  President Trump said today that the Mideast war is “over” and the US will hold a meeting with Iran next week.  Stocks fell back from their best levels after the US May new home sales fell more than expected to a 7-month low.

US MBA mortgage applications rose +1.1% in the week ended June 20, with the purchase mortgage sub-index down -0.4% and the refinancing mortgage sub-index up +3.0%. The average 30-year fixed rate mortgage rose +4 bp to 6.88% from 6.84% in the prior week.

US May new home sales fell -13.7% m/m to a 7-month low of 623,000, weaker than expectations of -6.7% m/m to 693,000.

Late Tuesday evening, Kansas City Fed President Schmid stated that the current “wait and see” monetary policy posture is appropriate, as the Fed should wait to see how tariffs and other policies impact the economy before adjusting interest rates.

The markets this week will watch to see if the ceasefire holds between Israel and Iran. Also, any new tariff news or trade deals will be scrutinized.  On Thursday, Q1 GDP is expected to be unrevised at -0.2% (q/q annualized). Also, weekly initial unemployment claims are expected to fall by -2,000 to 243,000.  Friday brings May personal spending (expected +0.1% m/m) and May personal income (expected +0.3% m/m).  Also on Friday, the May core PCE price index, the Fed’s preferred price gauge, is expected to rise by +0.1% m/m and +2.6% y/y.  Finally, Friday’s June University of Michigan US consumer sentiment index is expected to be revised lower by -0.2 points to 60.3. 

The markets are discounting the chances at 21% for a -25 bp rate cut at the July 29-30 FOMC meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is down -0.53%.  China’s Shanghai Composite rallied to a 6-1/4 month high and closed up +1.04%.  Japan’s Nikkei Stock 225 closed up +0.39%.

Interest Rates

September 10-year T-notes (ZNU25) today are down -7 ticks.  The 10-year T-note yield is up +3.3 bp to 4.328%.  Sep T-notes fell from a 1-1/2 month high today and are moving lower, and the 10-year T-note yield rebounded from a 1-1/2 month low of 4.275%.  T-notes are under pressure today on negative carryover from weakness in European government bonds.  Also, hawkish comments from Kansas City Fed President Schmid undercut T-notes when he said the Fed should wait to see how tariffs and other policies impact the economy before adjusting interest rates.  Supply pressures are negative for T-notes ahead of the Treasury’s $28 billion auction of 2-year floating rate notes and the $70 billion auction of 5-year T-notes later today. 

European government bond yields today are moving higher.  The 10-year German bund yield rose to a 1-week high of 2.577% and is up +2.4 bp to 2.568%.  The 10-year UK gilt yield rebounded from a 1-1/2 month low of 4.440% and is up +1.3 bp to 4.486%.

Eurozone May new car registrations rose +1.6% y/y to 927,000, the biggest increase in five months.

Swaps are discounting the chances at 8% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

The strength in chip stocks today has helped push the Nasdaq 100 to a new all-time high, providing support for the overall market.  Advanced Micro Devices (AMD) is up more than +3% to lead gainers in the Nasdaq 100.  Also, Nvidia (NVDA) is up more than +3% to lead gainers in the Dow Jones Industrials.  In addition, ARM Holdings Plc (ARM) and Applied Materials (AMAT) are up more than +1%, and Broadcom (AVGO) is up +0.90%. 

Super Micro Computer (SMCI) is up more than +6% to lead gainers in the S&P 500 after GF Securities Ltd initiated coverage of the stock with a buy recommendation and a price target of $59. 

Symbotic (SYM) is up more than +6% after Arete initiated coverage on the stock with a buy recommendation and a price target of $50. 

Stellantis NV (STLA) is up more than +3% after Jefferies upgraded the stock to buy from hold with a price target of $13.20. 

Yum!  Brands (YUM) is up more than +3% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $162. 

Alphabet (GOOGL) is up more than +2% after launching Gemini CLI, an artificial intelligence coding assistant to ease the work of developers.

Coinbase Global (COIN) is up more than +1% after Bernstein raised its price target on the stock to $510 from $310. 

Paychex (PAYX) is down more than -8% to lead losers in the S&P 500 and Nasdaq 100 after reporting Q4 adjusted EPS of $1.19 and matching estimates. 

Tesla (TSLA) is down more than -4% after reporting European May auto deliveries fell -28% y/y. 

FedEx (FDX) is down more than -2% after forecasting Q1 adjusted EPS of $3.40 to $4.000, weaker than the consensus of $4.03, and said it won’t provide a profit outlook for the fiscal year due to uncertain global demand. 

QXO Inc. (QXO) is down more than -6% after announcing a public offering of 89.9 million shares of its common stock at a price to the public of $22.25 per share, below Tuesday’s closing price of $23.51.

General Mills (GIS) is down more than -3% after reporting Q4 net sales of $4.56 billion, below the consensus of $4.59 billion.

NuScale Power Corp (SMR) is down more than -8% after BTIG LLC downgraded the stock to neutral from buy.

WEC Energy (WEC) is down more than -1% after Goldman Sachs downgraded the stock to sell from neutral with a price target of $100.

Earnings Reports (6/25/2025)

Daktronics Inc (DAKT), General Mills Inc (GIS), HB Fuller Co (FUL), Jefferies Financial Group Inc (JEF), Micron Technology Inc (MU), MillerKnoll Inc (MLKN), Novagold Resources Inc (NG), Paychex Inc (PAYX), Steelcase Inc (SCS), Winnebago Industries Inc (WGO), Worthington Steel Inc (WS).