Stocks See Support on Strength in Chip Stocks and Lower Bond Yields

The S&P 500 Index ($SPX) (SPY) today is up +0.35%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.56%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.18%.  September E-mini S&P futures (ESU25) are up +0.25%, and September E-mini Nasdaq futures (NQU25) are up +0.13%. 

Stock indexes are climbing, with the S&P 500 posting a 4-month high, the Dow Jones Industrials climbing to a 3-3/4 month high, and the Nasdaq 100 posting a new all-time high.  Strength in chip makers is boosting the broader market today after Micron Technology reported stronger-than-expected Q3 EPS and gave an upbeat forecast for the current quarter, driven by demand for artificial intelligence equipment.  Stocks saw support from today's news of a larger-than-expected drop in weekly jobless claims and a larger-than-expected increase in May core capital goods orders.

On the negative side for stocks was today's news of an unexpected downward revision to Q1 GDP. Also, the May trade deficit was wider than expected, a negative factor for Q2 GDP.

Lower bond yields are supporting equity prices as the 10-year T-note yield fell to a 7-week low on speculation that Fed rate cuts could come sooner than expected. The 10-year T-note yield fell to a 7-week low today of 4.26% following a report from the Wall Street Journal that said President Trump may announce Fed Chair Powell's replacement a soon as September, an unusually early appointment, reinforcing expectations of a more dovish leaning Fed, after Trump criticized Powell for holding interest rates steady. Because Powell's term expires in May 2026, announcing a new Fed chair far earlier than the traditional 3-4 month transition period could allow the chair-in-waiting to influence expectations about the likely path for interest rates.   

US weekly initial unemployment claims fell -7,000 to 236,000, showing a stronger labor market than expectations of 243,000.  However, weekly continuing claims rose +37,000 to a 3-1/2 year high of 1.974 million, above expectations of 1.950 million, signaling more people are staying out of work for longer.

US Q1 GDP was revised lower to -0.5% (q/q annualized), weaker than expectations of no change at -0.2% as Q1 personal consumption was revised downward to 0.5% from 1.2%.  The Q1 core PCE price index was revised higher to +3.5% q/q, stronger than expectations of no change at +3.4% q/q.

US May capital goods new orders nondefense ex-aircraft rose +1.7% m/m, stronger than expectations of +0.1% m/m and the largest increase in 4 months.

The US May trade deficit of -$96.6 billion was wider than expectations of -$86.1 billion, a negative factor for Q2 GDP.

Richmond Fed President Barkin said he expects tariffs to put upward pressure on prices, and with so much still uncertain, he favors waiting for more clarity 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.  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 25% 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 -0.09%.  China's Shanghai Composite fell from a 6-1/4 month high and closed down -0.22%.  Japan's Nikkei Stock 225 rallied to a 4-3/4 month high and closed up +1.65%.

Interest Rates

September 10-year T-notes (ZNU25) today are up +6 ticks.  The 10-year T-note yield is down -2.2 bp to 4.269%.  Sep T-notes today climbed to an 8-week high, and the 10-year T-note yield fell to a 7-week low of 4.263%.  T-notes are moving higher today on a Wall Street Journal report that said President Trump is considering naming Fed Chair Powell's successor as early as September, well before his term expires next May, making him a lame duck and spurring speculation that interest rates could eventually fall faster than markets are currently pricing.  T-notes also found support after Q1 GDP was revised lower.

Limiting gains in T-notes was today's stronger-than-expected economic news , which included unemployment claims and core capital goods orders.  Also, the upward revision to the Q1 core PCE price index was bearish for T-notes.  In addition, hawkish comments from Richmond Fed President Barkin weighed on T-notes when he said he favors waiting for more clarity before adjusting interest rates. Supply pressures are negative for T-notes as the Treasury will auction $44 billion of 7-year T-notes later today.

European government bond yields today are moving lower.  The 10-year German bund yield is down -1.8 bp to 2.547%.  The 10-year UK gilt yield is down -1.8 bp to 4.463%.

The German Jun GfK consumer confidence index unexpectedly fell -0.3 to -20.3, weaker than expectations of an increase to -19.2.

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

Micron Technology (MU) is up more than +2% to give chip stocks and the overall market a lift.  Micron reported Q3 adjusted revenue of $9.30 billion, stronger than the consensus of $8.85 billion, and forecasted Q4 adjusted revenue of $10.4 billion-$11.0 billion, well above the consensus of $9.89 billion. Also, Marvel Technology (MRVL) is up more than +4% to lead gainers in the Nasdaq 100.  In addition, ARM Holdings Plc (ARM) is up more than +1% and Intel (INTC) is up +0.83%.

Managed healthcare stocks are moving higher today.  Universal Health Services (UHS) is up more than +4%.  Also, Cigna (CI) and HCA Healthcare (HCA) are up more than +3%.  In addition, CVS Health (CVS), Centene (CNC), Molina Healthcare (MOH),  and Humana (HUM) are up more than +1%. 

McCormick & Co (MKC) is up more than +5% after reporting Q2 EPS of 69 cents, better than the consensus of 66 cents, and forecasting full-year adjusted EPS of $3.03-$3.08, above the consensus of $3.02. 

Copper mining stocks are climbing today with the price of COMEX copper up more than +2% at a 2-3/4 month high.  Southern Copper (SCCO) and Freeport McMoRan (FCX) are up more than +4%, and Rio Tinto Plc (RIO) is up more than +2%.   

Sandisk Corp (SNDK) is up more than +1% after Citigroup initiated coverage of the stock with a buy recommendation and a price target of $57.

General Mills (GIS) is up more than +1% after RBC Capital Markets upgraded the stock to outperform from sector perform with a price target of $63.

Truist Financial Corp (TFC) is up nearly +1% after Citigroup upgraded the stock to buy from neutral with a price target of $55. 

Equinix Inc (EQIX) is down more than -10% to lead losers in the S&P 500 after BMO Capital Markets downgraded the stock to market perform from outperform.

Trade Desk (TTD) is down more than -4% to lead losers in the Nasdaq 100 after Wells Fargo Securities downgraded the stock to equal weight from overweight. 

Kratos Defense & Security Solutions (KTOS) is down more than -3% after announcing it intends to sell $500 million of shares of its common stock in an underwritten offering. 

Unity Software (U) is down more than -3% after Bank of America Global Research initiated coverage of the stock with a recommendation of underperform and a price target of $15. 

Jeffries Financial Group (JEF) is down more than -2% after reporting Q2 EPS of 40 cents, weaker than the consensus of 44 cents.

Earnings Reports (6/26/2025)

Acuity Inc (AYI), Concentrix Corp (CNXC), McCormick & Co Inc/MD (MKC), NIKE Inc (NKE), Walgreens Boots Alliance Inc (WBA).