S&P 500 and Nasdaq Climb to Record Highs on China Trade Optimism

The S&P 500 Index ($SPX) (SPY) Friday closed up +0.52%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.00%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.39%.  September E-mini S&P futures (ESU25) are up +0.42%, and September E-mini Nasdaq futures (NQU25) are up +0.34%. 

Stock indexes Friday settled higher, with the S&P 500 and Nasdaq 100 posting new all-time highs, and the Dow Jones Industrials posting a 3-3/4 month high.  Positive trade news buoyed stocks Friday as the US moves closer to trade deals with China and other trading partners.  Stocks also found support on Friday after the University of Michigan’s US June consumer sentiment index improved, as inflation expectations unexpectedly declined. 

US Commerce Secretary Lutnick said that the US and China had finalized a trade understanding reached last month in Geneva, including a commitment from China to deliver rare earth materials.  China’s Commerce Ministry also confirmed the agreement and stated that it will review and approve eligible applications for the export of controlled items, and the US will cancel the restrictive measures taken against China.  In addition, Commerce Secretary Lutnick said the White House has imminent plans to reach agreements with a set of 10 major trading partners ahead of a July 9 deadline for reciprocal tariffs.  Meanwhile, the Treasury Department announced a deal with G-7 countries that will exclude US companies from some taxes imposed by other countries in exchange for removing the “revenge tax” proposal from President Trump’s tax bill.

However, stocks fell back from their best levels on Friday afternoon after President Trump announced he was ending all trade talks with Canada over its digital services tax and threatened to impose new tariffs on the country within the next week. Gains in stocks were also limited on Friday’s weaker-than-expected US May personal spending and income reports, as well as the stronger-than-expected May core PCE price index.

US May personal spending unexpectedly fell -0.1% m/m, weaker than expectations of a +0.1% m/m increase.  May personal income unexpectedly fell -0.5% m/m, weaker than expectations of +0.3% m/m and the biggest decline in more than 3-1/2 years.

The US May core PCE price index, the Fed’s preferred gauge of underlying inflation, rose +0.2% m/m and +2.7% y/y, stronger than expectations of +0.1% m/m and +2.6% y/y.

The University of Michigan US Jun consumer sentiment index was revised upward by +0.2 to 60.7, stronger than expectations of no change at 60.5.

The University of Michigan US Jun 1-year inflation expectations were unexpectedly revised lower to 5.0%, weaker than expectations of an upward revision to 5.2%. The 5-10 year inflation expectations were revised downward to 4.0%, weaker than expectations of no change at 4.1%.

Minneapolis Fed President Kashkari said he sees two 25-bp Fed rate cuts this year, with the first potentially in September, but warned that tariffs could have a delayed impact on inflation, and policymakers should remain flexible.

On the negative side for stocks is the upcoming earnings season, which begins in two weeks.  Bloomberg Intelligence data show the consensus for Q2 earnings of S&P 500 companies to rise by 2.8% year-over-year, the smallest increase in two years.  Also, only six of the 11 S&P 500 sectors are projected to post an increase in earnings, the fewest since Q1 of 2023, according to Yardeni Research.

Federal funds futures prices are discounting the chances at 19% for a -25 bp rate cut at the July 29-30 FOMC meeting.

Overseas stock markets on Friday settled mixed.  The Euro Stoxx 50 rallied to a 1-1/2 week high and closed up +1.56%.  China’s Shanghai Composite closed down -0.70%.  Japan’s Nikkei Stock 225 climbed to a 5-month high and closed up +1.43%.

Interest Rates

September 10-year T-notes (ZNU25) Friday closed down by -6.5 ticks.  The 10-year T-note yield rose +4.3 bp to 4.285%. 

T-note prices were under pressure on Friday due to some negative carryover from weakness in European government bonds.  Also, positive trade news on Friday pushed the S&P 500 to a new record high and reduced safe-haven demand for T-notes.  In addition, the stronger-than-expected May core PCE price index, the Fed’s preferred gauge of underlying inflation, is negative for T-notes. 

Losses in T-notes were limited due to the unexpected declines in the US May personal spending and income reports, dovish factors for Fed policy.  Also, the unexpected downward revision to the University of Michigan US inflation expectations is bullish for T-notes.  In addition, dovish comments on Friday from Minneapolis Fed President Kashkari were supportive of T-notes, as he stated that he sees two 25-bp Fed rate cuts this year.

European government bond yields on Friday moved higher.  The 10-year German bund yield rose to a 1-month high of 2.606% and finished up +2.3 bp to 2.592%.  The 10-year UK gilt yield rose +3.2 bp to 4.504%.

The Eurozone Jun economic confidence survey unexpectedly fell -0.8 to 94.0, weaker than expectations of unchanged at 94.8.

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

Nike (NKE) closed up more than +15% to lead gainers in the S&P 500 and Dow Jones Industrials after reporting Q4 revenue of $11.10 billion, better than the consensus of $10.72 billion, and saying it is taking steps to mitigate tariffs, including “surgical” price increases and reducing production in China. 

Apogee Enterprises (APOG) closed up more than +6% after raising guidance on its 2026 adjusted EPS forecast to $3.80-$4.20 from a previous forecast of $3.55-$4.10. 

Positive credit news lifted cruise line stocks on Friday after Norwegian Cruise Line Holdings announced it successfully upsized its existing senior secured revolving credit facility from $1.7 billion to $2.486 billion, and Moody’s upgraded Carnival’s long-term corporate rating to Ba2 from Ba3.  As a result, Carnival (CCL) and Royal Caribbean Cruises Ltd (RCL) closed up more than +4% and Norwegian Cruise Line Holdings (NCLH) closed up more than +3%. 

Boeing (BA) closed up more than +5% after Redburn upgraded the stock to buy from neutral with a price target of $275.

Amazon.com (AMZN) closed up more than +2% after BNP Paribas Exane upgraded the stock to outperform from neutral with a price target of $254.

Alphabet (GOOGL) closed up more than +2% after Citizens JMP Securities LLC upgraded the stock to outperform from market perform with a price target of $220. 

Trade Desk (TTD) closed up more than +2% after Evercore ISI upgraded the stock to outperform from in line with a price target of $90.   

Palantir Technologies (PLTR) closed down more than -9% to lead losers in the S&P 500 and Nasdaq 100 after Canada announced a tax on digital business from  the US.  Coinbase Global (COIN) also closed down more than -5% on the news.   

Gold mining stocks are under pressure today, with the price of COMEX gold falling to a 4-week low.  As a result, Anglogold Ashanti Plc (AU) closed down more than -5%, and Gold Fields Ltd (GFI) and Newmont (NEM) closed down more than -3%.   

CorMedix (CRMD) closed down more than -16% after announcing it intends to offer and sell $85 million of shares of its common stock in an underwritten public offering.

Uber Technologies (UBER) closed down more than -1% after Canaccord Genuity downgraded the stock to hold from buy.

CrowdStrike Holdings (CRWD) closed down more than -1% on signs of insider selling after an SEC filing showed the company’s CEO, President, CFO, and CAO sold a combined $19.9 million of shares on Monday. 

Earnings Reports (6/30/2025)

B Riley Financial Inc (RILY), Compass Diversified Holdings (CODI), Golden Matrix Group Inc (GMGI), Outdoor Holding Co (POWW), Progress Software Corp (PRGS).