Stocks Mixed as Bond Yields Climb

The S&P 500 Index ($SPX) (SPY) today is down -0.05%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.33%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.09%.  September E-mini S&P futures (ESU25) are down -0.04%, and September E-mini Nasdaq futures (NQU25) are up +0.11%. 

Stocks are mixed today.  Strength in chip makers has pushed the Nasdaq 100 into positive territory.  Also, the rally in energy producers is supportive of the overall market.  However, higher bond yields are weighing on the broader market as the 10-year T-note yield is up +5 bp at a 2-week high of 4.43%.  Bond yields are climbing on the concern that higher tariffs could boost inflation and prevent the Fed from cutting interest rates.

Stocks have some support today following Monday’s retreat as recent tariff announcements suggested there is room for further negotiations.  Late Monday, President Trump said he’s still open to additional trade talks and that the August 1 deadline for higher tariff rates was “not 100% firm,” adding, “we’re not going to be unfair” and would look favorably on countries continuing to offer additional concessions.  Monday afternoon, President Trump announced plans to hike tariffs on several countries, including Japan, South Korea, Laos, South Africa, Myanmar, and Malaysia, with rates ranging from 25% to 40%, effective August 1. 

Another hurdle for stocks is the upcoming earnings season, which begins this week.  Bloomberg Intelligence data show that the consensus for Q2 earnings of S&P 500 companies is for a rise of +2.8% year-over-year, the smallest increase in two years.  Also, only six of the eleven S&P 500 sectors are projected to post an increase in earnings, the fewest since Q1 of 2023, according to Yardeni Research.

This week’s market focus will mainly be on new tariff and trade deal news ahead of Wednesday’s deadline.  On Wednesday, the minutes of the June 17-18 FOMC meeting will be released.  On Thursday, weekly initial unemployment claims will be released.  Also, on Thursday, St. Louis Fed President Musalem and San Francisco Fed President Daly speak on the US economy and monetary policy.

Federal funds futures prices are discounting the chances at 5% for a -25 bp rate cut at the July 29-30 FOMC meeting.

Overseas stock markets today are higher.   The Euro Stoxx 50 climbed to a 3-1/2 week high and is up +0.50%.  China’s Shanghai Composite rallied to an 8-month high and closed up +0.70%.  Japan’s Nikkei Stock 225 closed up +0.26%.

Interest Rates

September 10-year T-notes (ZNU25) today are down -6 ticks.  The 10-year T-note yield is up +5.0 bp to 4.429%.  Sep T-notes fell to a 2-week low today, and the 10-year T-note yield climbed to a 2-week high of 4.433%.  T-note prices are being undercut by Monday’s announcement of US tariff increases on several countries, including Japan and South Korea, which fueled concerns that the higher tariffs could boost inflation and prevent the Fed from cutting interest rates.  T-note prices are also being undercut by rising inflation expectations, as the 10-year breakeven inflation expectations rate today rose to a 6-week high of 2.378%.  Supply pressures are also negative for T-notes as the Treasury will auction $119 billion of T-notes and T-bonds this week, beginning with today’s $58 billion auction of 3-year T-notes.  T-note prices are also being undercut by today’s weakness in European government bond prices.

European government bond yields today are moving higher.  The 10-year German bund yield climbed to a 1-month high of 2.707% and is up +4.2 bp to 2.685%.  The 10-year UK gilt yield rose to a 1-month high of 4.654% and is up +5.9 bp to 4.645%.

German trade news was weaker than expected after May exports fell -1.4% m/m, weaker than expectations of -0.5% m/m.  Also, May imports fell -3.8% m/m, weaker than expectations of -1.7% m/m and the biggest decline in a year.

Swaps are discounting the chances at 5% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

Chip stocks are climbing today to give underlying support to the broader market.  Intel (INTC) is up more than +5% to lead gainers in the Nasdaq 100.  Also, GlobalFoundries (GFS) is up more than +5% and ON Semiconductor Corp (ON) is up more than +4%.  In addition, Microchip Technology (MCHP) and Micron Technology (MU) are up more than +3%, and Advanced Micro Devices (AMD), NXP Semiconductors NV (NXPI), Analog Devices (ADI), and Marvell Technology (MRVL) are up more than +2%. 

Energy stocks and energy service providers are moving higher today to boost the overall market.  Haliburton (HAL) and APA Corp (APA) are up more than +5% and Occidental Petroleum (OXY) is up more than +4%.  Also, Schlumberger (SLB), Diamondback Energy (FANG), Hess Corp (HES), and ConocoPhillips (COP) are up more than +3%.  In addition, Baker Hughes (BKR), Exxon Mobil (XOM), Valero Energy (VLO), and Phillips 66 (PSX) are up more than +2%.  Finally, Chevron (CVX) is up more than +2% to lead gainers in the Dow Jones Industrials.

Chemical-making companies are rallying today after the US Environmental Protection Agency withdrew new use rules for 18 chemicals.  As a result, Chemours Co (CC) is up more than +11% and Albemarle (ALB) is up more than +9%.  Also, Dow Inc. (DOW) is up more than +7% and LyondellBasell Industries NV (LYB) is up more than +5%. 

 

Stanley Black & Decker (SWK) is up more than +4% after Wolfe Research upgraded the stock to peer perform from underperform.

Merit Medical Systems (MMSI) is up more than +4% after reporting preliminary Q2 revenue of $380 million to $384 million, stronger than the consensus of $372.3 million. 

Parsons Corp (PSN) is up more than +1% after Raymond James upgraded the stock to strong buy from market perform with a price target of $90.

Datadog (DDOG) is down more than -4% to lead losers in the Nasdaq 100 after Guggenheim Securities downgraded the stock to sell from neutral with a price target of $105.

JPMorgan Chase (JPM) is down more than -3% to lead losers in the Dow Jones Industrials after HSBC downgraded the stock to reduce from hold. 

Circle Internet Group (CRCL) is down more than -2% after Mizuho Securities initiated coverage of the stock with a recommendation of sell and a price target of $85.

Bank of America (BAC) is down more than -2% after HSBC downgraded the stock to hold from buy. 

Ciena (CIEN) is down more than -1% after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $70.

Earnings Reports (7/8/2025)

Aehr Test Systems (AEHR), Kura Sushi USA Inc (KRUS), Penguin Solutions Inc (PENG).