Stocks Finish Mixed on Strength in Chip Makers and Higher Bond Yields

The S&P 500 Index ($SPX) (SPY) Tuesday closed down -0.07%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.37%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.07%.  September E-mini S&P futures (ESU25) are down -0.07%, and September E-mini Nasdaq futures (NQU25) are up +0.06%. 

Stocks on Tuesday settled mixed.  Hard-line trade rhetoric from President Trump weighed on stocks on Tuesday when he said the US won’t offer extensions to the August 1 deadline for reciprocal tariffs to take effect.  Higher bond yields also weighed on the broader market as the 10-year T-note yield rose +4 bp to a 2-week high of 4.42%.  Bond yields are climbing on the concern that higher tariffs could boost inflation and prevent the Fed from cutting interest rates.  The Nasdaq 100 settled higher due to strength in chip makers. Also, the rally in energy producers was supportive of the overall market. 

Stocks initially received some support on Tuesday 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 on Tuesday settled higher.   The Euro Stoxx 50 climbed to a 3-1/2 week high and closed up +0.57%.  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) Tuesday closed down -4.5 ticks.  The 10-year T-note yield rose +3.6 bp to 4.415%.  Sep T-notes fell to a 2-week low Tuesday, and the 10-year T-note yield climbed to a 2-week high of 4.433%.  T-note prices were 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 on Tuesday rose to a 6-week high of 2.378%. T-note prices were also weighed down by Tuesday’s weakness in European government bond prices.  Finally, the slack demand for the Treasury’s $58 billion auction of 3-year T-notes was bearish for T-notes as the auction had a bid-to-cover ratio of 2.51, below the 10-auction average of 2.60. 

European government bond yields on Tuesday moved higher.  The 10-year German bund yield climbed to a 1-month high of 2.707% and finished up +4.3 bp to 2.687%.  The 10-year UK gilt yield rose to a 1-month high of 4.654% and finished up +4.7 bp to 4.633%.

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

Strength in chip stocks on Tuesday kept the Nasdaq 100 in positive territory.  Intel (INTC) closed up more than +7% to lead gainers in the Nasdaq 100.  Also, GlobalFoundries (GFS) closed up more than +6% and ON Semiconductor Corp (ON) closed up more than +5%.  In addition, Microchip Technology (MCHP) closed up more than +4%, and Micron Technology (MU) closed up more than +3%.  Finally, Advanced Micro Devices (AMD), NXP Semiconductors NV (NXPI), and Applied Materials (AMAT) closed up more than +2%. 

Energy stocks and energy service providers rallied Tuesday after the price of WTI crude oil climbed to a 2-week high.  Devon Energy (DVN) and Haliburton (HAL) closed up more than +6%, and APA Corp (APA) and Occidental Petroleum (OXY) closed up more than +5%.  Also, Schlumberger (SLB), Diamondback Energy (FANG), and Hess Corp (HES) closed up more than +4%, and Chevron (CVX) closed up more than +3% to lead gainers in the Dow Jones Industrials.  In addition, ConocoPhillips (COP), Valero Energy (VLO), Baker Hughes (BKR), Exxon Mobil (XOM), and Phillips 66 (PSX) closed up more than +2%. 

Chemical-making companies rallied Tuesday after the US Environmental Protection Agency withdrew new use rules for 18 chemicals.  As a result, Chemours Co (CC) closed up more than +9%, Albemarle (ALB) closed up more than +7%, Dow Inc. (DOW) closed up more than +5%, and LyondellBasell Industries NV (LYB) closed up more than +4%. 

 

Stanley Black & Decker (SWK) closed up more than +3% after Wolfe Research upgraded the stock to peer perform from underperform.

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

Southwest Gas Holdings (SWX) closed up more than +2% after Jeffries upgraded the stock to buy from hold with a price target of $82.

Fair Isaac (FICO) closed down more than -8% to lead losers in the S&P 500 after federal regulators said Fannie Mae and Freddie Mac will be able to use a second firm, Vantage 4.0, when determining borrowers’ creditworthiness.

Datadog (DDOG) closed 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.

Newmont (NEM) closed down more than -4% after Goldman Sachs downgraded the stock to neutral from buy, citing valuation concerns.

JPMorgan Chase (JPM) closed down more than -3% after HSBC downgraded the stock to reduce from hold. 

Bank of America (BAC) closed down more than -3% after HSBC downgraded the stock to hold from buy. 

Circle Internet Group (CRCL) closed down more than -1% after Mizuho Securities initiated coverage of the stock with a recommendation of sell and a price target of $85.

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

Earnings Reports (7/9/2025)

AZZ Inc (AZZ), Barnes & Noble Education Inc (BNED), Bassett Furniture Industries Inc (BSET), Gencor Industries Inc (GENC), Methode Electronics Inc (MEI), Pure Cycle Corp (PCYO).