Stocks Settle Higher on Tech Stock Strength and Lower Bond Yields

The S&P 500 Index ($SPX) (SPY) Wednesday closed up +0.61%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.49%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.72%.  September E-mini S&P futures (ESU25) are up +0.57%, and September E-mini Nasdaq futures (NQU25) are up +0.66%. 

Stocks moved higher on Wednesday, with the Nasdaq 100 reaching a new all-time high. Strength in the Magnificent Seven technology stocks supported gains in the overall market.  President Trump on Wednesday unveiled new tariffs on numerous countries, which did little to curb the bullish enthusiasm for stocks.  Lower bond yields were also positive for stocks, with the 10-year T-note yield falling -6 bp to 4.34%. 

The price of Bitcoin (^BTSUSD) rose more than +2% Wednesday and posted a new record high, which sparked a rally in cryptocurrency-exposed stocks.

Gains in stocks are limited as President Trump vowed to push forward with his aggressive tariff regime, stressing he would not offer additional extensions on country-specific tariffs set to take effect on August 1.  Mr. Trump also stated that he would impose a 50% tariff on imported copper products and that drug companies could face tariffs as high as 200% on imports if they don't relocate production to the US within the next year.  In addition, despite stating that the US was close to a trade deal with India, Mr. Trump said he would still impose a 10% tariff on India's goods for their participation in BRICS, a group of developing nations he claimed were "set up to hurt" the US.   

US MBA mortgage applications rose +9.4% in the week ended July 4, with the purchase mortgage sub-index up +9.4% to a nearly 2.5 year high and the refinancing sub-index up +9.2%.  The average 30-year fixed rate mortgage fell -2 bp to 6.77% from 6.79% in the prior week.

US May wholesale trade sales unexpectedly fell -0.3% m/m, weaker than expectations of a +0.2% m/m increase and the biggest decline in 4 months.

The minutes of the June 17-18 FOMC meeting were sightly hawkish as they stated that "While a few participants noted that tariffs would lead to a one-time increase in prices and would not affect longer-term inflation expectations, most participants noted the risk that tariffs could have more persistent effects on inflation."

Consumer and producer price reports from China showed that demand remains sluggish and deflationary pressures persist.  China's June PPI fell -3.6% y/y, weaker than expectations of -3.2% y/y, the biggest decline in nearly two years, and the 33rd consecutive month producer prices have contracted.  Meanwhile, China's June CPI unexpectedly rose +0.1% y/y, stronger than expectations of a -0.1% y/y decline but still a weak report.

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 tariffs and trade deal news.  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 7% for a -25 bp rate cut at the July 29-30 FOMC meeting.

Overseas stock markets on Wednesday settled mixed.   The Euro Stoxx 50 rallied to a 1-month high and closed up +1.37%.  China's Shanghai Composite fell from a 9-month high and closed down -0.13%.  Japan's Nikkei Stock 225 closed up +0.33%.

Interest Rates

September 10-year T-notes (ZNU25) Wednesday closed up +15.5 ticks.  The 10-year T-note yield fell -6.1 bp to 4.338%.  Sep T-notes moved higher Wednesday on carryover support from strength in European government bonds.  T-notes extended their gains Wednesday afternoon on solid demand for the Treasury's $39 billion auction of 10-year T-notes that had a bid-to-cover ratio of 2.61, above the 10-auction average of 2.58. 

Gains in T-notes were limited by concern that US tariff increases could boost inflation and prevent the Fed from cutting interest rates.  Also, strength in stocks on Wednesday curbed safe-haven demand for T-notes.  In addition, supply pressures are negative for T-notes, as the Treasury will auction $22 billion of 30-year T-bonds on Thursday to conclude this week's auction slate of $119 billion of T-notes and T-bonds.  

European government bond yields on Wednesday moved lower.  The 10-year German bund yield fell -1.4 bp at 2.673%.  The 10-year UK gilt yield fell -2.1 bp to 4.612%.

ECB Governing Council member Holzmann said, "There's no reason at the moment why the ECB should cut interest rates, definitely not at the next meeting, and also for the rest of the year."

Swaps are discounting the chances at 3% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

The Magnificent Seven stocks moved higher Wednesday, led by a gain of more than +1% in (NVDA), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), and Meta Platforms (META).  Also, Apple (AAPL) closed up +0.54%.

Homebuilding stocks jumped on Wednesday after weekly mortgage applications to purchase a new home rose +9.4% last week to a 2.5-year high.  As a result, DR Horton (DHI) closed up more than +5%.  Also, Toll Brothers (TOL), Lennar (LEN), and PulteGroup (PHM) closed up more than +4%.

Cryptocurrency-exposed stocks rallied Wednesday as the price of Bitcoin (^BTCUSD) rose more than +2% to a new record high.  As a result, Coinbase Global (COIN), MARA Holdings (MARA), and Riot Platforms (RIOT) closed up more than +5%.  Also, MicroStrategy (MSTR) closed up more than +4% to lead gainers in the Nasdaq 100. 

AES Corp (AES) closed up more than +19% to lead gainers in the S&P 500 on a newswire report that the company is exploring a potential sale amid takeover interest. 

Bloom Energy (BE) closed up more than +17% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $33.

Boeing (BA) closed up more than +3% to lead gainers in the Dow Jones Industrials after it delivered 60 aircraft in June, the most in 18 months. 

Doximity (DOCS) closed up more than +2% after Evercore ISI upgraded the stock to outperform from in line with a price target of $70. 

Aehr Test Systems (AEHR) closed down more than -12% after reporting Q4 revenue of $14.1 million, down -15% y/y. 

Fair Isaac (FICO) closed down more than -6% to lead losers in the S&P 500 and added to Tuesday's -8% plunge after federal regulators said Fannie Mae and Freddie Mac will be able to use FICO's rival, VantageScore Solutions, when determining borrowers' creditworthiness.

Hershey (HSY) closed down more than -4% as a shortage of cocoa powder has lifted cocoa powder prices to near a record, curbing chocolate demand and eating into company profits.

Tandem Diabetes (TNDM) closed down more than -4% after Citigroup downgraded the stock to sell from neutral with a price target of $14. 

Monster Beverage (MNST) closed down more than -3% after Rothschild & Co Redburn downgraded the stock to neutral from buy, citing valuation and gross margin pressure from aluminum tariff increases.

UnitedHealth Group (UNH) closed down more than -1% to lead losers in the Dow Jones Industrials after the Wall Street Journal reported the Department of Justice is probing the company's Medicare billing practices. 

T-Mobile US (TMUS) closed down more than -1% after KeyBanc Capital Markets downgraded the stock to underweight from sector weight with a price target of $200. 

Merck (MRK) will buy UK-based biotech Verona Pharma Plc (VRNA) in a $10 billion deal.  Verona's US-listed ADRs closed up more than +20% on the news, while Merck closed up more than +2%.

Earnings Reports (7/10/2025)

Byrna Technologies Inc (BYRN), Conagra Brands Inc (CAG), Delta Air Lines Inc (DAL), E2open Parent Holdings Inc (ETWO), Frequency Electronics Inc (FEIM), Helen of Troy Ltd (HELE), PriceSmart Inc (PSMT), Simply Good Foods Co/The (SMPL), WD-40 Co (WDFC).