S&P 500 Climbs to a Record High Despite Tariff Uncertainty

The S&P 500 Index ($SPX) (SPY) Thursday closed up +0.27%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.43%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.16%.  September E-mini S&P futures (ESU25) are up +0.26%, and September E-mini Nasdaq futures (NQU25) are down -0.17%. 

Stock indexes on Thursday settled mixed, with the S&P 500 posting a new all-time high. Strength in airline stocks was positive for the broader market Thursday, with Delta Air Lines jumping more than +12% after restoring its full-year guidance.  Stocks also found support after the weekly US initial unemployment report showed jobless claims unexpectedly fell to an 8-week low, a sign that the US labor market remains strong.

Bond yields fell from early highs Thursday to give equities a lift after solid demand was seen for the Treasury's $22 billion auction of 30-year T-bonds.  Dovish comments from San Francisco Fed President Mary Daly were also supportive for stocks when she said she "still expects two 25 bp interest rate cuts this year."

The price of Bitcoin (^BTSUSD) rose more than +2% Thursday and posted a new record high, which sparked a rally in cryptocurrency-exposed stocks.  The US House Committee on Financial Services announced the week of July 14 as "Crypto Week," and the US House Committee on Ways and Means has planned an oversight subcommittee hearing on July 16, "Making America the Crypto Capital of the World," which may lead to more crypto-friendly regulations.

Stocks continue to see downward pressure due to uncertainty about President Trump's trade policies. On Wednesday, President Trump issued a new set of tariff demands on several countries, including a 50% tariff rate on Brazil.  Mr. Trump also confirmed that the US will begin levying a 50% tariff on copper imports, effective August 1.

President Trump has 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 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 weekly initial unemployment claims unexpectedly fell -5,000 to an 8-week low of 227,000, showing a stronger labor market than expectations of an increase to 235,000.  However, weekly continuing claims rose +10,000 to a 3.5-year high of 1.965 million, right on expectations and a sign that out-of-work Americans are finding it difficult to secure a new job. 

Comments Thursday from St. Louis Fed President Alberto Musalem were slightly hawkish, as he noted that he sees upside risks to inflation, but it is too early to determine whether tariffs will have a persistent impact on prices.  However, comments from San Francisco Fed President Mary Daly were dovish when she said she "still expects two 25 bp interest rate cuts this year," and sees a greater chance that the price effects from tariffs may be more muted than anticipated.

Another hurdle for stocks is the upcoming earnings season, which begins in earnest next 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.

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 Thursday settled mixed.   The Euro Stoxx 50 fell from a 3.5-month high and closed down -0.14%.  China's Shanghai Composite rallied to a 9-month high and closed up +0.48%.  Japan's Nikkei Stock 225 closed down -0.44%.

Interest Rates

September 10-year T-notes (ZNU25) Thursday closed down -1.5 ticks.  The 10-year T-note yield rose +1.8 bp to 4.350%.  T-notes were under pressure Thursday after US weekly jobless claims unexpectedly fell to an 8-week low, a sign of labor market strength that was hawkish for Fed policy.  T-notes were also weighed down by concern that US tariff increases could boost inflation and prevent the Fed from cutting interest rates.  T-notes extended their losses today after St. Louis Fed President Alberto Musalem said he sees upside risks to inflation. 

However, T-notes recouped most of their decline on solid demand for the Treasury's $22 billion auction of 30-year T-bonds, which saw the bonds awarded at a yield of 4.889%, slightly lower than the 4.890% pre-auction yield just before the bidding deadline, a sign of strong demand.  Also, dovish comments from San Francisco Fed President Mary Daly gave T-notes a boost when she said she "still expects two 25 bp interest rate cuts this year,"

European government bond yields on Thursday were mixed.  The 10-year German bund yield rose to a 3-month high of 2.710% and finished up +3.2 bp at 2.705%.  The 10-year UK gilt yield fell -1.6 bp to 4.595%.

Italy May industrial production fell -0.7% m/m, weaker than expectations of -0.2% m/m.

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

Airline stocks rallied sharply Thursday, as Delta Air Lines (DAL) jumped more than +12% after it restored its full-year guidance and projected full-year adjusted EPS of $5.25-$6.25, the midpoint well above the consensus of $5.35.  United Airlines Holdings (UAL) closed up more than +14% to lead gainers in the S&P 500, and American Airlines Group (AAL) closed up more than +12%.  Also, Alaska Air Group (ALK) and Southwest Airlines (LUV) closed up more than +8%. 

Cryptocurrency-exposed stocks moved higher Thursday as the price of Bitcoin (^BTCUSD) rose more than +2% to a new record high.  As a result, Coinbase Global (COIN) closed up more than +3%.  Also, MARA Holdings (MARA) and Riot Platforms (RIOT) closed up more than +2%, and MicroStrategy (MSTR) closed up more than +1%. 

MP Materials (MP) closed up more than +50% after the company struck a multi-billion-dollar public-private deal with the US Department of Defense to build a new magnet plant and expand rare earth capabilities.  

WK Kellogg (KLG) closed up more than +30% after Ferrero International SA acquired the company for about $3.1 billion or $23 per share. 

Tesla (TSLA) closed up more than +4% to lead gainers in the Nasdaq 100 after CEO Musk said the company will launch deployment of its driverless taxis in the San Francisco Bay area "in a month or two," pending regulatory approvals.

Advance Micro Devices (AMD) closed up more than +4% after HSBC upgraded the stock to buy from hold with a price target of $200.

Trex Co (TREX) closed up more than +6% after Baird upgraded the stock to outperform from neutral with a price target of $75.

Huntington Ingalls Industries (HII) closed up more than +3% after TD Cowen upgraded the stock to buy from hold with a price target of $300.

McDonald's (MCD) closed up more than +1% after Goldman Sachs upgraded the stock to buy from neutral with a price target of $345. 

Methode Electronics (MEI) closed down more than -25% after reporting a Q4 loss per share of -77 cents versus a loss of -23 cents y/y. 

Helen of Troy (HELE) closed down more than -22% after reporting Q1 net sales of $371.7 million, weaker than the consensus of $396.5 million.   

Autodesk (ADSK) closed down more than -6% on reports that the company is considering the acquisition of PTC Inc.

Crowdstrike Holdings (CRWD) closed down more than -5% after CFRA downgraded the stock to hold from buy.

Workday (WDAY) closed down more than -4% after Piper Sandler downgraded the stock to underweight from neutral with a price target of $235. 

Conagra Brands (CAG) closed down more than -4% after reporting Q4 net sales of $2.78 billion, below the consensus of $2.84 billion. 

Earnings Reports (7/11/2025)

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