Stocks See Support from Favorable CPI and Positive Bessent Trade Remarks

The S&P 500 Index ($SPX) (SPY) is up +0.33%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.25%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.64%.  September E-mini S&P futures (ESU25) are up +0.23%, and September E-mini Nasdaq futures (NQU25) are up +0.53%. 

Stock indexes today are trading higher on a favorable core CPI report of +0.2% m/m and on favorable trade news after Treasury Secretary Bessent said US-China trade negotiations are in a “very good place.”

Today’s CPI report was considered net favorable for the markets due to the slightly weaker-than-expected +0.2% m/m increase in the core CPI, which was driven by lower car prices.  However, there were some scattered signs of upside pressure from tariffs, and that pressure is expected to increase in the coming months.  Also, both the headline and core CPI reports on a year-over-year basis rose from May.

Specifically, the June US CPI rose +0.3% m/m, which was in line with market expectations, while the year-over-year figure of +2.7% was slightly worse than expectations of +2.6% and was up from May’s +2.4%.  The June US core CPI rose +0.2% m/m, which was slightly better than expectations of +0.3%.  On a year-over-year basis, the June US core CPI was in line with expectations at +2.9% y/y but rose from May’s +2.8%.

There was some positive trade news today after Treasury Secretary Bessent said that US-China trade talks are in a “very good place” and that the US-China deadline is flexible and told market participants “not to worry about August 12.”  Mr. Bessent confirmed that the Trump administration has told Nvidia that a license for the sale of its advanced H20 GPU chips to Chinese firms will be granted and is “all part of a mosaic” in the US-China negotiations. He also said he hopes to meet with Chinese Vice Premier He Lifeng in August.

Stocks have been undercut by recent US trade news.  Over the weekend, President Trump announced that the US will impose 30% tariffs on US imports from the European Union and Mexico, effective August 1.  Mr. Trump said last Thursday that a 35% tariff on some Canadian products would take effect on August 1, up from the current 25%.  Last week, Mr. Trump imposed a 50% tariff on copper imports, which will include semi-finished goods, and 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.

Today’s July Empire manufacturing index report of 5.5 was stronger than expectations of -9.2, and was up from June’s level of -16.0.

The price of Bitcoin (^BTSUSD) is down nearly -2% today due to some long liquidation pressure following the recent rally on hopes for more favorable crypto regulation from Washington.  The US House Committee on Ways and Means plans to hold an oversight subcommittee hearing on July 16 entitled, “Making America the Crypto Capital of the World,” which may lead to more crypto-friendly regulations.

The markets this week will focus on any fresh news on tariffs or trade deals.  On Wednesday, June PPI final demand is expected to ease to +2.5% y/y from +2.6% in May, and June core PPI is expected to ease to +2.7% y/y from +3.0% y/y in May.  Also, on Wednesday, June manufacturing production is expected to fall by -0.1% m/m.  Finally, on Wednesday, the Fed will release its Beige Book.  On Thursday, June retail sales are expected to climb by +0.1% m/m and +0.3% ex-autos, and weekly initial unemployment claims are expected to climb by +7,000 to 234,000.  Also, on Thursday, the July Philadelphia Fed business outlook survey is expected to climb +3.0 points to -1.0, and the July NAHB housing market index is expected to rise +1 to 33.  On Friday, June housing starts are expected to climb +3.3% m/m to 1.298 million, and June building permits are expected to slip -0.6% m/m to 1.386 million.  Also, the University of Michigan’s US July consumer sentiment index is expected to climb +0.8 to 61.5.

Earnings season began in earnest this week with a focus on big bank earnings results.  Key earnings reports today include Blackrock, Citigroup, JP Morgan, NY Bank of Mellon, Wells Fargo, and State Street. Key earnings reports Wednesday include Bank of America, Goldman Sachs, Morgan Stanley, and United Airlines.  Key reports Thursday include PepsiCorp, Abbott, US Bancorp, GE Fifth Third, and GE.  Key reports Friday include Schwab and American Express.

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 for a -25 bp rate cut at 3% at the July 29-30 FOMC meeting and at 65% at the following meeting on Sep 16-17.

Overseas stock markets today are mixed.   The Euro Stoxx 50 is up +0.22%.  China’s Shanghai Composite closed down -0.42%.  Japan’s Nikkei Stock 225 closed up +0.55%.

Interest Rates

September 10-year T-notes (ZNU25) today are up +2 ticks.  The 10-year T-note yield is down by -2.4 bp at 4.409%.  T-note prices are seeing support today from the slightly weaker-than-expected June US core CPI report of +0.2% m/m versus expectations of +0.3%.  On the bearish side, the 10-year breakeven expectations rate today rose to a 4.75-month high and is currently up +0.3 bp at 2.408%.

Also on the bearish side for US bond prices, the Trump administration’s campaign against Fed Chair Powell continued today, fueling concern among bond vigilantes about the Fed’s independence and the possibility of politically driven interest rate cuts that could be inflationary.  US Treasury Secretary Bessent said that Fed Chair Powell should step down as a Fed Governor when his term as Chairman ends in May 2026, in line with tradition.  Mr. Bessent also stated that he is part of a formal process that has already begun to decide who President Trump will appoint as the new Chairman when Mr. Powell’s term ends in May 2026, or earlier “for cause,” based on attacks on how Mr. Powell has handled the renovation of the Fed’s building in Washington.

European government bond yields today are lower.  The 10-year German bund yield is down -5.3 bp at 2.677%.  The 10-year UK gilt yield is down -2.2 bp at 4.577%.

Swaps are discounting the chances at 2% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

The Magnificent Seven stocks are all trading higher today, except for a small decline in Meta.

Chip stocks are doing well today after the Trump administration indicated that it will loosen US restrictions on chip sales to China.  Nvidia (NVDA is up more than +4% on the news.  Advanced Micro Devices (AMD) is up more than +8% and Arm Holdings (ARM) is up more than +2%.

Cryptocurrency-exposed stocks are mixed today as bitcoin (^BTCUSD) fell nearly -2% on some long liquidation pressure after posting a new record high on Monday. Riot Platforms (RIOT) is down more than -2%, and MicroStrategy (MSTR) is down -0.9%, but Coinbase Global (COIN) is up +0.5%. 

BlackRock (BLK) is down more than -6% after it reported that long-term asset inflows were below market expectations. 

JPMorgan Chase (JPM) is down -0.4% after it raised its full-year expense guidance.

Copper miners are trading lower today after Morgan Stanley downgraded the sector's prospects due to expectations that 50% tariffs will lead to reduced US demand for copper products.  Freeport McMoRan (FCX) and Southern Copper (SCCO) are down about -2%. 

Earnings Reports (7/15/2025)

Albertsons Cos Inc (ACI), Bank of New York Mellon Corp/The (BK), Blackrock Inc (BLK), Citigroup Inc (C), JB Hunt Transport Services Inc (JBHT), JPMorgan Chase & Co (JPM), Omnicom Group Inc (OMC), Pinnacle Financial Partners In (PNFP), State Street Corp (STT), Sun Communities Inc (SUI), Wells Fargo & Co (WFC).