Stocks Mixed as T-Note Yields Rise

The S&P 500 Index ($SPX) (SPY) is unchanged, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.55%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.51%.  September E-mini S&P futures (ESU25) are up +0.02%, and September E-mini Nasdaq futures (NQU25) are up +0.57%. 

Stock indexes rallied early the session due to a favorable core CPI print of +0.2% m/m, but then faded as T-note prices fell and as expectations for a Fed rate cut in September were trimmed to 58% from 65%.  The 10-year T-note yield is currently up +4.8 bp and the 30-year T-bond yield rose back above the 5% mark for the first time in 6 weeks. 

The Dow was undercut by negative breadth with 24 of the 30 stocks showing declines, led by Merck (MRK) and American Express (AXP).

Today’s CPI report received some favorable initial media attention due to the slightly weaker-than-expected +0.2% m/m increase in the core CPI, which was driven partly 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%.

Expectations for a -25 bp Fed rate cut were little changed for the July FOMC meeting but were trimmed to 58% for the September meeting from 65% on Tuesday.  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 58% at the following meeting on Sep 16-17.

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 -3% 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.

The consensus is for the S&P 500 companies to show Q2 earnings growth of +2.8% y/y, the smallest increase in two years, according to Bloomberg Intelligence.  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. 

Overseas stock markets today are mixed.   The Euro Stoxx 50 is down -0.31%.  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 down -13.5 ticks.  The 10-year T-note yield is up by +4.8 bp at 4.481%.  T-note prices being undercut by reduced expectations for Fed easing, as the market cut expectations for a rate cut at the September meeting to 55% from 65%.  Also, the 10-year breakeven expectations rate today rose to a 4.75-month high and is currently up +1.5 bp at 2.419%.

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. Powell’s term as a Fed Governor lasts until January 2028, well beyond the expiration of his term as Chairman in mid-May-2026.

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 mixed.  The 10-year German bund yield is down -1.9 bp at 2.710%.  The 10-year UK gilt yield is up +2.2 bp at 4.622%.

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 trading higher today, except for Meta Platforms (META) and Tesla (TSLA).  Apple (AAPL) Apple is up more than +1% after news that it reached a $500 million deal to buy rare-earth minerals from Pentagon-backed MP Materials Corp. 

In Tesla (TSLA) news today, the company opened its first India showroom.  Also, Bloomberg reported that Tesla’s top sales executive in North America, Troy Jones, has left the company after a 15-year stint.

Chip stocks are doing well today after the Trump administration indicated that it will loosen US restrictions on chip sales to China.  Advanced Micro Devices (AMD) is up more than +6%, and Nvidia (NVDA) is up more than +4% on the news.  Arm Holdings (ARM) is up more than +3%.

Cryptocurrency-exposed stocks are mixed today as bitcoin (^BTCUSD) fell -3% on some long liquidation pressure after posting a new record high on Monday. Riot Platforms (RIOT) is down more than -3%, and MicroStrategy (MSTR) is more than -1%, but Coinbase Global (COIN) is up +0.4%.

BlackRock (BLK) is down more than -5% after it reported that long-term asset inflows were less than 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) is down more than -4%, and Southern Copper (SCCO) is down more than -3%.

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).