Stocks Pressured by Chip-Stock Sell-off and Increased Talk about Powell Firing

The S&P 500 Index ($SPX) (SPY) today is down -0.07%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.05%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.30%.  September E-mini S&P futures (ESU25) are down -0.03%, and September E-mini Nasdaq futures (NQU25) are down -0.26%.

Stocks are seeing support today from the favorable PPI report and positive earnings results from several top Wall Street banks.  However, the Nasdaq 100 index is being undercut by weakness in chip stocks, which fell after disappointing guidance from ASML.

Stocks also saw some weakness after CBS today reported that President Trump asked a group of House Republicans on Tuesday whether he should fire Fed Chair Powell.  Several of those lawmakers said Mr. Trump indicated he would go ahead with the firing.  However, CBS also quoted sources inside the White House as saying that the White House has not yet built a legal predicate for firing Mr. Powell, which can only be done for cause.  In any case, Mr. Trump is continuing to pressure Mr. Powell to voluntarily resign.

Today's June PPI report was favorable, as both the month-over-month and year-over-year figures were better than expected, suggesting that tariff inflation has not yet hit the producer level.  The PPI report sparked some inflation optimism after Tuesday's mixed CPI report.

Specifically, the June final-demand PPI was unchanged m/m and +2.3% y/y, which was weaker than expectations of +0.2% m/m and +2.5% y/y.  The June core PPI report of unchanged m/m and +2.6% y/y was weaker than expectations of +0.2% m/m and +2.6% y/y.  The year-over-year figures of +2.3% (nominal) and +2.6% y/y (core) were down from the revised May figures of +2.7% and +3.2%, respectively.

Today's June US industrial production report of +0.3% m/m was slightly stronger than market expectations of +0.1%, and May was revised higher to unchanged from -0.2%.  The June US manufacturing production report of +0.1% m/m was slightly stronger than expectations of unchanged.

The July New York Fed services business activity index rose to -9.3 from -13.2 in June.

The Fed's July Beige Book report will be released later today.

Expectations for Fed policy were little changed after today's economic reports, but the reports about a possible Powell firing slightly boosted the chances for a rate cut. Federal funds futures prices are discounting the chances for a -25 bp rate cut at 5% at the July 29-30 FOMC meeting (versus 3% Tuesday) and 64% at the following meeting on Sep 16-17 (versus 58% Tuesday).

Bitcoin (^BTSUSD) is up +2.3% today, overcoming part of Tuesday's -3.3% decline, after President Trump cajoled right-wing House Republicans later yesterday to vote in favor of the crypto legislation supported by the White House and the crypto industry.  President Trump said he expects the House to pass the GENIUS Act stablecoin bill today.  Those Republicans yesterday blocked the legislation by voting against a procedural motion.

Bitcoin has rallied sharply in the past several weeks, driven by hopes for favorable crypto regulation from Washington.  The US House Committee on Ways and Means plans to hold an oversight subcommittee hearing today entitled "Making America the Crypto Capital of the World," which is expected to promote crypto-friendly regulations.

Recent trade and tariff news has been mixed.  There was some positive trade news Tuesday after Treasury Secretary Bessent said that US-China trade talks are in a "very good place" and told market participants "not to worry about August 12," the deadline for US-China trade talks.  There was also some positive trade news on Tuesday after President Trump announced that his administration had reached a trade deal with Indonesia.

However, stocks were undercut by negative trade news that emerged last week and during this past weekend.  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.

The markets will focus on any fresh news regarding tariffs or trade deals during the remainder of this week.  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 reports on Thursday include PepsiCorp, Abbott, US Bancorp, Fifth Third, and GE.  Key reports on Friday include Schwab and American Express.

The consensus is for 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 lower.  The Euro Stoxx 50 is down -0.62%.  China's Shanghai Composite closed down -0.03%.  Japan's Nikkei Stock 225 closed down -0.04%.

Interest Rates

September 10-year T-notes (ZNU25) are up +9 ticks.  The 10-year T-note yield is down -1.6 bp at 4.465%.  Bullish factors today include the favorable PPI report and today's -0.4 bp decline in the 10-year inflation expectations rate to 2.410%.  Bearish factors include today's slightly stronger-than-expected US industrial production report.

The short-end of the Treasury curve saw support from the slightly increased chances for a Fed rate cut on today's heightened news that President Trump may soon fire Fed Chair Powell.  However, the long-end of the Treasury curve would view that as a bearish development due to the inflation risks of a politically-motivated central bank.

European government bond yields are mixed.  The 10-year German bund yield is down -1.9 bp at 2.693%.  The 10-year UK gilt yield is up +3.1 bp at 4.656%.

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 mixed today, with three gainers and four losers.  The largest movers are Tesla (TSLA), with a gain of more than +2%, and Amazon (AMZN), with a loss of more than -1%.

Wall Street firms today reported positive results that boosted the stocks in pre-market trading, although those stocks are now trading lower. 

Goldman Sachs (GS) was up more than +1% in pre-market trading but then faded and is now trading -0.6% lower. Goldman reported a Wall Street record of $4.3 billion of equity-trading revenue.  Also, management fees in asset and wealth management rose +11% y/y.

Bank of America (BAC) is down more than -2% despite reporting that its trading division posted a record quarter and that net interest income was better than expected.

Morgan Stanley (MS) is down more than -3% despite reporting strong equity-trading income and boosting net new assets in its wealth management division.

ASML (ASML) is down more than -10% after issuing cautious guidance for next year.  The report dampened enthusiasm for the chip sector, which turned lower today after yesterday's rally on optimism about the Trump administration's move to loosen some chip sale restrictions to China.   Marvell Technology (MRVL) and Applied Materials (AMAT) are down more than -4%.  Micron Technology (MU), Lam Research (LRCX), and KLA Corp (KLAC) are down more than -3%.

Cryptocurrency-exposed stocks are trading higher today after President Trump yesterday apparently convinced right-wing House members to vote in favor of the stablecoin legislation currently before the House.  Bitcoin (^BTCUSD) today is up +2.3% after Tuesday's -3.3% decline.  Mara Holdings (MARA) and Riot Platforms (RIOT) are up more than +5%, and Coinbase (COIN) is up more than +3%.

Johnson & Johnson (JNJ) is up more than +5% after raising its full-year sales guidance for the year and reporting better-than-expected Q2 earnings and revenue.

Earnings Reports (7/16/2025)

Prologis Inc (PLD), Progressive Corp/The (PGR), M&T Bank Corp (MTB), PNC Financial Services Group I (PNC), Bank of America Corp (BAC), Johnson & Johnson (JNJ), Goldman Sachs Group Inc/The (GS), Morgan Stanley (MS), United Airlines Holdings Inc (UAL), Kinder Morgan Inc (KMI).