Signs of Economic Strength Boost Stocks

The S&P 500 Index ($SPX) (SPY) today is up +0.30%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.35%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.40%.  September E-mini S&P futures (ESU25) are up +0.08%, and September E-mini Nasdaq futures (NQU25) are up +0.18%.

Stocks are climbing today on signs the US economy is holding up, despite tariff uncertainty.  Positive economic news today included a decline in weekly jobless claims to a 3-month low, a stronger-than-expected retail sales report, and a rise in the Philadelphia Fed index to a 5-month high.

Strength in airline stocks is also lifting the broader market as United Airlines Holdings jumped more than +6% after CEO Kirby said the second half of the year has become more predictable, and the company has potential "upside" to beat its earnings targets as customers returned to booking flights. 

On the negative side, health insurers are retreating today, led by an -11% plunge in Elevance Health after the company cut its earnings outlook for the year.

US weekly initial unemployment claims unexpectedly fell -7,000 to a 3-month low of 221,000, showing a stronger labor market than expectations of an increase to 233,000.

US June retail sales rose +0.6% m/m, stronger than expectations of +0.1% m/m, and June retail sales ex-autos rose +0.5% m/m, stronger than expectations of +0.3% m/m.

The US June import price index ex-petroleum was unchanged m/m, weaker than expectations of +0.2% m/m.

The US July Philadelphia Fed business outlook survey rose +19.9 to a 5-month high of 15.9, stronger than expectations of -1.0.

On the trade front, President Trump said late Wednesday that he intends to send a tariff letter to more than 150 countries notifying them their tariff rates could be 10% or 15%, effective August 1, and that the group was "not big countries who don't do that much business with the US."

Also, signs that the US could ease some of its export restrictions on semiconductor chips to China are bullish for chip makers.  Commerce Secretary Lutnick said Nvidia could soon resume sales of its less advanced H20 chips to China, and Advanced Micro Devices received similar assurances from the Commerce Department, a sign that the US may be in the process of negotiating a grand trade deal with China.  Treasury Secretary Bessent is expected to meet his Chinese counterpart, Vice Premier He Lifeng, within "the next couple of weeks" and signaled the US will likely extend an August 12 deadline for the easing of sky-high tariffs.

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.

Federal funds futures prices are discounting the chances for a -25 bp rate cut at 3% at the July 29-30 FOMC meeting and 58% at the following meeting on Sep 16-17.

The markets will focus on any fresh news regarding tariffs or trade deals during the remainder of this week.  Later today, 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.  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 higher.  The Euro Stoxx 50 is up +1.11%.  China's Shanghai Composite closed up +0.37%.  Japan's Nikkei Stock 225 closed up +0.60%.

Interest Rates

September 10-year T-notes (ZNU25) today are up +4 ticks.  The 10-year T-note yield is down -2.2 bp to 4.433%.  T-notes recovered from early losses today and moved higher on carryover support from late Wednesday when President Trump said he has "no plans” on firing Fed Chair Powell.  T-notes also found support on signs of easing price pressures after today's news showed the Jun import price index ex-petroleum rose less than expected.

T-notes initially moved lower today on stronger-than-expected US economic news, including June retail sales, weekly initial unemployment claims, and the July Philadelphia Fed manufacturing survey, which signaled strength in the US economy that was hawkish for Fed policy.  Also, strength in stocks today has reduced safe-haven demand for T-notes. 

European government bond yields today are moving higher.  The 10-year German bund yield is up +0.4 bp to 2.691%.  The 10-year UK gilt yield climbed to a 6-week high of 4.678% and is up +2.2 bp to 4.660%.

Swaps are discounting the chances at 1% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

United Airlines Holdings (UAL) is up more than +6% to lead airline stocks higher after CEO Kirby said the second half of the year has become more predictable and the company has potential "upside" to beat its earnings targets as customers returned to booking flights.  Also, American Airlines Group (AAL) is up more than +5% and Alaska Air Group (ALK) is up more than +3%.  In addition, Delta Air Lines (DAL) is up more than +2% and Southwest Airlines (LUV) is up more than +1%.

Snap-on (SNA) is up more than +6% to lead gainers in the S&P 500 after reporting Q2 net sales of $1.18 billion, stronger than the consensus of $1.16 billion. 

PepsiCo (PEP) is up more than +6% to lead gainers in the Nasdaq 100 after reporting Q2 net revenue of $22.73 billion, above the consensus of $22.32 billion. 

CSX Corp (CSX) is up more than +3% after Semafor reported that Union Pacific is exploring an acquisition of the company.

Steven Madden Ltd (SHOO) is up more than +7% after Citigroup upgraded the stock to buy from neutral with a price target of $32. 

Toast (TOST) is up more than +3% after Deutsche Bank upgraded the stock to buy from not rated with a price target of $54. 

Mondelez International (MDLZ) is up more than +1% after Jefferies upgraded the stock to buy from hold with a price target of $78. 

Health insurance providers are sliding today, led by an -11% plunge in Elevance Health (ELV) to lead losers in the S&P 500 after cutting its earnings outlook for the year to "approximately" $30 per share, well below a previous forecast of $34.15 to $34.85 per share.  Also, Molina Healthcare (MOH) is down more than -5%.  In addition, Humana (HUM), Centene (CNC), and Cigna Group (CI) are down more than -2%.  Finally, UnitedHealth Group (UNH) is down more than -1% to lead losers in the Dow Joens Industrials.

Sonic Automotive (SAH) is down more than -6% after JPMorgan Chase downgraded the stock to underweight from overweight with a price target of $72.

Starwood Property Trust (STWD) is down more than -4% after selling over 25.5 million shares of its common stock in an underwritten public offering overnight between $19.91 to $20.33 a share, below Wednesday's closing price of $20.85.

MP Materials (MP) is down more than -2% after it said it commenced a $500 million underwritten public offering of its common stock to fund its expansion.

Archer-Daniels-Midland (ADM) is down more than -1% after President Trump said Coca-Cola has agreed to use "real cane sugar" in Coke soda in the US, which could reduce demand for ADM's corn syrup and hurt its corn-processing business. 

Shake Shack (SHAK) is down more than -1% after Jeffries downgraded the stock to underperform from hold with a price target of $120.

Earnings Reports (7/17/2025)

PepsiCo Inc (PEP), Travelers Cos Inc/The (TRV), Abbott Laboratories (ABT), Elevance Health Inc (ELV), Cintas Corp (CTAS), Marsh & McLennan Cos Inc (MMC), US Bancorp (USB), Snap-on Inc (SNA), General Electric Co (GE), Citizens Financial Group Inc (CFG), Fifth Third Bancorp (FITB), Netflix Inc (NFLX).