Stocks Pressured by Weakness in Netflix and Health Insurers

The S&P 500 Index ($SPX) (SPY) today down -0.08%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.44%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.15%.  September E-mini S&P futures (ESU25) are down -0.14%, and September E-mini Nasdaq futures (NQU25) are down -0.17%.

Stocks today gave up an early advance and turned lower as a -5% decline in Netflix weighed on technology stocks after the company forecasted below-consensus full-year operating margins.  Also, the weakness in health insurance providers is weighing on the broader market today after Humana lost a lawsuit to reverse cuts to its Medicare bonus payments and after Elevance Health was downgraded.

Stock indexes initially moved higher, with the S&P 500 and Nasdaq 100 posting new record highs.  Bullish factors included the stronger-than-expected housing starts report and generally upbeat earnings reports.  Also, the University of Michigan’s US July consumer sentiment index rose more than expected to a 5-month high.

Falling bond yields are supportive of stocks following dovish comments from Fed Governor Christopher Waller on Thursday evening, who stated that he supports a Fed interest rate cut at the July 29-30 FOMC meeting.  Also, an easing of inflation expectations in today’s University of Michigan’s July inflation expectations report was bullish for T-notes and stocks. The 10-year T-note yield is down -3 bp to 4.42%.

US June housing starts rose +4.6% m/m to 1.321 million, stronger than expectations of 1.300 million.  Also, June building permits, a proxy for future construction, unexpectedly rose +0.2% m/m to 1.397 million versus expectations of a -0.5% m/m decline to 1.387 million.

The University of Michigan’s July US consumer sentiment index rose +1.1 to a 5-month high of 61.8, stronger than expectations of 61.5.

The University of Michigan’s US July 1-year inflation expectations indicator fell to a 5-month low of +4.4%, better than expectations of no change at +5.0%. Also, the July 5-10 year inflation expectations indicator eased to a 5-month low of +3.6%, weaker than expectations of +3.9%.

Thursday evening, Fed Governor Christopher Waller said, “With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate.  I believe it makes sense to cut the FOMC’s policy rate by 25 basis points two weeks from now.”

Recent trade news has put some downward pressure on stocks.  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, President Trump last weekend 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 5% at the July 29-30 FOMC meeting and 58% at the following meeting on September 16-17.

Earnings season began in earnest this week as big bank earnings results came in stronger than expected.  Early results now show S&P 500 earnings are on track to rise +3.2% for the second quarter, better than the pre-season expectations of +2.8% y/y, 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 -0.42%.  China’s Shanghai Composite closed up +0.50%.  Japan’s Nikkei Stock 225 fell from a 2.5-week high and closed down -0.21%.

Interest Rates

September 10-year T-notes (ZNU25) today are up +9 ticks.  The 10-year T-note yield is down -2.0 bp to 4.432%.  T-notes are climbing today on dovish comments from Fed Governor Christopher Waller, who said he backs a Fed rate cut at the July 29-30 FOMC meeting.  Also, falling inflation expectations in today’s University of Michigan report were bullish for T-notes.

On the bearish side, today’s US housing starts report was stronger than expected.  Also, today’s increase in the University of Michigan US July consumer sentiment to a 5-month high was negative for T-notes.

European government bond yields today are moving higher.  The 10-year German bund yield is up +2.1 bp to 2.696%.  The 10-year UK gilt yield climbed to a 1.5-month high of 4.680% and is up +2.1 bp to 4.676%.

Eurozone May construction output fell -1.7% m/m, the biggest decline in nearly 2.5-years.

The German June PPI fell -1.3% y/y, right on expectations and the steepest pace of decline in 9 months.

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

Weakness in managed health care stocks is weighing on the broader market today. Elevance Health (ELV) is down more than -5% to lead losers in the S&P 500 after Leerink Partners downgraded the stock to market perform from outperform.  Also, Humana (HUM) is down more than -2% after it lost a lawsuit seeking to reverse cuts to its Medicare bonus payments.  In addition, Molina Healthcare (MOH) is down more than -4%, and Centene (CNC) and CVS Health Corp (CVS) are down more than -1%. 

Netflix (NFLX) is down more than -5% to lead losers in the Nasdaq 100 after forecasting a full-year operating margin of 29.5%, below the consensus of 29.7%.

American Express (AXP) is down more than -3% to lead losers in the Dow Jones Industrials after reporting Q2 total expenses of $12.90 billion, above the consensus of $12.73 billion. 

3M Co (MMM) is down more than -3% after cutting its full-year organic sales estimate to +2% from a previous forecast of +2% to +3%.

Sarepta Therapeutics (SRPT) is down more than -18% after it said another patient died from acute liver failure after receiving one of its experimental gene therapies for a muscle disease. 

Autoliv (ALV) is down more than -4% after reporting Q2 adjusted operating margin of 9.30%, below the consensus of 9.35%. 

Builders FirstSource (BLDR) is down more than -2% after Zelman & Associates downgraded the stock to underperform. 

Talen Energy (TLN) is up more than +22% after acquiring gas-fired power plants in Pennsylvania and Ohio for $3.5 billion. 

Invesco Ltd (IVZ) is up more than +11% to lead gainers in the S&P 500 after it filed a proxy statement with the SEC seeking to convert the Invesco QQQ Trust Series 1 into an open-ended fund from a unit investment trust.

Interactive Brokers Group (IBKR) is up more than +6% after reporting Q2 total net interest income of $860 million, well above the consensus of $794.7 million. 

Regions Financial (RF) is up more than +4% after reporting Q2 net interest income of $1.27 billion, better than the consensus of $1.24 billion, and raising its full-year net interest income growth estimate to +3% to +5% from a previous estimate of +1% to +4%.

Abbott Laboratories (ABT) is up more than +3% after Jefferies upgraded the stock to buy from hold with a price target of $145.

Norfolk Southern (NSC) is up more than +3% on reports that Union Pacific is said to be exploring an acquisition of the company. 

Charles Schwab (SCHW) is up more than +2% after reporting Q2 net revenue of $5.85 billion, stronger than the consensus of $5.72 billion.

Earnings Reports (7/18/2025)

3M Co (MMM), Ally Financial Inc (ALLY), American Express Co (AXP), Charles Schwab Corp/The (SCHW), Comerica Inc (CMA), Euronet Worldwide Inc (EEFT), Huntington Bancshares Inc/OH (HBAN), MarketAxess Holdings Inc (MKTX), Regions Financial Corp (RF), Schlumberger NV (SLB), Southern Copper Corp (SCCO), Truist Financial Corp (TFC).