Nasdaq Pressured by Chip Stocks, But Broad Market Supported by Lower T-note Yields

The S&P 500 Index ($SPX) (SPY) Tuesday closed up +0.06%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.40%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.50%.  September E-mini S&P futures (ESU25) rose +0.01%, and September E-mini Nasdaq futures (NQU25) fell -0.52%.

Stock indexes settled mixed on Tuesday.  On the positive side, D.R. Horton rallied more than +16% to lead home builders higher after reporting stronger-than-expected Q3 net sales and raising its full-year revenue forecast.  Also, Northrop Grumman rose more than +9% after boosting its full-year adjusted EPS forecast.  In addition, bond yields fell on Tuesday, supporting stocks after Treasury Secretary Bessent said, "He sees no reason for Fed Chair Powell to step down right now." The 10-year T-note yield fell -4 bp to a 1.5-week low of 4.34%.

Positive trade comments from Treasury Secretary Bessent on Tuesday were supportive for stocks when he said, "trade is in a very good place with China," and he will meet his Chinese counterparts in Stockholm next week.  He also said he believes the US "will likely extend" its trade truce with China past the August 12 deadline of the current truce.

Weighing on the Nasdaq 100 index Tuesday was weakness in semiconductor stocks.  Also, Lockheed Martin dropped more than -10% after reporting weaker-than-expected Q2 net sales and cutting its full-year EPS estimate.  In addition, General Motors fell more than -7% after forecasting full-year EBIT below analysts' estimates.

Tuesday's US economic news was bearish for stocks after the July Richmond Fed manufacturing index unexpectedly fell -12 to an 11-month low of -20, weaker than expectations of an increase to -2.

Recent trade news has put some downward pressure on stocks.  Last Wednesday, President Trump announced that he intends to send a tariff letter to more than 150 countries, notifying them that their tariff rates could be 10% or 15%, effective August 1.  Also, President Trump recently announced that the US will impose 30% tariffs on US imports from the European Union and Mexico, effective August 1.  In addition, Mr. Trump said that a 35% tariff on some Canadian products would take effect on August 1, up from the current 25%. 

The markets this week will focus on any tariff news along with the announcement of any new trade deals.  On Wednesday, June existing home sales are expected to fall -0.7% m/m to 4.00 million. On Thursday, weekly initial unemployment claims are expected to climb by +6,000 to 227,000.  Also, the July S&P US manufacturing PMI is expected to slip -0.4 to 52.5.  Finally, on Thursday, June new home sales are expected to climb +4.3% m/m to 650,000. On Friday, June capital goods new orders nondefense ex-aircraft and parts are expected to increase by +0.2% m/m.

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.

The markets are awaiting a heavy slate of quarterly corporate earnings results this week, including Alphabet and Tesla on Wednesday.  About one-fifth of the companies in the S&P 500 are expected to report their Q2 earnings results this week.  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 on Tuesday settled mixed.  The Euro Stoxx 50 fell to a 2-week low and closed down -0.98%.  China's Shanghai Composite climbed to a 9.5-month high and closed up +0.62%.  Japan's Nikkei Stock 225 fell from a 3-week high and closed down -0.11%.

Interest Rates

September 10-year T-notes (ZNU25) Tuesday closed up +7 ticks.  The 10-year T-note yield fell -4.0 bp to 4.338%.  T-notes recovered from overnight losses and climbed to a 2.5-week high, and the 10-year T-note yield fell to a 1.5-week low of 4.326% on comments from Treasury Secretary Bessent, who said "he sees no reason for Fed Chair Powell to step down right now."  T-notes extended their gains after the July Richmond Fed manufacturing index unexpectedly fell to an 11-month low.  T-notes also garnered carryover support Tuesday from a rally in 10-year German bunds to a 2-week high.

European government bond yields on Tuesday moved lower.  The 10-year German bund yield fell to a 2-week low of 2.585% and finished down -2.3 bp to 2.590%.  The 10-year UK gilt yield fell -3.4 bp to 4.569%.

The ECB's quarterly Bank Lending Survey stated that "Loan demand was supported by declining interest rates, but dampened by global uncertainty and trade tensions, and while lenders saw a 'slight net increase' in loan demand in Q2, the uptake remained weak overall."

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

US Stock Movers

Weakness in chip stocks was a negative factor for the overall market on Tuesday, with KLA Corp (KLAC) closing down more than -4% to lead losers in the Nasdaq 100.  Also, Lam Research (LRCX), ARM Holdings Plc (ARM), Micron Technology (MU), and Broadcom (AVGO) closed down more than +3%.  In addition, Nvidia (NVDA) closed down more than -2% to lead losers in the Dow Jones Industrials, and Analog Devices (ADI) and Applied Materials (AMAT) closed down more than -2%. 

D.R. Horton (DHI) surged more than +16% to lead homebuilders higher after reporting Q3 net sales of 23,071, better than the consensus of 22,017, and raising its full-year revenue forecast to $33.7 billion-$34.2 billion from a previous estimate of $33.3 billion-$34.8 billion, the midpoint above the consensus of $33.84 billion. Also, PulteGroup (PHM) closed up more than +11%, and Lennar (LEN) and Toll Brothers (TOL) closed up more than +8%.

IQVIA Holdings (IQV) closed up more than +17% to lead gainers in the S&P 500 after reporting Q2 revenue of $4.02 billion, above the consensus of $3.96 billion. 

Northrop Grumman (NOC) closed up more than +9% after boosting its full-year adjusted EPS forecast to $25.00-$25.40 from a previous forecast of $24.95-$25.35, the midpoint above the consensus of $25.17.   

Quest Diagnostics (DGX) closed up more than +7% after reporting Q2 adjusted EPS of $2.62, better than the consensus of $2.58, and raising its full-year adjusted EPS estimate to $9.63-$9.83 from a previous estimate of $9.55-$9.80. 

Genuine Parts Co (GPC) closed up more than +7% after reporting Q2 net sales of $6.20 billion, better than the consensus of $6.11 billion.

PACCAR Inc. (PCAR) closed up more than +6% to lead gainers in the Nasdaq 100 after raising the lower end of its full-year capex estimate to $750 million-$800 million from a previous forecast of $700 million-$800 million. 

United Natural Foods (UNFI) closed up more than +3% after Northcoast Research upgraded the stock to buy from neutral with a price target of $36.

Lockheed Martin (LMT) closed down more than -10% to lead losers in the S&P 500 after reporting Q2 net sales of $18.16 billion, weaker than the consensus of $18.53 billion, and cut its full-year EPS estimate to $21.70-$22.00 from a previous estimate of $27.00-$27.30. 

General Motors (GM) closed down more than -8% after forecasting full-year adjusted EBIT of $10.00 billion to $11.37 billion, with the midpoint below the consensus of $11.37 billion. 

Equifax (EFX) closed down more than -8% after forecasting Q3 adjusted EPS of $1.87-$1.97, below the consensus of $1.99. 

Phillip Morris International (PM) closed down more than -8% after forecasting full-year organic revenue to climb +6% to +8%, weaker than the consensus of +8.29%. 

Circle Internet Group (CRCL) closed down more than -8% after Compass Point Research & Trading LLC downgraded the stock to sell from neutral with a price target of $130.

MSCI Inc (MSCI) closed down more than -8% after reporting Q2 net new recurring subscription sales of $43.8 million, weaker than the consensus of $46.6 million. 

Earnings Reports (7/23/2025)

Alphabet Inc (GOOGL), Amphenol Corp (APH), AT&T Inc (T), Boston Scientific Corp (BSX), Chipotle Mexican Grill Inc (CMG), CME Group Inc (CME), Crown Castle Inc (CCI), CSX Corp (CSX), Fiserv Inc (FI), Freeport-McMoRan Inc (FCX), GE Vernova Inc (GEV), General Dynamics Corp (GD), Globe Life Inc (GL), Hasbro Inc (HAS), Hilton Worldwide Holdings Inc (HLT), International Business Machine (IBM), Lamb Weston Holdings Inc (LW), Las Vegas Sands Corp (LVS), Lennox International Inc (LII), Molina Healthcare Inc (MOH), Moody's Corp (MCO), NextEra Energy Inc (NEE), Northern Trust Corp (NTRS), NVR Inc (NVR), O'Reilly Automotive Inc (ORLY), Otis Worldwide Corp (OTIS), Packaging Corp of America (PKG), Raymond James Financial Inc (RJF), Rollins Inc (ROL), ServiceNow Inc (NOW), TE Connectivity PLC (TEL), Teledyne Technologies Inc (TDY), Tesla Inc (TSLA), Thermo Fisher Scientific Inc (TMO), T-Mobile US Inc (TMUS), United Rentals Inc (URI).