The S&P 500 Index ($SPX) (SPY) Wednesday closed up +0.78%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.43%. September E-mini S&P futures (ESU25) rose +0.80%, and September E-mini Nasdaq futures (NQU25) rose +0.45%.
Stock indexes rallied on Wednesday, with the S&P 50 posting a new all-time high and the Dow Jones Industrials posting a 5.5-month high. Positive trade news bolstered stock prices and boosted market sentiment on Wednesday.
President Trump late Tuesday announced a trade deal with Japan, which will impose 15% tariffs on imports from Japan, lower than the previously announced 25% rate set to take effect on August 1. The deal also creates a $550 billion fund for Japan to invest in the US. Japan also agreed to purchase 100 Boeing aircraft, increase its purchases of US rice by 75%, and buy $8 billion in other agricultural products, while raising its defense spending with American firms to $17 billion annually, from $14 billion.
Stocks built on their gains Wednesday afternoon when Bloomberg News reported that diplomats briefed on the situation said the European Union (EU) and the US are progressing toward an agreement that would set a 15% tariff for most imports, lower than the 30% rate President Trump had threatened on EU goods if no trade agreement was reached by August 1.
However, gains in the Nasdaq 100 index were limited due to weakness in auto-related chip makers, led by a -13% plunge in Texas Instruments after company executives on an earnings call said there isn’t a “true broad recovery” in the automotive sector, as automotive customers who ship into the US are cautious due to tariffs.
Wednesday’s US economic news was bearish for stocks after June existing home sales fell -2.7% m/m to a 9-month low of 3.93 million, weaker than expectations of -0.7% to 4.00 million.
US MBA mortgage applications rose +0.8% in the week ended July 18, with the purchase mortgage sub-index up +3.4% and the refinancing sub-index down -2.6%. The average 30-year fixed rate mortgage rose +2 bp to 6.84% from 6.82% in the prior week.
The markets are awaiting President Trump’s August 1 deadline for trade deals to avoid high tariffs. Last Wednesday, Mr. 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, 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 Thursday, weekly initial unemployment claims are expected to climb by +5,000 to 226,000. Also, the July S&P US manufacturing PMI is expected to slip -0.2 to 52.7. 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 3% at the July 29-30 FOMC meeting and 58% at the following meeting on September 16-17.
The markets are absorbing a heavy slate of quarterly corporate earnings results this week. 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 today settled higher on Wednesday. The Euro Stoxx 50 closed up +1.02%. China’s Shanghai Composite rose to a new 9.5-month high and closed up +0.01%. Japan’s Nikkei Stock 225 rallied to a 1-year high and closed up sharply by +3.51%.
Interest Rates
September 10-year T-notes (ZNU25) on Wednesday closed down -12.5 ticks. The 10-year T-note yield rose +4.0 bp to 4.384%. T-notes retreated on Wednesday as global trade tensions eased, which curbed safe-haven demand for T-notes. The US and Japan announced a trade deal late Tuesday, and Bloomberg News reported Wednesday that the US and EU are closing in on a trade deal. Wednesday’s rally in the S&P 500 to a new record high also reduced safe-haven demand for government debt.
Losses in T-notes are contained after US existing home sales fell more than expected to a 9-month low, a dovish factor for Fed policy. T-note prices also garnered support from a decline in the US 10-year breakeven inflation rate to a 1.5-week low Wednesday of 2.379%. In addition, strong demand for the Treasury’s $13 billion auction of 20-year T-bonds was positive for T-notes, as the auction had a bid-to-cover ratio of 2.79, better than the 10-auction average of 2.57.
European government bond yields on Wednesday moved higher. The 10-year German bund yield rose +5.0 bp to 2.639%. The 10-year UK gilt yield rose +6.6 bp to 4.635%.
Swaps are discounting the chances at 2% for a -25 bp rate cut by the ECB at Thursday’s policy meeting.
US Stock Movers
Power producers rallied Wednesday after PJM Interconnection LLC predicted that the AI boom will prompt businesses and households served by the largest US power grid to spend a record $16.1 billion to ensure electricity supplies, which could support utility profit margins. Talen Energy (TLN) closed up more than +8% and Vistra (VST) closed up more than +5%. Also, NRG Energy (NRG) closed up more than +4% and Constellation Group (CEG) closed up more than +1%.
Weakness in shares of automotive and industrial chipmakers limited gains in the Nasdaq 100, with Texas Instruments (TXN) closing down more than -13% to lead losers in the Nasdaq 100 after company executives on an earnings call said there isn’t a “true broad recovery” in the automotive sector as automotive customers who ship into the US are cautious due to tariffs. Also, Microchip Technology (MCHP) closed down more than -6% and ON Semiconductor (ON) closed down more than -4%. In addition, Analog Devices (ADI) closed down more than -3%, and NXP Semiconductors (NXPI) closed down more than -1%.
Lamb Weston Holdings (LW) closed up more than +16% to lead gainers in the S&P 500 after reporting Q4 net sales of $1.68 billion, stronger than the consensus of $1.59 billion.
GE Vernova (GEV) closed up more than +14% after reporting Q2 revenue of $9.11 billion, stronger than the consensus of $8.80 billion.
Baker Hughes (BKR) closed up more than +11% to lead gainers in the Nasdaq 100 after reporting Q2 revenue of $6.91 billion, stronger than the consensus of $6.64 billion.
TE Connectivity Plc (TEL) closed up more than +11% after reporting Q3 net sales of $4.53 billion, better than the consensus of $4.33 billion, and forecasting Q4 net sales of $4.55 billion, above the consensus of $4.42 billion.
Thermo Fisher Scientific (TMO) closed up more than +9% after reporting Q2 revenue of $10.86 billion, above the consensus of $10.69 billion, and forecasting full-year sales of $43.6 billion-$44.2 billion, the midpoint above the consensus of $43.7 billion.
Lennox International (LII) closed up more than +6% after reporting Q2 adjusted EPS of $7.82, well above the consensus of $6.89.
CoStar Group (CSGP) closed up more than +6% after reporting Q2 revenue of $781.3 million, above the consensus of $772.1 million, and raising its full-year revenue forecast to $3.14 billion-$3.16 billion from a previous forecast of $3.12 billion-$3.16 billion, stronger than the consensus of $3.13 billion.
Fiserv (FI) closed down more than -13% after reporting Q2 organic revenue grew +8.00%, below the consensus of +8.91%.
Otis Worldwide (OTIS) closed down more than -12% after reporting Q2 net sales of $3.60 billion, below the consensus of $3.71 million, and cutting its full-year net sales forecast to $114.5 billion to $14.6 billion from a previous estimate of $14.6 billion to $14.8 billion, weaker than the consensus of $14.72 billion.
Hilton Worldwide Holdings (HLT) closed down more than -2% after cutting its full-year net income forecast to $1.64 billion to $1.68 billion from a previous forecast of $1.71 billion to $1.75 billion.
Unity Software (U) closed down more than -2% after BTIG downgraded the stock to sell from neutral with a price target of $25.
Northern Trust Corp (NTRS) closed down more than -1% after reporting Q2 provision for credit losses of $16.5 million, well above the consensus of $4.31 million.
Teledyne Technologies (TDY) closed down more than -1% after forecasting full-year adjusted EPS of $21.20-$21.50, the midpoint below the consensus of $21.42.
Earnings Reports (7/24/2025)
A O Smith Corp (AOS), Allegion plc (ALLE), Ameriprise Financial Inc (AMP), Blackstone Inc (BX), CenterPoint Energy Inc (CNP), Deckers Outdoor Corp (DECK), Digital Realty Trust Inc (DLR), Dover Corp (DOV), Dow Inc (DOW), Edwards Lifesciences Corp (EW), Healthpeak Properties Inc (DOC), Honeywell International Inc (HON), Intel Corp (INTC), Keurig Dr Pepper Inc (KDP), L3Harris Technologies Inc (LHX), Labcorp Holdings Inc (LH), LKQ Corp (LKQ), Mohawk Industries Inc (MHK), Nasdaq Inc (NDAQ), Newmont Corp (NEM), Pool Corp (POOL), Southwest Airlines Co (LUV), Textron Inc (TXT), Tractor Supply Co (TSCO), Union Pacific Corp (UNP), Valero Energy Corp (VLO), VeriSign Inc (VRSN), West Pharmaceutical Services Inc (WST), Westinghouse Air Brake Technol (WAB), Weyerhaeuser Co (WY).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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