S&P 500 and Nasdaq 100 Post Record Highs on Tech Stock Strength

The S&P 500 Index ($SPX) (SPY) Thursday closed up +0.07%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.70%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.25%.  September E-mini S&P futures (ESU25) rose +0.09%, and September E-mini Nasdaq futures (NQU25) rose +0.33%.

Stock indexes on Thursday settled mostly higher, with the S&P 500 and Nasdaq 100 posting new all-time highs.  Earnings results from Alphabet showed solid demand for artificial intelligence and bolstered confidence in technology stocks, which rose after the company reported better-than-expected Q2 revenue.  Stocks added to their gains on signs of resilience in the US labor market, following the unexpected decline in weekly initial unemployment claims to a 3-month low.

On the negative side, Tesla closed down more than -7% after reporting its biggest revenue decline in at least ten years and CEO Musk warning of a "rough patch" for the company for the next year or more.  Also, IBM fell more than -7% to weigh on the Dow Jones Industrials after reporting weaker-than-expected Q2 software revenue.  In addition, signs of weakness in US manufacturing activity are bearish for stocks after the July S&P US manufacturing PMI fell -3.4 to 49.5, weaker than expectations of 52.7 and the weakest level in 7 months.

US weekly initial unemployment claims unexpectedly fell -4,000 to a 3-month low of 217,000, showing a stronger labor market than expectations of an increase to 226,000.

The US June Chicago Fed national activity index rose +0.06 to -0.10, stronger than expectations of -0.15.

US June new home sales rose +0.6% m/m to 627,000, weaker than expectations of +4.3% m/m to 650,000.

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.  As an update, Mr. Trump late Wednesday said, "We'll have a straight, simple tariff of anywhere between 15% and 50%," an indication that the floor for tariffs is rising and suggesting that he would not go below 15%. 

The markets this week will focus on any tariff news, along with the announcement of any new trade deals.  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 63% at the following meeting on September 16-17.

The markets this week absorbed a heavy slate of quarterly corporate earnings, with reports from about one-fifth of the companies in the S&P 500.  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 Thursday settled higher.  The Euro Stoxx 50 closed up +0.20%.  China's Shanghai Composite closed up +0.65%.  Japan's Nikkei Stock 225 climbed to a new 1-year high and closed up sharply for a second session by +1.59%.

Interest Rates

September 10-year T-notes (ZNU25) Thursday closed down -6 ticks.  The 10-year T-note yield rose by +3.2 bp to 4.412%.  T-notes were under pressure on Thursday due to reduced safe-haven demand for government securities, as optimism grew that the US would reach more trade deals with its trading partners following the clinching of a deal with Japan on Wednesday.  Also, Bloomberg News reported on Wednesday that the US and EU are closing in on a trade deal.  T-notes dropped to their lows Thursday after weekly US jobless claims unexpectedly fell to a 3-month low, a sign of labor market strength that is hawkish for Fed policy.

However, T-notes recovered from their worst levels Thursday after June new home sales rose less than expected and the US manufacturing PMI unexpectedly fell to a 7-month low, dovish factors for Fed policy. 

European government bond yields on Thursday finished mixed.  The 10-year German bund yield rose to a 1-week high of 2.711% and ended up +6.3 bp to 2.702%.  The 10-year UK gilt yield fell -1.3 bp to 4.622%.

The Eurozone July S&P manufacturing PMI rose +0.3 to a 3-year high of 49.8, right on expectations.  The Eurozone July S&P composite PMI rose +0.4 to 51.0, stronger than expectations of +0.1 to 50.7 and the strongest level in 11 months.

Eurozone Jun new car registrations fell -7.3% y/y to 1.010 million units, the largest decline in 10 months.

The German Aug GfK consumer confidence index unexpectedly fell -1.2 to a 4-month low of -21.5, weaker than expectations of an increase to -19.3.

As expected, the ECB kept the deposit facility rate unchanged at 2.00%.  The ECB said, "Inflation is currently at the 2% medium-term target," and the economy has so far proven resilient, but the environment remains uncertain due to trade disputes.

ECB President Lagarde said the economic risks to the Eurozone are tilted to the downside, and a stronger euro could dampen inflation more than expected.

Swaps are discounting the chances at 21% for a -25 bp rate cut by the ECB at the September 11 policy meeting.

US Stock Movers

The Magnificent Seven stocks, sans Apple and Tesla, rallied Thursday and supported gains in the broader market.  Nvidia (NVDA), Amazon.com (AMZN), and Microsoft (MSFT) closed up more than +1%.  Also, Alphabet (GOOGL) closed up +0.88%, and Meta Platforms (META) closed up +0.17%.

West Pharmaceutical Services (WST) closed up more than +22% to lead gainers in the S&P 500 after reporting Q2 net sales of $766.5 million, well above the consensus of $726.1 million, and raising its full-year net sales forecast to $3.04 billion-$3.06 billion from a previous forecast of $2.95 billion-$2.98 billion, stronger than the consensus of $2.96 billion.

United Rentals (URI) closed up more than +8% after reporting Q2 revenue of $3.94 billion, above the consensus of $3.90 billion, and said it was adding $400 million to its stock buyback program.

Labcorp Holdings (LH) closed up more than +6% after reporting Q2 revenue of $3.53 billion, better than the consensus of $3.49 billion, and raising its full-year adjusted EPS estimate to $16.05-$16.50 from a previous estimate of $15.70-$16.40.

T-Mobile US (TMUS) closed up more than +5% to lead gainers in the Nasdaq 100 after reporting Q2 total postpaid net customers of 1.77 million, above the consensus of 1.34 million, and raising its full-year postpaid net customers forecast to 6.1 million-6.4 million from a previous estimate of 5.5 million-6.0 million, better than the consensus of 5.94 million. 

ServiceNow (NOW) closed up more than +4% after reporting Q2 subscription revenue of $3.11 billion, above the consensus of $3.04 billion, and raising its full-year subscription revenue forecast to $12.78 billion-$12.80 billion from a previous forecast of $12.64 billion-$12.68 billion, stronger than the consensus of $12.68 billion.

Las Vegas Sands (LVS) closed up more than +4% after reporting Q2 net revenue of $3.18 billion, well above the consensus of $2.83 billion.

A O Smith (AOS) closed up more than +3% after boosting its full-year net sales forecast to $3.85 billion-$3.93 billion from a previous forecast of $3.80 billion-$3.90 billion, better than the consensus of $3.86 billion.

LKQ Corp (LKQ) closed down more than -17% to lead losers in the S&P 500 after reporting Q2 adjusted EPS continuing operations of 87 cents, weaker than the consensus of 93 cents.

Dow Inc. (DOW) closed down more than -17% after reporting a Q2 adjusted operating loss per share of -42 cents, a much wider loss than the consensus of -18 cents. 

Molina Healthcare (MOH) closed down more than -16% after reporting Q2 adjusted EPS of $5.48, below the consensus of $5.52, and cutting its full-year adjusted EPS forecast to at least $19.00 from a previous estimate of $21.50-$22.50, weaker than the consensus of $22.08. 

Chipotle Mexican Grill (CMG) closed down more than -13% after reporting Q2 comparable sales fell -4%, weaker than the consensus of -2.91%, and cutting its full-year comparable sales forecast to 0% from a previous forecast of low single-digits growth. 

Tesla (TSLA) closed down more than -7% to lead losers in the Nasdaq 100 after reporting Q2 revenue of $22.50 billion, below the consensus of $22.64 billion, and CEO Musk warning of a "rough patch" for the company for the next year or more. 

International Business Machines (IBM) closed down more than -7% to lead losers in the Dow Jones Industrials after reporting Q2 software revenue of $7.39 billion, weaker than the consensus of $7.49 billion. 

Southwest Airlines (LUV) closed down more than -11% after cutting its full-year EBIT to $600 million-$800 million from a previous estimate of $1.7 billion, saying it expects fallout from tariff turmoil to erase as much as $1 billion of its annual pre-tax profit this year.

American Airlines Group (AAL) closed down more than -9% after reinstating annual earnings guidance for 2025 from an adjusted loss of -20 cents a share to a profit of 80 cents, with the midpoint well below the consensus of a 72-cent profit. 

Earnings Reports (7/25/2025)

Aon PLC (AON), AutoNation Inc (AN), Booz Allen Hamilton Holding Co (BAH), Centene Corp (CNC), Charter Communications Inc (CHTR), Erie Indemnity Co (ERIE), First Citizens BancShares Inc/ (FCNCA), First Hawaiian Inc (FHB), Gentex Corp (GNTX), HCA Healthcare Inc (HCA), Lear Corp (LEA), OneMain Holdings Inc (OMF), Phillips 66 (PSX), Saia Inc (SAIA), Skechers USA Inc (SKX).