The Federal Reserve Leaves Rates Unchanged

The S&P 500 Index ($SPX) (SPY) today is up +0.20%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.01%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.46%. 

The Federal Reserve chose to maintain its benchmark interest rate, despite public criticism from President Donald Trump and dissenting votes from two senior officials. The Federal Open Market Committee (FOMC) voted 9-2 to keep the federal funds rate unchanged in its 4.25%-4.5% range, a key rate that impacts borrowing costs throughout the economy.

Earlier in the day the July ADP employment change rose more than expected and posted its largest increase in four months.  Also, economic activity rebounded after Q2 GDP expanded more than expected.  Also, Microsoft and Meta Platforms are set to release their earnings after today’s close. 

The US July ADP employment change rose +104,000, stronger than expectations of +76,000 and the largest increase in four months.  Also, the Jun ADP employment change was revised upward to -23,000 from the previously reported -33,000.

US Q2 GDP rose +3.0% (q/q annualized), stronger than expectations of +2.6%.  The Q2 core PCE price index rose +2.5% q/q, stronger than expectations of +2.3% q/q.

US Jun pending home sales unexpectedly fell -0.8% m/m, weaker than expectations of a +0.2% m/m increase.

US MBA mortgage applications fell -3.8% in the week ending July 25, with the purchase mortgage sub-index down -5.8% and the refinancing sub-index down -1.1%.  The average 30-year fixed rate mortgage fell -1 bp to 6.83% from 6.84% in the prior week.

The Treasury said in its quarterly refunding announcement today that it anticipates keeping the size of its note and bond auctions unchanged “for at least the next several quarters,” and will rely more on the shortest-dated securities to fund the federal deficit at least until 2026.

In the latest tariff news, President Trump today said he will impose a tariff rate of 25% on India starting August 1 and suggested he would add an additional penalty over the country’s energy purchases from Russia.

The markets this week will focus on any news of new trade deals before Friday’s deadline. The Fed is expected to keep the fed funds target range unchanged at 4.25% to 4.50% when the FOMC meeting ends later today.  On Thursday, initial weekly unemployment claims are expected to rise by 6,000 to 223,000, and the Q2 employment cost index is expected to increase by 0.8%. Also, Jun personal spending is expected to climb +0.4% m/m and Jun personal income is expected to rise +0.2% m/m. In addition, the Jun core PCE price index, the Fed’s preferred inflation gauge, is expected to climb +0.3% m/m and +2.7% y/y.  Finally, on Thursday, the Jul MNI Chicago PMI is expected to increase by +1.6 to 42.0. On Friday, Jul nonfarm payrolls are expected to increase by +109,000, and the Jul unemployment rate is expected to rise by +0.1 to 4.2%.  Also, Jul average hourly earnings are expected +0.3% m/m and +3.8% y/y.  In addition, the Jul ISM manufacturing index is expected to increase by +0.2 to 49.5.  Finally, the University of Michigan Jul consumer sentiment index is expected to be unrevised at 61.8. 

The markets are awaiting President Trump’s August 1 deadline for trade deals to avoid high tariffs.  On July 16, 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 last 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%. 

Federal funds futures prices are discounting the chances for a -25 bp rate cut at 2% at today’s FOMC meeting and 62% at the following meeting on September 16-17.

This week kicks off the earnings season’s busiest week, with 38% of the stocks in the S&P 500 reporting quarterly earnings, double the amount reported last week. The earnings results of Magnificent Seven members will be front and center, with Microsoft and Meta Platforms reporting after today’s close and Apple and Amazon.com reporting on Thursday.  Early results show that S&P 500 earnings are on track to rise +4.5% for the second quarter, better than the pre-season expectations of +2.8% y/y, according to Bloomberg Intelligence.  With about a third of S&P 500 firms having reported, around 82% exceeded profit estimates. 

Overseas stock markets today are mixed.  The Euro Stoxx 50 is up +0.33%.  China’s Shanghai Composite rallied to a 9.5-month high and closed up +0.17%.  Japan’s Nikkei Stock 225 closed down -0.05%.

Interest Rates

September 10-year T-notes (ZNU25) today are down -8 ticks.  The 10-year T-note yield is up +4.8 bp to 4.368%.  Sep T-notes fell from a 3.5-week high today and turned lower, and the 10-year T-note yield rose from a 3.5-week low of 4.313% and moved higher. T-notes erased early gains today on signs of strength in the US labor market after the July ADP employment change rose more than expected.  T-notes extended their losses after Q2 GDP expanded more than expected.  Short covering ahead of the results of today’s FOMC meeting is limiting losses in T-notes.

European government bond yields today are moving lower.  The 10-year German bund yield is down -0.1 bp to 2.707%.  The 10-year UK gilt yield is down -2.5 bp to 4.608%.

Eurozone Q2 GDP rose +0.1% q/q and +1.4% y/y, stronger than expectations of unchanged m/m and +1.2% y/y.

Eurozone July economic confidence rose +1.6 to a 5-month high of 95.8, stronger than expectations of 94.5.

Swaps are discounting the chances at 13% for a -25 bp rate cut by the ECB at the September 11 policy meeting.

US Stock Movers

Teradyne (TER) is up more than +18% to lead gainers in the S&P 500 after reporting Q2 adjusted EPS of 57 cents, better than the consensus of 54 cents.

Marvell Technology (MRVL) is up more than +9% to lead gainers in the Nasdaq 100 after Morgan Stanley raised its price target on the stock to $80 from $73.

VF Corp (VFC) is up more than +11% after reporting Q1 net revenue of $1.80 billion, well above the consensus of $1.70 billion.

Generac Holdings (GNRC) is up more than +8% after reporting Q2 net sales of $1.06 billion, better than the consensus of $1.03 billion.

Humana (HUM) is up more than +5% after reporting Q2 adjusted ESP of $6.27, stronger than the consensus of $5.74, and raising its full-year adjusted EPS estimate to $17.00 from a previous estimate of $16.25, well above the consensus of $16.35.

Electronic Arts (EA) is up more than +4% after reporting Q1 net bookings of $1.30 billion, above the consensus of $1.24 billion. 

Etsy (ETSY) is up more than +4% after reporting Q2 gross merchandise sales of $2.81 billion, better than the consensus of $2.77 billion.

Hershey (HSY) is up more than +2% after reporting Q2 net sales of $2.61 billion, stronger than the consensus of $2.52 billion.

Check Point Software (CHKP) is down more than -11% after reporting Q2 adjusted EPS of $2.37, right on expectations. 

IDEX Corp (IEX) is down more than -9% to lead losers in the S&P 500 after cutting its full-year adjusted EPS forecast to $7.85-$7.95 from a previous estimate of $8.10-$8.45.

Old Dominion Freight Line (ODFL) is down more than -8% to lead losers in the Nasdaq 100 after reporting Q2 EPS of $1.27, below the consensus of $1.29.

Trane Technologies (TT) is down more than -7% after reporting Q2 net revenue of $5.75 billion, below the consensus of $5.77 billion. 

Mondelez International (MDLZ) is down more than -6% after reporting Q2 North American organic revenue fell -3.4%, weaker than expectations of -1.83%, citing elevated cocoa costs. 

Entegris Inc. (ENTG) is down more than -6% after reporting Q2 adjusted gross margin of 44.6%, below the consensus of 45.1%. 

GE HealthCare Technologies (GEHC) is down more than -6% after CEO Saccaro said in a conference call that he expects “softness” in the Chinese region in the second half of this year. 

Palo Alto Networks (PANW) is down more than -5% after it agreed to buy CyberArk for $25 billion in cash and stock. 

Seagate Technology (STX) is down more than -5% after forecasting Q1 revenue of $2.50 billion plus or minus $150 million, weaker than the consensus of $2.52 billion. 

Earnings Reports (7/30/2025)

Albemarle Corp (ALB), Align Technology Inc (ALGN), Allstate Corp/The (ALL), Altria Group Inc (MO), American Electric Power Co Inc (AEP), American Water Works Co Inc (AWK), Automatic Data Processing Inc (ADP), AvalonBay Communities Inc (AVB), Bunge Global SA (BG), CH Robinson Worldwide Inc (CHRW), Cognizant Technology Solutions (CTSH), Dexcom Inc (DXCM), eBay Inc (EBAY), Entergy Corp (ETR), Equinix Inc (EQIX), Everest Group Ltd (EG), Extra Space Storage Inc (EXR), F5 Inc (FFIV), Fair Isaac Corp (FICO), FirstEnergy Corp (FE), Ford Motor Co (F), Fortive Corp (FTV), Garmin Ltd (GRMN), GE HealthCare Technologies Inc (GEHC), Generac Holdings Inc (GNRC), Hershey Co/The (HSY), Hologic Inc (HOLX), Host Hotels & Resorts Inc (HST), Humana Inc (HUM), IDEX Corp (IEX), Illinois Tool Works Inc (ITW), Invitation Homes Inc (INVH), Kraft Heinz Co/The (KHC), Lam Research Corp (LRCX), Meta Platforms Inc (META), MGM Resorts International (MGM), Microsoft Corp (MSFT), Mid-America Apartment Communities (MAA), Old Dominion Freight Line Inc (ODFL), Prudential Financial Inc (PRU), PTC Inc (PTC), Public Storage (PSA), QUALCOMM Inc (QCOM), Smurfit WestRock PLC (SW), Trane Technologies PLC (TT), Tyler Technologies Inc (TYL), UDR Inc (UDR), Ventas Inc (VTR), Verisk Analytics Inc (VRSK), VICI Properties Inc (VICI), WEC Energy Group Inc (WEC), Western Digital Corp (WDC).