Stocks Trade Higher on Solid Earnings and Fed Rate Cut Speculation

The S&P 500 Index ($SPX) (SPY) today is up +0.44%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.26%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.60%.  September E-mini S&P futures (ESU25) are up +0.43%, and September E-mini Nasdaq futures (NQU25) are up +0.62%.

Stock indexes are climbing today on some positive corporate earnings results. Arista Networks is up more than +17% after its Q3 revenue forecast exceeded expectations.  Also, Match Group is up more than +12% after projecting a stronger-than-expected Q3 sales forecast.  Limiting gains in the Nasdaq 100 is weakness in technology stocks, with Super Micro Computer down more than -20% after reporting weaker-than-expected Q4 earnings.  Also, Advanced Micro Devices is down more than -8% to lead chip stocks lower after reporting mixed Q2 results. 

Speculation that recent weaker-than-expected US economic news will push the Fed to lower interest rates as soon as next month is also supporting stocks.  Tuesday's unexpected decline in US services activity added to last Friday's weak payroll and manufacturing reports.  The chances of a Fed rate cut at the September FOMC meeting rose to 94% from 40% last Friday.

Also, comments today from Minneapolis Fed President Neel Kashkari bolstered speculation about a Fed rate cut when he said, "The economy is slowing and in the near term it may become appropriate to start adjusting the federal funds rate lower." 

The US MBA mortgage applications index rose +3.1% in the week ended August 1, with the purchase mortgage sub-index up +1.5% and the refinancing mortgage sub-index up +5.2%.  The average 30-year fixed rate mortgage fell -6 bp to 6.77% from 6.83% in the prior week.

In recent tariff news, President Trump announced today that he will impose an additional 25% tariff on US imports from India, on top of the current 25% tariff, due to India's purchases of Russian oil.  On Tuesday, Mr. Trump said that US tariffs on semiconductor and pharmaceutical imports would be announced "within the next week or so." Last Thursday, President Trump raised tariffs on some Canadian goods to 35% from 25% and announced a 10% global minimum, along with tariffs of 15% or higher for countries with trade surpluses with the US, effective after midnight on August 7. According to Bloomberg Economics, the average US tariff will rise to 15.2% if rates are implemented as announced, up from 13.3% earlier, and significantly higher than the 2.3% in 2024 before the tariffs were announced. 

The markets this week will focus on earnings reports and any fresh tariff or trade news. On Thursday, weekly initial unemployment claims are expected to increase by +3,000 to 221,000.  Also on Thursday, Q2 nonfarm productivity is expected to be +2.0% with unit labor costs rising +1.5%.

Federal funds futures prices are discounting the chances for a -25 bp rate cut at 94% at the September 16-17 FOMC meeting and 63% at the following meeting on October 28-29.

Q2 earnings reports released thus far suggest that S&P 500 earnings are on track to rise +9.1% for the second quarter, much better than the pre-season expectations of +2.8% y/y and the most in four years, according to Bloomberg Intelligence.  With over 67% of S&P 500 firms having reported Q2 earnings, around 83% exceeded profit estimates. 

Overseas stock markets today are higher.  The Euro Stoxx 50 is up +0.16%.  China's Shanghai Composite closed up +0.45%.  Japan's Nikkei Stock 225 closed up +0.60%.

Interest Rates

September 10-year T-notes (ZNU25) today are down -3 ticks.  The 10-year T-note yield is up +1.2 bp to 4.222%.  Supply pressures are weighing on T-notes as the Treasury will auction $42 billion of 10-year T-notes later today as part of this week's $125 billion auctions of T-notes and T-bonds in the August quarterly refunding. Also, strength in stocks today has reduced safe haven demand for T-notes.  Losses in T-notes are limited due to dovish comments today from   Minneapolis Fed President Neel Kashkari, who said a Fed rate cut may be appropriate in the near term.

European government bond yields today are mixed.  The 10-year German bund yield is up +1.6 bp to 2.640%.  The 10-year UK gilt yield is down -0.2 bp to 4.515%.

Eurozone June retail sales rose +0.3% m/m, right on expectations.

German June factory orders unexpectedly fell by -1.0% m/m, weaker than expectations of a +1.1% m/m increase and the biggest decline in 5 months.

ECG Governing Council member Holzmann said, "In my view, there is no longer any reason for the ECB to lower interest rates further and we should wait and see what economic developments arise, particularly outside Europe, and how we respond to them."

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

Astera Labs (ALAB) is up more than +29% after reporting Q2 gross margin of 76%, better than the consensus of 74%. 

RingCentral (RNG) is up more than +26% after reporting Q2 adjusted EPS of $1.06, above the consensus of $1.02, and raising its full-year adjusted EPS forecast to $4.20-$4.32 from a previous forecast of $4.13-$4.27, stronger than the consensus of $4.21. 

Shopify (SHOP) is up more than +19% to lead gainers in the Nasdaq 100 after reporting Q2 revenue of $2.68 billion, stronger than the consensus of $2.55 billion. 

Arista Networks (ANET) is up more than +17% to lead gainers in the S&P 500 after reporting Q2 revenue of $2.20 billion, above the consensus of $2.11 billion, and forecasting Q3 revenue of $2.25 billion, stronger than the consensus of $2.13 billion.  

Match Group (MTCH) is up more than +12% after reporting Q2 revenue of $863.7 million, better than the consensus of $853.9 million, and forecasting Q3 revenue of $910 million-$920 million, stronger than the consensus of $889.8 million.

Assurant (AIZ) is up more than +9% after reporting Q2 adjusted EPS of $5.10, well above the consensus of $4.46.

Global Payments (GPN) is up more than +6% after reporting Q2 adjusted EPS including SBC of $3.10, better than the consensus of $3.08.

Apple (AAPL) is up more than +4% to lead gainers in the Dow Jones industrials after President Trump said the company will announce that it will commit to spending another $100 billion on domestic manufacturing.

Super Micro Computer (SMCI) is down more than -20% to lead losers in the S&P 500 after reporting Q4 net sales of $5.76 billion, weaker than the consensus of $6.01 billion, and forecast Q1 set sales of $6.0 billion to $7.0 billion, the midpoint below the consensus of $6.59 billion. 

Advanced Micro Devices (AMD) is down more than -8% to lead chip makers lower after reporting Q2 adjusted EPS of 48 cents, below the consensus of 49 cents, and saying it was unable to give a clear outlook for resuming sales in China.  Also, Marvell Technology (MRVL) is down more than -2%, and Applied Materials (AMAT), Microchip Technology (MCHP), NXP Semiconductors NV (NXPI), GlobalFoundries (GFS), Lam Research (LRCX), Micron Technology (MU), and Qualcomm (QCOM) are down more than -1%.

Vertex (VERX) is down more than -23% after reporting Q2 software subscription revenue of $157.8 million, below the consensus of $158.9 million, and cutting its full-year revenue forecast to $750 million-$754 million from a previous forecast of $760 million-$768 million, weaker than the consensus of $763.4 million. 

Snap (SNAP) is down more than -18% after reporting Q2 revenue of $1.34 billion, below the consensus of $1.35 billion. 

Coca-Cola Europacific (CCEP) is down more than -8% to lead losers in the Nasdaq 100 after cutting its full-year revenue growth forecast to +3% to +4%, from a previous forecast of +4%.

Emerson Electric (EMR) is down more than -7% after reporting Q3 net sales of $4.55 billion, weaker than the consensus of $4.60 billion. 

Kemper Corp (KMPR) is down more than -22% after Piper Sandler double-downgraded the stock to underweight from overweight with a price target of $50. 

Walt Disney (DIS) is down more than -3% after reporting Q3 revenue of $23.65 billion, below the consensus of $23.68 billion.

Earnings Reports (8/6/2025)

Airbnb Inc (ABNB), American International Group Inc (AIG), APA Corp (APA), Atmos Energy Corp (ATO), Bio-Techne Corp (TECH), CDW Corp/DE (CDW), Cencora Inc (COR), CF Industries Holdings Inc (CF), Charles River Laboratories Int (CRL), Corpay Inc (CPAY), Corteva Inc (CTVA), Dayforce Inc (DAY), DoorDash Inc (DASH), Emerson Electric Co (EMR), Federal Realty Investment Trust (FRT), 

Fortinet Inc (FTNT), Global Payments Inc (GPN), Iron Mountain Inc (IRM), MarketAxess Holdings Inc (MKTX), McDonald's Corp (MCD), McKesson Corp (MCK), MetLife Inc (MET), NiSource Inc (NI), NRG Energy Inc (NRG), Occidental Petroleum Corp (OXY), Paycom Software Inc (PAYC), Pinnacle West Capital Corp (PNW), Realty Income Corp (O), Rockwell Automation Inc (ROK), STERIS PLC (STE), Texas Pacific Land Corp (TPL), TKO Group Holdings Inc (TKO), Trimble Inc (TRMB), Uber Technologies Inc (UBER), Walt Disney Co/The (DIS).