Stocks Close Mixed after Higher Bond Yields and Tariff News

The S&P 500 Index ($SPX) (SPY) Thursday closed down -0.08%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.51%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.32%.  September E-mini S&P futures (ESU25) fell -0.04%, and September E-mini Nasdaq futures (NQU25) rose +0.38%.

Stock indexes gave up an early advance Thursday and settled mixed.  Stocks initially moved higher Thursday as technology stocks rose after President Trump announced late Wednesday that companies would be eligible for exemptions from his proposed 100% tariff on chip imports if they demonstrate a commitment to building their products in the US.  Market sentiment also improved on an easing of geopolitical risks after the Russian government confirmed that Presidents Putin and Trump will meet for summit talks on ending the war in Ukraine in the next few days. 

On the negative side, Fortinet plunged more than -22% to drag cybersecurity stocks lower and weigh on the broader market after it narrowed its full-year revenue forecast. Also, Eli Lilly tumbled more than -14% on disappointing data from its new weight loss drug. 

Stock indexes were also pressured Thursday afternoon after weak demand for the Treasury's $25 billion auction of 30-year T-bonds pushed T-note yields higher.  The 10-year T-note yield rose +2 bp to 4.24%.

Speculation that weaker-than-expected US economic news will push the Fed to lower interest rates as soon as next month provided underlying support for stocks.  Late Wednesday, San Francisco Fed President Mary Daly said, "The labor market has softened, and I would see additional slowing as unwelcome.  All this means that the Fed will likely need to adjust monetary policy in the coming months." However, Atlanta Fed President Raphael Bostic said he only sees one 25 bp rate cut by the Fed this year, as there are reasons to be skeptical that the inflationary effects from tariffs will be temporary.  The chances of a Fed rate cut at the September FOMC meeting rose to 91% Thursday from 40% last Friday.

Today's weekly news on jobless claims shows some weakness in the labor market, which was dovish for Fed policy.  US weekly initial unemployment claims rose +7,000 to 226,000, showing a weaker labor market than expectations of 222,000.  Weekly continuing claims rose +38,000 to a 3.75-year high of 1.974 million, higher than expectations of 1.950 million and a sign that those currently unemployed are taking longer to secure new employment.

US Q2 nonfarm productivity rose +2.4%, higher than expectations of +2.0%.  Q2 unit labor costs rose +1.6%, slightly stronger than expectations of +1.5%.

US June consumer credit rose by +$7.371 billion, slightly below expectations of +$7.5 billion.

Chinese trade news was better than expected, a supportive factor for global economic growth. China July exports rose +7.2% y/y, stronger than expectations of +5.6% y/y.  Also, China's July imports unexpectedly rose +4.1% y/y, the most in a year and stronger than expectations of a -1.0% y/y decline.

In recent tariff news, President Trump announced Wednesday that he will impose a 100% tariff on semiconductor imports.  Still, companies would be eligible for exemptions if they demonstrate a commitment to building their products in the US.  However, the US will levy a separate tax on imports of electronic products that employ semiconductors.  Also, President Trump announced Wednesday that he will double tariffs on US imports from India to 50% from the current 25% tariff, due to India's purchases of Russian oil.  On Tuesday, Mr. Trump said that US tariffs on 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 today.  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. 

Federal funds futures prices are discounting the chances for a -25 bp rate cut at 91% at the September 16-17 FOMC meeting and 68% at the following meeting on October 28-29.

Earnings reports released thus far suggest that S&P 500 earnings for Q2 are on track to rise +9.1% y/y, much better than the pre-season expectations of +2.8% y/y and the most in four years, according to Bloomberg Intelligence.  With over 79% of S&P 500 firms having reported Q2 earnings, around 83% exceeded profit estimates. 

Overseas stock markets on Thursday settled higher.  The Euro Stoxx 50 closed up sharply +1.31%.  China's Shanghai Composite climbed to a 10-month high and closed up +0.16%.  Japan's Nikkei Stock 225 rose to a 1.5-week high and closed up +0.65%.

Interest Rates

September 10-year T-notes (ZNU25) on Thursday closed down by -4.5 ticks.  The 10-year T-note yield rose +1.8 bp to 4.244%.  T-notes gave up a slight advance on Thursday and closed lower due to weak demand for the Treasury's $25 billion auction of 30-year T-bonds.  The auction had a bid-to-cover ratio of 2.27, well below the 10-auction average of 2.43 and a sign of tepid demand.  T-notes were also pressured after Atlanta Fed President Raphael Bostic said the effects of tariffs on inflation may persist.

T-note prices initially moved slightly higher on Thursday after weekly US jobless claims and Q2 nonfarm productivity rose more than expected, dovish factors for Fed policy. Also, dovish comments from San Francisco Fed President Mary Daly supported T-notes when she said the Fed may need to cut interest rates in the "coming months."

European government bond yields on Thursday were mixed.  The 10-year German bund yield fell -2.0 bp to 2.630%.  The 10-year UK gilt yield rose +2.1 bp to 4.547%.

German June industrial production fell -1.9% m/m, weaker than expectations of -0.5% m/m and the largest decline in 11 months.

German trade news was better than expected as German Jun exports rose +0.8% m/m, stronger than expectations of +0.4% m/m.  Also, Jun imports rose +4.2% m/m, stronger than expectations of +0.8% m/m and the largest increase in 5 months.

As expected, the Bank of England (BOE) lowered the official bank rate by -25 bp to 4.00% from 4.25%.  BOE Governor Andrew Bailey said, "Interest rates are still on a downward path, but any future rate cuts will need to be made gradually and carefully."

Swaps are discounting the chances at 12% for a -25 bp rate cut by the ECB at the September 11 policy meeting.

US Stock Movers

Most chip makers moved higher Thursday after President Trump said companies that move production back to the US will be exempt from a planned 100% tariff on chip imports.  Advanced Micro Devices (AMD) closed up more than +5%.  Also, ASML Holdings NV (ASML) and Lam Research (LRCX) closed up more than +3%.  In addition, Applied Materials (AMAT), Micron Technology (MU), and KLA Corp (KLAC) closed up more than +2%.

Dutch Bros (BROS) closed up more than +22% after reporting Q2 revenue of $415.8 million, above the consensus of $403.8 million, and raising its full-year revenue forecast to $1.59 billion-$1.60 billion from $1.56 billion-$1.58 billion. 

Celsius Holdings (CELH) closed up more than +17% after reporting Q2 revenue of $739.3 million, well above the consensus of $652.4 million. 

Duolingo (DUOL) closed up more than +13% after reporting Q2 revenue of $252.3 million, well above the consensus of $240.6 million, and raised its full-year revenue forecast to $1,01 billion-$1.02 billion from a previous forecast of $987 million-$996 million, stronger than the consensus of $996.5 million. 

AppLovin (APP) closed up more than +11% to lead gainers in the Nasdaq 100 after reporting Q2 revenue of $1.26 billion, better than the consensus of $1.25 billion, and forecasting Q3 total revenue of $1.32 billion-$1.34 billion, stronger than the consensus of $1.30 billion.

Insulet (PODD) closed up more than +9% to lead gainers in the S&P 500 after reporting Q2 revenue of $649.1 million, stronger than the consensus of $613.9 million.

Zimmer Biomet Holdings (ZBH) closed up more than +7% after reporting Q2 net sales of $2.08 billion, above the consensus of $2.06 billion, and raising its full-year revenue forecast to +6.7% to +7.7% from a previous estimate of +5.7% to +8.2%

APA Corp (APA) closed up more than +7% after reporting Q2 adjusted EPS of 87 cents, well above the consensus of 48 cents.

DoorDash (DASH) closed up more than +5% after reporting Q2 revenue of $3.28 billion, better than the consensus of $3.17 billion.

Fortinet (FTNT) closed down more than -22% to lead losers in the S&P 500 and Nasdaq 100 after narrowing its full-year revenue forecast to $6.68 billion-$6.83 billion from a previous forecast of $6.65 billion-$6.85 billion, the midpoint below the consensus of $6.76 billion.

Crocs (CROX) closed down more than -29% after forecasting Q3 adjusted operating margin of 18% to 19%, below the consensus of 23.2%. 

Eli Lilly (LLY) closed down more than -14% after reporting patients shed 11% of their body weight in a late-stage study of its experimental weight loss pill orforglipron, below the 14% to 15% that patients lost taking the rival weight loss drug Wegovy made by Novo Nordisk A/S. 

Symbotic (SYM) closed down more than -13% after forecasting Q4 total revenue of $590 million-$610 million, weaker than the consensus of $634.4 million.   

Elf Beauty (ELF) closed down more than -9% after declining to give an outlook for fiscal 2026, citing a wide range of potential outcomes related to tariffs. 

Airbnb (ABNB) closed down more than -8% after it forecast Q3 revenue growth of around 8%, well below the nearly 13% revenue growth in Q2, and warned that sales growth may moderate in the second half of the year. 

Exact Sciences (EXAS) closed down more than -7% after agreeing to pay up to $885 million to in-license a blood-based colorectal cancer test from Freenome.

CF Industries Holdings (CF) closed down more than -7% after reporting Q2 EPS of $2.37, below the consensus of $2.51.

Earnings Reports (8/8/2025)

Freedom Holding Corp/NV (FRHC), Lamar Advertising Co (LAMR), Liberty Media Corp-Liberty Live (LLYVA), Skechers USA Inc (SKX), Sotera Health Co (SHC), Tempus AI Inc (TEM), Under Armour Inc (UAA), Wendy's Co/The (WEN).