Stocks Decline Ahead of US Inflation News

The S&P 500 Index ($SPX) (SPY) Monday closed down -0.25%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.45%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.36%.  September E-mini S&P futures (ESU25) fell -0.28%, and September E-mini Nasdaq futures (NQU25) fell -0.40%.

Stock indexes on Monday gave up an early advance and settled lower.  Position squaring and long liquidation pressures ahead of this week's US inflation reports on July CPI and PPI weighed on stocks Monday. 

Stocks on Monday initially moved higher, with the S&P 500 posting a 1-week high and the Nasdaq 10 posting a new record high.  Recent dovish Fed comments have bolstered the outlook for Fed rate cuts sooner rather than later and are supportive of stocks.  Fed Governor Michelle Bowman said she supports an interest rate cut at the September FOMC meeting and that she favors three interest rate cuts this year. Stocks also garnered support Monday when CNBC reported that President Trump is extending the tariff truce with China, which was to expire on Tuesday, for another 90 days.

Stocks were also under pressure as hopes dim for an imminent end to the Russian-Ukrainian war. President Trump on Monday downplayed expectations of a breakthrough to end the war in Ukraine when he meets with Russian President Putin this Friday in Alaska, saying the summit is a "feel-out meeting" to end the war in Ukraine.  Also, comments from Ukrainian President Zelenskiy dampened hopes for a quick end to the war when he rejected any talk of Ukraine ceding territory to Russia.

Stocks are seeing support from speculation that recent weaker-than-expected US economic news and dovish Fed commentary will push the Fed to lower interest rates as soon as next month.  On Saturday, Fed Governor Michelle Bowman said she supports cutting interest rates at the FOMC's next meeting in September and that she favors three rate cuts this year to "help avoid a further unnecessary erosion in labor market conditions and reduce the chance that the committee will need to implement a larger policy correction should the labor market deteriorate further."  The chances of a Fed rate cut at the September FOMC meeting rose to 88% from 40% earlier this month.

The price of Bitcoin (^BTCUSD) rose more than +1% Monday to a 4-week high, boosted by strong demand from institutional investors and corporate buyers, which are helping to lift the entire cryptocurrency market.  According to data from Coingecko, digital-asset treasury companies, listed vehicles that accumulate cryptocurrencies, have amassed a Bitcoin stockpile worth $113 billion thus far.

In recent tariff news, CNBC on Monday reported that President Trump will extend the tariff truce with China, which was to expire on Tuesday, for another 90 days. Last Wednesday, President Trump announced 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 last 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.  Last Tuesday, Mr. Trump said that US tariffs on pharmaceutical imports would be announced "within the next week or so." 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 market's focus this week will be on corporate earnings results and any new trade or tariff news.  On Tuesday, the July US CPI is expected to edge up to +2.8% y/y from +2.7% y/y in June, and the July CPI ex-food and energy is expected to climb +3.0% y/y from +2.9% y/y in June.  On Thursday, weekly initial unemployment claims are expected to fall by -1,000 to 225,000.  Also on Thursday, the July final-demand PPI is expected to increase to +2.5% y/y from +2.3% y/y in June, and the July PPI ex-food and energy is expected to rise to +2.9% y/y from +2.6% y/y in June.  On Friday, July US retail sales are expected to climb +0.5% m/m and retail sales ex-autos are expected to rise +0.3% m/m.  Also on Friday, July manufacturing production is expected to remain unchanged m/m.  Finally, the University of Michigan's Aug US consumer sentiment index is expected to climb by +0.3 to 62.0.

Federal funds futures prices are discounting the chances for a -25 bp rate cut at 88% at the September 16-17 FOMC meeting and 62% at the following meeting on October 28-29.

Earnings reports indicate 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 82% of S&P 500 firms having reported Q2 earnings, about 82% of companies exceeded profit estimates. 

Overseas stock markets on Monday settled mixed.  The Euro Stoxx 50 fell from a 1-week high and closed down -0.30%.  China's Shanghai Composite rallied to a 10-month high and closed up +0.34%.  Japan's Nikkei Stock 225 was closed today for the Mountain Day holiday.

Interest Rates

September 10-year T-notes (ZNU25) Monday closed up +2 ticks.  The 10-year T-note yield fell -0.4 bp to 4.279%.  T-notes posted modest gains on Monday on mounting speculation that the Fed may soon cut interest rates after Fed Governor Michelle Bowman said she supports an interest rate cut at the September FOMC meeting and that she favors three interest rate cuts this year.  T-notes also have carryover support from last Thursday, when President Trump nominated Stephen Miran for Fed Governor to replace Adriana Kugler for the rest of the year.  Miran views President Trump's policies as disinflationary and would support a more dovish Fed policy. 

European government bond yields on Monday settled mixed.  The 10-year German bund yield rose by +0.6 bp to 2.696%.  The 10-year UK gilt yield fell -3.6 bp to 4.565%.

Swaps are discounting the chances at 6% for a -25 bp rate cut by the ECB at the September 11 policy meeting.

US Stock Movers

Monday.com (MNDY) closed down more than -29% on growth concerns after it failed to boost its full-year revenue guidance from the current estimate of $1.22 billion to $1.23 billion. 

C3.ai (AI) closed down more than -25% after DA Davidson downgraded the stock to underperform from neutral with a price target of $13, citing preliminary earnings results that were "significantly below guidance." 

AAON Inc. (AAON) closed down more than -10% after reporting Q2 EPS of 19 cents, well below the consensus of 32 cents. 

Upstart Holdings (UPST) closed down more than -7% after announcing it will offer $500 million of convertible senior notes due in 2032 in a private offering. 

Atlassian Corp (TEAM) closed down more than -5% as analysts have cut their price targets for the stock by an average of 11% since it posted earnings last Thursday.

Hershey (HSY) closed down more than -4% to lead chocolate makers lower on demand concerns after cocoa prices jumped more than +2% to a 6-week high.

Paramount Skydance (PSKY) closed down more than -3% after paying $7.7 billion to acquire the exclusive rights to show all events from the Ultimate Fighting Championship in the US over the next seven years.

TKO Group Holdings (TKO) closed up more than +10% to lead gainers in the S&P 500 after Paramount Skydance acquired the rights to show all events from the Ultimate Fighting Championship in the US over the next seven years for $7.7 billion.  

Elf Beauty (ELF) closed up more than +10% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $134.

Electronic Arts (EA) closed up more than +5% to lead gainers in the Nasdaq 100 after it successfully tested a beta launch for its Battlefield 6 video game.

Cryptocurrency-linked stocks moved higher on Monday after the price of Bitcoin rose by more than +1% to a 4-week high.  As a result, Coinbase Global (COIN), MicroStrategy (MSTR), and MARA Holdings (MARA) closed up more than +1%.   

Sapiens International Corp NV (SPNS) closed up more than +8% after Calcalist reported that Formula Systems is in advanced talks to sell control of the company for about $2 billion. 

Albemarle (ALB) closed up +7% after operations were halted at a major Chinese mine, spurring speculation that the Chinese government might move to suspend other lithium projects to tackle overcapacity concerns. 

Micron Technology (MU) closed up more than +4% after raising its fiscal Q4 sales estimate to $11.2 billion, plus or minus $100 million, from a previous estimate of $10.7 billion, plus or minus $300 million. 

Kratos Defense & Security Solutions (KTOS) closed up more than +2% after Canaccord Genuity initiated coverage on the stock with a recommendation of buy and a price target of $74. 

Earnings Reports (8/12/2025)

Cardinal Health Inc (CAH), Cava Group Inc (CAVA), Everus Construction Group Inc (ECG), H&R Block Inc (HRB), Lumentum Holdings Inc (LITE), Madison Square Garden Sports C (MSGS), On Holding AG (ONON), Smithfield Foods Inc (SFD).