Stocks Settle Little Changed as Bond Yields Climb

The S&P 500 Index ($SPX) (SPY) on Monday closed down by -0.01%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down by -0.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up by +0.01%.  September E-mini S&P futures (ESU25) fell -0.03%, and September E-mini Nasdaq futures (NQU25) fell -0.02%. 

Stock indexes on Monday settled little changed, pressured by higher bond yields.  Last Thursday’s bearish July PPI reported dampened speculation that the Fed could cut interest rates as soon as next month’s FOMC meeting.  The 10-year T-note yield rose to a 2-week high Monday at 4.35% and finished up +2 bp to 4.34%.

Stocks were also weighed down by uncertainty regarding Monday’s meeting between European leaders and Ukrainian President Zelenskiy with President Trump in Washington to discuss potential terms to end the Russian-Ukrainian war.  The outcome could have macroeconomic implications regarding tariffs and oil prices, and could, of course, have significant consequences for European security. In addition, concerns about how consumers are holding up in the early days of President Trump’s tariffs also weighed on stocks ahead of earnings results this week from some of the biggest US retailers, including Walmart, Target, and Home Depot.

Monday’s US economic news was negative for stocks after the Aug NAHB housing market index unexpectedly fell -1 to 32, weaker than expectations of an increase to 34.

The focus of the markets this week will be on any new tariff news and signs of progress toward a Ukraine peace deal, with Ukrainian President Zelenskiy and European leaders meeting President Trump in Washington on Monday.  On Tuesday, Jul housing starts are expected to fall -1.6% m/m to 1.300 million, and Jul building permits are expected to fall -0.4% m/m to 1.388 million. On Wednesday, the minutes of the July 29-30 FOMC meeting will be released.  On Thursday, weekly initial unemployment claims are expected to climb by +1,000 to 225,000 and the Aug Philadelphia Fed business outlook survey is expected to fall to 6.7 from 15.9 in July.  Also, the Aug S&P manufacturing PMI is expected to remain unchanged at 49.8.  In addition, Jul existing home sales are expected to fall -0.3% m/m to 3.92 million. On Friday, Fed Chair Powell speaks on the economic outlook at the Federal Reserve’s annual symposium at Jackson Hole, Wyoming. 

Regarding tariffs, President Trump said last Friday, “I’ll be setting tariffs next week and the week after on steel and on, I would say chips – chips and semiconductors, we’ll be setting sometime next week, week after.” Mr. Trump last week said he planned a 100% tariff on semiconductors but would exempt companies that move chip manufacturing to the US.  Mr. Trump also mentioned 200% or 300% tariffs on chips.

In other recent tariff news, Mr. Trump last Tuesday extended the tariff truce with China for another 90 days until November.  On August 6, Mr. Trump announced 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 August 5, 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.

Federal funds futures prices are discounting the chances for a -25 bp rate cut at 84% at the September 16-17 FOMC meeting, down from 93% last Thursday.  The markets are discounting the chances at 51% for a second -25 bp rate cut 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 92% 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 closed down -0.26%.  China’s Shanghai Composite rallied to a 10-year high and closed up +0.85%.  Japan’s Nikkei Stock 225 rallied to a new record high and closed up +0.77%.

Interest Rates

September 10-year T-notes (ZNU25) Monday closed down -2.5 ticks, and the 10-year T-note yield rose +2.0 bp to 4.336%.  Sep T-notes fell to a 2-week low on Monday, and the 10-year T-note yield rose to a 2-week high of 4.351%.  T-notes are under pressure on concern that last week’s bearish US July CPI and PPI reports could keep the Fed from cutting interest rates at next month’s FOMC meeting.

Losses in T-notes were limited after Monday’s news showed the Aug NAHB housing market index unexpectedly declined.  T-notes are also supported by an increase in safe-haven demand after there was no breakthrough in the Trump-Putin summit last Friday to end the war in Ukraine. 

European government bond yields on Monday were mixed.  The 10-year German bund yield fell -2.5 bp to 2.763%. The 10-year UK gilt yield rose to a 2.5-month high of 4.748% and finished up by +4.2 bp to 4.738%.

Swaps are discounting the chances at 5% for a -25 bp rate cut by the ECB at the September 11 policy meeting.

US Stock Movers

Natural gas producing stocks retreated Monday after Roth Capital Partners downgraded the sector on concerns that oversupply will keep prices depressed.  EQT Corp (EQT) closed down more than -4% to lead losers in the S&P 500.  Also, Comstock Resources (CRK) closed down more than -6%, and Antero Resources (AR) closed down more than -5%.  In addition, Corterra Energy (CTRA) and Range Resources (RRC) closed down more than -3%, and Expand Energy (EXE) closed down more than -2%. 

Intel (INTC) closed down more than -3% to lead losers in the Nasdaq 100 after Bloomberg reported that the Trump administration is in discussions to take a 10% stake in the company, a move that would make the US government the company’s largest shareholder.

Meta Platforms (META) closed down more than -2% after the Information newsletter reported that the company is planning the fourth restructuring of its AI organization in the last six months.

Northern Oil & Gas (NOG) closed down more than -2% after Morgan Stanley downgraded the stock to underweight from equal weight.

Paramount Skydance (PSKY) closed down more than -1% after Walleye Capital LLC reported a net short position in the stock of 5.43 million shares, or 0.51% of the total shares as of last Friday.

Dayforce (DAY) closed up more than +25% to lead gainers in the S&P 500 after Bloomberg reported that Thoma Bravo is in talks to acquire the company. 

Duolingo (DUOL) closed up more than +12% after Citigroup initiated coverage on the stock with a recommendation of buy and a price target of $400.

EPAM Systems (EPAM) closed up more than +4% after TD Cowen upgraded the stock to buy from hold with a price target of $205. 

CVS Health (CVS) closed up more than +2% after UBS upgraded the stock to buy from neutral with a price target of $79.

UnitedHealth Group (UNH) closed up more than +1% to lead gainers in the Dow Jones industrials, adding to last Friday’s +11% rally, after a 13F filing showed that Warren Buffett’s Berkshire Hathaway and other investors bought shares in the company during Q2.

Earnings Reports(8/19/2025)

Amer Sports Inc (AS), Home Depot Inc/The (HD), Jack Henry & Associates Inc (JKHY), James Hardie Industries PLC (JHX), Keysight Technologies Inc (KEYS), Medtronic PLC (MDT), Toll Brothers Inc (TOL), Viking Holdings Ltd (VIK).