Stocks Slightly Lower as Retailer Earnings Arrive

The S&P 500 Index ($SPX) (SPY) today is down by -0.10%, the Dow Jones Industrials Index ($DOWI) (DIA) is up by +0.32%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down by -0.52%.  September E-mini S&P futures (ESU25) are down -0.13%, and September E-mini Nasdaq futures (NQU25) are down -0.60%. 

Stock indexes are slightly lower today as retail stocks begin to report their earnings.  The weakness in the Magnificent Seven stocks today is weighing on the overall market. 

On the positive side, Home Depot recovered from early losses and is up more than +4% to lead the Dow Jones industrials higher after reporting a +3% jump in July comparable same-store sales.  Lowes and Target will report their earnings on Wednesday, and Walmart will report on Thursday.

Lower bond yields today are supportive of stocks, with the 10-year T-note yield down -2 bp to 4.31%.  US government debt garnered support today after S&P Global Ratings affirmed its AA+ long-term rating and A-1+ short-term rating on US debt and said the US can maintain its credit strength despite the fiscal hit of its recent spending bill because tariff revenues will "generally offset weaker fiscal outcomes."

Today's US housing news was mixed.  US Jul housing starts unexpectedly rose +5.2% m/m to a 5-month high of 1.428 million, stronger than expectations of a decline to 1.297 million.  However, Jul building permits, a proxy for future construction, fell -2.8% m/m to a 5-year low of 1.354 million, weaker than expectations of -0.5% m/m to 1.386 million. 

Diplomatic talks over the war in Ukraine continue to make headway.  Ukraine President Zelenskiy said he came away with a commitment from President Trump late Monday to join security guarantees for any peace deal and reserve discussion on territorial swaps with Russia for later.  The outcome of the talks could have macroeconomic implications regarding tariffs and oil prices, and could, of course, have significant consequences for European security. 

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 continuing their meeting with President Trump in Washington.  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 widened steel and aluminum tariffs to include more than 400 consumer items that contain the metals, such as motorcycles, auto parts, furniture components, and tableware.  The change went into effect on Monday and did not exclude goods already in transit.  Last Friday, Mr. Trump said, "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 53% 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 today are mixed.  The Euro Stoxx 50 rose to a 4.75-month high and is up +0.75%.  China's Shanghai Composite fell from a 10-year high and closed down -0.02%.  Japan's Nikkei Stock 225 retreated from a new record high and closed down -0.38%.

Interest Rates

September 10-year T-notes (ZNU25) today are up +6 ticks, and the 10-year T-note yield is down -2.5 bp to 4.308%.  Sep T-notes are moving higher today after S&P Global Ratings said that higher revenues from tariffs will help soften the blow to the US's fiscal health from the president's tax cuts, enabling the country to maintain its AA+ long-term credit rating.  The weakness in stocks today is also supporting safe-haven demand for T-notes. Gains in T-notes are limited due to concerns 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.

European government bond yields today are moving lower.  The 10-year German bund yield is down -0.2 bp to 2.761%. The 10-year UK gilt yield fell from a 2.5-month high of 4.756% and is down by -0.3 bp to 4.735%.

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

Viking Therapeutics (VKTX) is down more than -39% after a Phase 2 trial of its oral weight loss drug showed 28% of patients discontinued treatment over tolerability concerns. 

Fabrinet (FN) is down more than -10% after it said it expects to see a sequential dip in datacom segment revenue in its fiscal Q1, citing supply constraints for some critical components. 

Medtronic Plc (MDT) is down more than -5% to lead losers in the S&P 500 after reporting Q1 adjusted operating margin of 23.6%, weaker than the consensus of 23.7%.

Advanced Micro Devices (AMD) is down more than -3% after GF Securities downgraded the stock to hold from buy.

Amer Sports (AS) is down more than -2% after forecasting Q3 adjusted operating margin of 12% to 13%, below the consensus of 13%. 

Vertiv Holdings (VRT) is down more than -2% after GLJ Research initiated coverage on the stock with a recommendation of sell and a price target of $112. 

Cybersecurity stocks are climbing today, led by a +4% jump in Palo Alto Networks (PANW) after it forecast 2026 revenue of $10.48 billion-$10.53 billion, stronger than the consensus of $10.44 billion.  CyberArk Software Ltd (CYBR) is up more than +5%, and Zscaler (ZS) and CrowdStrike Holdings (CRWD) are up more than +0.50%.

Intel (INTC) is up more than +10% to lead gainers in the S&P 500 and Nasdaq 100 after SoftBank Group Corp agreed to buy $2 billion of the company's stock. 

Home Depot (HD) recovered from an early decline and is up more than +4% to lead gainers in the Dow Jones Industrials after reporting that July comparable same-store sales rose more than +3%. 

Prologis (PLD) is up more than +3% after Mizuho Securities upgraded the stock to outperform from neutral with a price target of $118.

Caterpillar (CAT) is up more than +1% after Evercore ISI upgraded the stock to outperform from in line with a price target of $476.

Peabody Energy (BTU) is up more than +1% after deciding to walk away from a $3.8 billion deal to buy the steelmaking coal business from Anglo American Plc following a fire at Anglo's Australian mine.

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).