Stock Losses Accelerate on a Rout in Tech Stocks

The S&P 500 Index ($SPX) (SPY) today is down by -1.01%, the Dow Jones Industrials Index ($DOWI) (DIA) is down by -0.27%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down by -1.75%.  September E-mini S&P futures (ESU25) are down -1.06%, and September E-mini Nasdaq futures (NQU25) are down -1.80%. 

Stock indexes today have extended Tuesday’s losses, with the S&P 500 falling to a 1.5-week low and the Nasdaq 100 dropping to a 2-week low.  The weakness in the Magnificent Seven technology companies and a selloff in chip stocks are weighing on the overall market.  Also, disappointing corporate news is negative for stocks, with Target down more than -7% after forecasting a bigger-than-expected decline in full-year sales.  Estee Lauder is down more than -5% after forecasting weaker-than-expected 2026 EPS.

US MBA mortgage applications fell -1.4% in the week ended August 15, with the purchase mortgage sub-index up +0.1% and the refinancing sub-index down -3.1%.  The average 30-year fixed rate mortgage rose +1 bp to 6.68% from 6.67% in the prior week.

Diplomatic talks over the war in Ukraine continue to make headway.  President Trump is pushing for a summit between Presidents Putin and Zelenskiy soon, and European leaders are discussing a plan to send British and French troops to Ukraine as part of a peace agreement.  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.  Later today, 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 55% 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 is down -0.22%.  China’s Shanghai Composite climbed to a new 10-year high and closed up +1.04%.  Japan’s Nikkei Stock 225 closed down -1.51%.

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 4.281%.  Sep T-notes are modestly higher today, supported by weakness in equity markets. Also, strength in European government bonds is providing carryover support to T-notes.  T-notes remained higher after the Wall Street Journal reported that President Trump is considering firing Fed Governor Lisa Cook over allegations that she committed mortgage fraud.  If Cook is fired or resigns, Mr. Trump could appoint another Fed Governor who favors his lower interest rate policies.

Supply pressures are limiting gains in T-notes as the Treasury will auction $16 billion of 20-year T-bonds later today.  Also, 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 are weighing on T-notes.

European government bond yields today are moving lower.  The 10-year German bund yield is down -3.4 bp to 2.716%. The 10-year UK gilt yield is down -6.0 bp to 4.680%.

ECB President Lagarde said the Eurozone economy is likely to see slower growth this quarter, with questions over global trade remaining despite recent trade deals with the US reducing uncertainty.

UK Jul CPI rose +3.8% y/y, stronger than expectations of +3.7% y/y and the fastest pace of increase in 1.5 years.  Jul core CPI also rose +3.8% y/y, stronger than expectations of +3.7% y/y.

Swaps are discounting the chances at 7% for a -25 bp rate cut by the ECB at the September 11 policy meeting.

US Stock Movers

The Magnificent Seven stocks are under pressure today, weighing on the broader market.  Tesla (TSLA) is down more than -4% and Nvidia (NVDA) is down more than -3%.  Also, Meta Platforms (META), Alphabet (GOOGL), and Amazon (AMZN) are down more than -2%, and Apple (AAPL) is down more than -1%.  Microsoft (MSFT) is down -0.33%.

Weakness in chip stocks is a drag on the overall market.  Intel (INTC) is down more than -7% and Micron Technology (MU) is down more than -6%.  Also, Advanced Micro Devices (AMD), ARM Holdings Plc (ARM), and Marvell Technology (MRVL) are down more than -4%.  In addition, Broadcom (AVGO) is down more than -3%, and Lam Research (LRCX), Applied Materials (AMAT), ON Semiconductor (ON), and GlobalFoundries (GFS) are down more than -2%.

James Hardie Industries Plc (JHX) is down more than -36% after reporting its Q2 operating profit sank -29% y/y and said difficult economic conditions continue to weigh on homebuyers after recording the slowest spring season in more than twelve years.

La-Z-Boy (LZB) is down more than -13% after reporting Q1 comparable sales fell -4% y/y versus -3% y/y, and forecast Q2 sales of $510 million-$530 million, the midpoint below the consensus of $528.5 million. 

Target (TGT) is down more than -7% after forecasting a full-year sales decline of a low single-digit percentage compared to the consensus of a -1.71% decline. 

Estee Lauder (EL) is down more than -5% after forecasting 2026 adjusted EPS of $1.90-$2.10, weaker than the consensus of $2.16. 

Carvana (CVNA) and Avis Budget Group (CAR) are down more than -5%, and CarMax (KMX) is down more than -1% after CNBC reported that Hertz Global Holdings will start selling pre-owned cars on Amazon Autos. 

TJX Cos (TJX) is up more than +4% to lead gainers in the S&P 500 after reporting Q3 comparable sales rose +4%, stronger than the consensus of +3.09%, and boosting its 2026 comparable sales forecast to +3% from a previous estimate of +2% to 3%, better than the consensus of +2.87%. 

Hertz Global Holdings (HTZ) is up more than +5% after CNBC reported the company will start selling pre-owned cars on Amazon Autos. 

Dayforce (DAY) is up more than +2% on reports that the company is in advanced talks with Thoma Bravo to be acquired for $70 a share.

Analog Devices (ADI) is up more than +2% to lead gainers in the Nasdaq 100 after reporting Q3 revenue of $2.88 billion, better than the consensus of $2.76 billion. 

Jack Henry & Associates (JKHY) is up more than +2% after reporting Q4 processing revenue of $264.1 million, above the consensus of $255.3 million.

McCormick & Co. (MKC) is up more than +1% after JPMorgan Chase double upgraded the stock to overweight from underweight with a price target of $83.

Lowe’s (LOW) is up more than +1% after acquiring Foundation Building Materials for about $8.8 billion as it expands beyond home improvement supplies. 

Earnings Reports(8/20/2025)

Analog Devices Inc (ADI), Coty Inc (COTY), Estee Lauder Cos Inc/The (EL), Lowe’s Cos Inc (LOW), Nordson Corp (NDSN), Target Corp (TGT), TJX Cos Inc/The (TJX).