Stocks Pressured by Fed Jitters but Supported by Chip Makers

The S&P 500 Index ($SPX) (SPY) today is up by +0.02%, the Dow Jones Industrials Index ($DOWI) (DIA) is down by -0.04%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up by +0.01%.  September E-mini S&P futures (ESU25) are down -0.06%, and September E-mini Nasdaq futures (NQU25) are down -0.10%. 

Stock indexes today are little changed.  Fresh concerns over the Fed's independence are weighing on stocks and the dollar after President Trump moved to fire Fed Governor Lisa Cook, citing "sufficient cause" based on allegations she made false statements on one or more mortgage loans.  Ms. Cook said she will not resign, and her lawyer pledged to take "whatever actions are needed to prevent" the president's "illegal action." 

On the positive side for stocks is the strength in semiconductor makers.  Also, China is sending Vice Commerce Minister Li Chenggang to the US to meet with US trade officials and negotiators, a move that signals trade talks with China are progressing.

Stocks also found support after today's report on US July capital goods new orders nondefense ex-aircraft and parts, a proxy for capital spending, rose +1.1% m/m, stronger than expectations of +0.2% m/m.

The US June S&P Core Logic composite-20 home price index eased to +2.14% y/y from +2.81% y/y in May, the smallest increase in two years.

Regarding tariffs, President Trump late Monday threatened to impose new tariffs and export restrictions on advanced technology and semiconductors in retaliation against other nations' digital services taxes that hit American companies.  Last week, Mr. 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 last Monday and did not exclude goods already in transit.  

In other recent tariff news, Mr. Trump on August 13 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.  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.

On the geopolitical front, diplomatic efforts to end the war in Ukraine remain elusive, as the US tries to broker a peace deal between the two countries.  On Sunday, Russian Foreign Minister Lavrov said there was no meeting planned between the leaders of Russia and Ukraine and that there "needs to be an agenda first" for a meeting to take place.  "This agenda is not ready at all." 

The markets this week will focus on any fresh tariff news or developments on ending the Ukraine-Russian war.  Later today, the Conference Board's Aug consumer confidence index is expected to fall -0.8 to 96.4.  After Wednesday's close, Nvidia will release its quarterly earnings and guidance.  On Thursday, Q2 GDP is expected to be revised upward by +0.1 to 3.1% (q/q annualized). Also, weekly initial unemployment claims are expected to fall by -5,000 to 230,000.  On Friday, July personal spending is expected to climb +0.3% m/m, and July personal income is expected to rise +0.4% m/m.   Also, the July core PCE price index, the Fed's preferred inflation gauge, is expected to climb +0.2% m/m and +2.9% y/y.  In addition, the Aug MNI Chicago PMI is expected to fall -0.6 to 46.5.  Finally, the University of Michigan's final-Aug US consumer sentiment index is expected to be unrevised at 58.6.

Federal funds futures prices are discounting the chances for a -25 bp rate cut at 84% at the next FOMC meeting on September 16-17.  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 Q2 earnings season winding down, over 94% of S&P 500 firms having reported Q2 earnings, about 82% of companies exceeded profit estimates. 

Overseas stock markets today are lower.  The Euro Stoxx 50 fell to a 1.5-week low and is down -0.89%.  China's Shanghai Composite fell from a new 10-year high and closed down -0.39%.  Japan's Nikkei Stock 225 dropped to a 2-week low and closed down -0.97%.

Interest Rates

September 10-year T-notes (ZNU5) today are down -2 ticks, and the 10-year T-note yield is up +0.6 bp to 4.281%. 

T-notes are under pressure today after President Trump said he will move to fire Fed Governor Cook, exacerbating investor concerns about the Fed's independence and fanning inflation fears if politics forces interest rates below the neutral rate.  Also, rising inflation expectations are undercutting T-note prices after the 10-year breakeven inflation expectations rate rose to a 3.5-week high today of 2.438%. In addition, today's stronger-than-expected July US core capital goods new orders report was bearish for T-notes. Finally, supply pressures are negative for T-notes as the Treasury will auction $69 billion of 2-year T-notes later today as part of this week's $211 billion of T-note and floating-rate note auctions. 

Sep T-notes recovered from their worst levels as short covering emerged when Fed Governor Cook said she has no plans to resign and that "no cause exists" for President Trump to fire her. 

European government bond yields today are mixed.  The 10-year German bund yield is down -1.8 bp to 2.740%. 10-year UK gilt yield rose to a 3-month high of 4.765% and is up +5.3 bp to 4.746%.

The French Aug consumer confidence indicator unexpectedly fell -1 to a 1.75-year low of 87, weaker than expectations of 89.

Swaps are discounting the chances at 1% for a -25 bp rate cut by the ECB at the September 11 policy meeting.

US Stock Movers

Qualcomm (QCOM) is up more than +1% to lead gainers in the Nasdaq 100, and semiconductor makers after Arete Research Group LLC upgraded the stock to buy from neutral with a price target of $200.  Also, Advanced Micro Devices (AMD) is up more than +1% after the company and IBM announced a quantum-centric supercomputing partnership.  In addition, ARM Holdings Plc (ARM), Micron Technology (MU), Marvell Technology (MRVL), GlobalFoundries (GFS), and Broadcom (AVGO) are up more than +1%. 

Eli Lilly (LLY) is up more than +4% to lead gainers in the S&P 500 after the company said a second trial of its experimental obesity pill showed patients lost weight and saw significant improvements in blood sugar levels.

PDD Holdings (PDD) is up more than +1% to lead gainers in the Nasdaq 100 after Benchmark Company LLC raised its price target on the stock to $160 from $128. 

EchoStar (SATS) is up more than +76% after AT&T announced an agreement to buy spectrum licenses from the company for about $23 billion. 

Semtech (SMTC) is up more than +8% after reporting Q2 adjusted gross margin of 53.2%, above the consensus of 53.0%.

VF Corp (VFC) is up more than +5% after Baird upgraded the stock to outperform from neutral with a price target of $20.

Kinetik Holdings (KNTK) is up more than +3% after S&P Dow Jones Indices announced the company will replace Pacific Premier Bancorp in the S&P SmallCap 600 effective before the opening of trading on Tuesday, September 2. 

Generac Holdings (GNRC) is down more than -2% after Citigroup downgraded the stock to neutral from buy. 

Shoe Carnival (SCVL) is down more than -2% after Seaport Global Securities downgraded the stock to neutral from buy.

Amer Sports (AS) is down more than -1% after holder Anamered Investments sold as much as $163 million of shares in an unregistered block sale between $39.75 to $40.25 per share, below Monday's closing price of $40.69.

Brown-Forman (BF.B) is down more than -1% after the company said CFO Cunningham will retire on May 1, 2026.

Keurig Dr Pepper (KDP) is down more than -1% after HSBC downgraded the stock to hold from buy.

Earnings Reports(8/26/2025)

American Woodmark Corp (AMWD), Box Inc (BOX), Citi Trends Inc (CTRN), Electromed Inc (ELMD), Golden Matrix Group Inc (GMGI), MongoDB Inc (MDB), nCino Inc (NCNO), Okta Inc (OKTA), Ooma Inc (OOMA), PACS Group Inc (PACS), PVH Corp (PVH).