Stocks Settle Higher as Bond Yields Fall and Chip Makers Climb

The S&P 500 Index ($SPX) (SPY) on Monday closed up +0.21%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.25%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.46%.  September E-mini S&P futures (ESU25) rose +0.25%, and September E-mini Nasdaq futures (NQU25) rose up +0.49%. 

Stocks settled higher on Monday on the prospect of a more accommodative Federal Reserve.  The 10-year T-note yield fell to a 5-month low on Monday of 4.04%.  The markets have fully priced in a 25 bp rate cut by the Fed at next week's FOMC meeting and priced in a 10% chance for a 50 bp rate cut.  Strength in semiconductor makers led technology stocks and the overall market higher.  However, this week's US Aug CPI and PPI reports will show how much room the Fed has to cut interest rates and support the job market. 

Weaker-than-expected trade news from China is negative for global growth prospects after China's Aug exports rose +4.4% y/y, weaker than expectations of +5.5% y/y.  Also, Aug imports rose +1.3% y/y, weaker than expectations of +3.4% y/y.

Market focus this week will be on any trade or tariff news.  On Tuesday, the BLS will release annual benchmark revisions to US payrolls in the year through March.  On Wednesday, Aug PPI final demand is expected to climb +3.3% y/y, unchanged from July, and Aug PPI ex-food and energy is expected to ease to +3.5% y/y from +3.7% y/y in July.   On Thursday, Aug CPI is expected to climb to +2.9% y/y from +2.7% y/y in July, and Aug CPI ex-food and energy is expected to increase +3.1% y/y, unchanged from July. Also, weekly initial unemployment claims are expected to fall by -3,000 to 234,000.  On Friday, the University of Michigan Sep consumer sentiment index is expected to slip -0.2 to 58.0.

The markets are now pricing in a 15% chance of a 50 bp rate cut at the upcoming FOMC meeting on Sep 16-17, versus the previous expectations of a zero chance of that 50 bp rate cut.  After the fully expected -25 bp rate cut at the Sep 16-17 meeting, the markets are now discounting an 81% chance of a second -25 bp rate cut at the Oct 28-29 meeting, up from a 54% chance as of late Thursday.  The markets are now pricing in an overall -76 bp rate cut in the federal funds rate by year-end to 3.62% from the current 4.38% rate.

Regarding tariffs, a federal appeals court ruled late last month that President Trump exceeded his authority by imposing global tariffs without Congressional approval, but the court let the tariffs remain in place while appeals continue.  The US Court of Appeals for the Federal Circuit Court said, "The statute bestows significant authority on the President to undertake a number of actions in response to a declared national emergency, but none of these actions explicitly include the power to impose tariffs, duties, or the like, or the power to tax." The case now appears to be headed to the Supreme Court for a final decision.  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.

Overseas stock markets on Monday settled higher.  The Euro Stoxx 50 closed up +0.84%.  China's Shanghai Composite closed up +0.38%.  Japan's Nikkei Stock 225 rose to a 2.5-week high and closed up +1.45%.

Interest Rates

December 10-year T-notes (ZNZ5) closed up by +5 ticks.  The 10-year T-note yield fell by -2.8 bp to 4.046%.  The 10-year T-note yield dropped to a 5-month low Monday at 4.040% on carryover support from last Friday's weak US unemployment report that bolstered the outlook for Fed easing.  Supply pressures are limiting gains in T-note prices as the Treasury will auction $119 billion of T-notes and T-bonds this week, beginning with Tuesday's $58 billion auction of 3-year T-notes. 

Concerns about Fed independence are negatively impacting T-note prices due to President Trump's attempt to fire Fed Governor Cook and Stephen Miran's intention to hold a Fed Governor position while remaining technically in his White House role on the Council of Economic Advisors.

European government bond yields on Monday moved lower.  The 10-year German bund yield fell to a 1-month low of 2.638% and finished down -2.0 bp to 2.642%.  The 10-year UK gilt yield dropped to a 3-week low of 4.604% and finished down -4.0 bp to 4.605%.

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

Chip stocks rallied on Monday to provide support to the overall market.  Marvell Technology (MRVL) closed up more than +3%, and Broadcom (AVGO) closed up more than +3% and added to last Friday's +9% surge to lead chip stocks higher on news that the company is teaming up with OpenAI to make artificial intelligence accelerators.  Also, Lam Research (LRCX) closed up more than +2%, and ASML Holding NV (ASML) closed up more than +1%.  In addition, Nvidia (NVDA) and Analog Devices (ADI) closed up +0.77%.

AppLovin (APP) closed up more than +11% to lead gainers in the Nasdaq 100 after S&P Dow Jones Indices announced the stock will replace Caesars Entertainment in the S&P 500 before the start of trading on September 22.

Rapport Therapeutics (RAPP) closed up more than +122% after reporting positive topline results from its RAP-219 treatment for focal onset seizures. 

Forward Industries (FORD) closed up more than 54% after receiving $1.65 billion in cash and stablecoin commitments for a private investment in public equity offering to fund a Solana-focused digital asset treasury strategy.

EchoStar (SATS) closed up more than +18% after SpaceX's Starlink agreed to buy wireless spectrum from the company for about $17 billion. 

Robinhood Markets (HOOD) closed up more than +15% after S&P Dow Jones Indices announced the stock would replace MarketAxess Holdings in the S&P 500 before the start of trading on September 22.

Premier Inc. (PINC) closed up more than +4% after Patient Square Capital was said to be exploring an acquisition of the company. 

Uber Technologies (UBER) closed up more than +3% to lead gainers in the S&P 500 after it partnered with Chinese autonomous vehicle maker Momenta to test robotaxis in Munich next year.

Oracle (ORCL) closed up more than +2% after Morgan Stanley raised its price target on the stock to $246 from $175. 

CVS Health Corp (CVS) closed down more than -3% to lead losers in the S&P 500 after the company CEO and CFO, during a private investor meeting, provided no details about its upcoming quality ratings from the US government and offered no financial guidance.

Telecommunication stocks are falling today after SpaceX agreed to buy wireless spectrum from EchoStar for $17 billion.  T-Mobile US (TMUS) closed down more than -3% to lead losers in the Nasdaq 100, and Verizon Communications (VZ) closed down more than -2% to lead losers in the Dow Jones Industrials.  Also, SBA Communications (SBAC) closed down more than -3% and AT&T (T) closed down more than -2%. 

Summit Therapeutics (SMMT) closed down more than -25% unveiling new data that cast doubt on the future of its ivonescimab drug to treat lung cancer.

Norwegian Cruise Line Holding (NCLH) closed down more than -4% after announcing it will sell $1.025 billion of senior notes due 2031 and $1.025 billion of senior notes due 2033 in a private offering.  

Dexcom (DXCM) closed down more than -3% after Oppenheimer & Co. downgraded the stock to perform from outperform.

BXP Inc (BXP) closed down more than -1% after cutting its quarterly cash dividend to 70 cents a share from 98 cents.

Earnings Reports(9/9/2025)

Core & Main Inc (CNM), GameStop Corp (GME), Oracle Corp (ORCL), Rubrik Inc (RBRK), SailPoint Inc (SAIL), Synopsys Inc (SNPS).