Stocks Supported as US Producer Prices Ease and Bond Yields Fall

The S&P 500 Index ($SPX) (SPY) today is up +0.46%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.24%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.27%.  September E-mini S&P futures (ESU25) are up +0.46%, and September E-mini Nasdaq futures (NQU25) are up +0.263%. 

Stock indexes are mostly higher today, with the S&P 500 posting a new record high and the Nasdaq 100 posting a 4-week high.  Stocks are rallying today as bond yields fell after US producer prices for August unexpectedly eased, cementing expectations for Fed interest rate cuts.  The 10-year T-note yield is down -3 bp to 4.06%.

Stocks also have support from a +37% surge in Oracle to a record high, leading technology stocks higher after it gave an aggressive outlook for its cloud business, driven by demand for AI infrastructure. 

On the negative side for stocks is an escalation of geopolitical tensions in Europe after Poland shot down drones that crossed into its territory during Russia's latest air strike on Ukraine, calling it an "act of aggression."

Signs of ongoing deflation in China are negative for China's economy and global growth prospects.   China’s Aug CPI fell -0.4% y/y, weaker than expectations of -0.2% y/y and the steepest decline in 6 months.  Also, China’s Aug PPI fell -2.9% y/y, right on expectations, and the thirty-fifth consecutive month that producer prices have declined on a year-on-year basis.

US MBA mortgage applications rose +9.2% in the week ended September 5, with the purchase mortgage sub-index up +6.6% and the refinancing sub-index up +12.2%.  The average 30-year fixed rate mortgage fell -15 bp to an 11-month low of 6.49% from 6.64% in the prior week.

The US Aug final-demand PPI eased to +2.6% y/y from +3.1% y/y in July, a smaller increase than expectations of +3.3% y/y.  Aug PPI ex-food and energy eased to +2.8% y/y from +3.4% y/y in July, a smaller increase than expectations of +3.5% y/y.

Market focus this week will be on any trade or tariff news.  On Thursday, the US 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’s +3.1%.  Also, weekly initial unemployment claims are expected to fall by -3,000 to 234,000. On Friday, the University of Michigan’s Sep US consumer sentiment index is expected to slip -0.2 to 58.0.

The markets are now pricing in a 100% chance of a -25 bp rate cut and a 14% chance of a 50 bp rate cut at the upcoming FOMC meeting on Sep 16-17.  After the fully expected -25 bp rate cut at the Sep 16-17 meeting, the markets are discounting a 76% chance of a second -25 bp rate cut at the Oct 28-29 meeting.  The markets are now pricing in an overall -74 bp rate cut in the federal funds rate by year-end to 3.64% from the current 4.38% rate.

Overseas stock markets today are higher.  The Euro Stoxx 50 climbed to a 1.5-week high and is up +0.25%.  China's Shanghai Composite closed up +0.13%.  Japan's Nikkei Stock 225 closed up +0.87%.

Interest Rates

December 10-year T-notes (ZNZ5) today are up by +4 ticks.  The 10-year T-note yield is down by -3.1 bp to 4.057%.  T-notes erased early losses and moved higher today after US Aug producer prices eased more than expected, a dovish factor for Fed policy and cementing expectations for at least a 25 bp rate cut at next week's FOMC meeting.

Strength in stocks today is limiting gains in T-note prices. Also, supply pressures are weighing on T-notes as the Treasury will auction $39 billion of 10-year T-notes later today as part of this week's $119 billion slate of T-note and T-bond auctions. 

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 today are mixed.  The 10-year German bund yield fell to a 1-month low of 2.631% and is down -0.5 bp to 2.655%.  The 10-year UK gilt yield is up +0.7 bp to 4.630%.

Swaps are discounting no chance for a -25 bp rate cut by the ECB at Thursday's policy meeting.

US Stock Movers

Oracle (ORCL) is up more than +37% to lead gainers in the S&P 500 after giving a robust forecast for its cloud-infrastructure business, a sign of strong AI-related demand.  After fiscal year 2026, the company sees cloud infrastructure revenue in the subsequent four years of $32 billion, $73 billion, $114 billion, and $114 billion.

Stocks tied to AI computing infrastructure are rallying after Oracle forecasted faster-than-expected revenue growth in its cloud infrastructure unit.  CoreWeave (CRWV) is up more than +16% and Broadcom (AVGO) is up more than +6%, leading gainers in the Nasdaq 100.  Also, Nvidia (NVDA) is up more than +3% to lead gainers in the Dow Jones industrials, and Arista Networks (ANET) and Advanced Micro Devices (AMD) are up more than +3%. 

Strength in chip makers is a positive factor for the broader market. ARM Holdings Plc (ARM) and Micron Technology (MU) are up more than +3%.  Also, On Semiconductor (ON), Intel (INTC), Microchip Technology (MCHP), and Marvell Technology (MRVL) are up more than +1%. 

Today's rally in AI-infrastructure stocks is also boosting power-producing stocks, as the increase in AI usage will require more power.  Vertiv Holdings (VRT) is up more than +9%, and Vistra Corp (VST) and Constellation Energy (CEG) are up more than +5%.  Also, GE Vernova (GEV) and Talen Energy (TLN) are up more than +4%.

Travere Therapeutics (TVTX) is up more than +23% after the FDA informed the company that an advisory committee is no longer needed for its supplemental drug application for the treatment of a rare kidney disorder. 

GameStop (GME) is up more than +5% after reporting Q2 hardware and accessories net sales of $592.1 million, well above the consensus of $434.8 million. 

Bill Holdings (BILL) is up more than +5% after the Financial Times reported that Elliot Management has built a large stake in the company. 

Synopsys (SNPS) is down more than -33% to lead losers in the S&P 500 and Nasdaq 100 after forecasting full-year adjusted EPS of $12.76-$12.80, well below the consensus of $15.11. 

Chewy (CHWY) is down more than -12% despite reporting better-than-expected Q2 results, with analysts citing disappointment that the results weren't even better. 

Humana (HUM) is down more than -4%, adding to Tuesday's -12% plunge, after a post on LinkedIn, cited by analysts at Leerink Partners, stated that changes in the thresholds for Medicare quality ratings that pay bonuses to health plans are harder to get. Humana receives most of its revenue from selling private Medicare Advantage plans.

Trade Desk Inc (TTD) is down more than -3% after Morgan Stanley downgraded the stock to equal weight from overweight. 

HP Inc (HPQ) is down more than -2% after Evercore ISI downgraded the stock to in line from outperform. 

Earnings Reports(9/10/2025)

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