The S&P 500 Index ($SPX) (SPY) Monday closed up +1.47%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.34%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.87%. September E-mini S&P futures (ESU25) rose +1.58%, and September E-mini Nasdaq futures (NQU25) rose +1.96%.
Stock indexes rallied sharply on Monday as they recovered from some of last Friday's steep losses. Recent stellar earnings results boosted Magnificent Seven technology stocks and semiconductor chip makers, supporting gains in the broader market. Stocks also have support from speculation that last Friday's dismal payroll and ISM manufacturing reports will prompt the Fed to cut interest rates. The chances of a Fed rate cut at the September FOMC meeting rose to 90% from 40% before the reports were released.
Monday's US economic news was mixed for stocks. US June factory orders fell -4.8% m/m, right on expectations and the biggest decline in more than 5 years. However, June factory orders ex-transportation rose +0.4% m/m, stronger than the expectations of +0.3% m/m and the largest increase in 7 months.
In the latest tariff news, President Trump said Monday that he would be "substantially raising" the tariff on US imports from India from the current 25% due to India's purchases of Russian oil. Last Thursday, President Trump raised tariffs on some Canadian goods to 35% from 25% and announced a 10% global minimum, along with tariffs of 15% or higher for countries with trade surpluses with the US, effective after midnight on August 7. 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.
The markets this week will focus on earnings reports and any fresh tariff or trade news. On Tuesday, the June trade deficit is expected to narrow to -$61.1 billion from -$71.5 billion in May. Also on Tuesday, the July ISM services index is expected to climb by +0.7 to 51.5. On Thursday, weekly initial unemployment claims are expected to increase by +3,000 to 221,000. Also on Thursday, Q2 nonfarm productivity is expected to be +2.0% with unit labor costs rising +1.5%.
Federal funds futures prices are discounting the chances for a -25 bp rate cut at 90% at the September 16-17 FOMC meeting and 70% at the following meeting on October 28-29.
Q2 earnings reports released thus far suggest that S&P 500 earnings are on track to rise +9.1% for the second quarter, much better than the pre-season expectations of +2.8% y/y and the most in four years, according to Bloomberg Intelligence. With over 66% of S&P 500 firms having reported Q2 earnings, around 82% exceeded profit estimates.
Overseas stock markets on Monday settled mixed. The Euro Stoxx 50 closed up sharply by +1.49%. China's Shanghai Composite rebounded from a 2-week low and closed up +0.66%. Japan's Nikkei Stock 225 fell to a 1.5-week low and closed down -1.25%.
Interest Rates
September 10-year T-notes (ZNU25) Monday closed up +5.5 ticks. The 10-year T-note yield fell -2.4 bp to 4.192%. Sep T-notes on Monday recovered from overnight losses and rallied to a 3-month nearest-futures high, and the 10-year T-note yield fell to a 1-month low of 4.192%.
T-notes have positive carryover support from last Friday's weaker-than-expected payroll and ISM manufacturing reports, which boosted the chance of a Fed rate cut at next month's FOMC meeting to 90% from 40% before the reports. Also, Monday's -1% drop in WTI crude oil prices reduced inflation expectations, a bullish factor for T-notes. In addition, Monday's strength in European government bonds provided carryover support to T-notes.
Gains in T-notes were limited by a sharp rebound in equity markets, which curbed safe-haven demand for government securities. Also, supply pressures are weighing on T-notes as the Treasury will auction $125 billion of T-notes and T-bonds in this week's August quarterly refunding, beginning with Tuesday's $58 billion auction of 3-year T-notes.
European government bond yields on Monday moved lower. The 10-year German bund yield fell to a 1.5-week low of 2.624% and finished down -5.4 bp to 2.624%. The 10-year UK gilt yield dropped to a 1-month low of 4.501% and finished down -1.9 bp to 4.509%.
The Eurozone Aug Sentix investor confidence index unexpectedly fell -8.2 to -3.7, weaker than expectations of an increase to 6.9.
Swaps are discounting the chances at 15% for a -25 bp rate cut by the ECB at the September 11 policy meeting.
US Stock Movers
Strength in the Magnificent Seven technology stocks supported gains in the broader market. Nvidia (NVDA), Alphabet (GOOGL), and Meta Platforms (META) closed up more than +3%. Also, Microsoft (MSFT) and Tesla (TSLA) closed up more than +2%. In addition, Apple (AAPL) closed up +0.48%.
Chip stocks rallied on Monday, a supportive factor for the overall market. Broadcom (AVGO) and KLA Corp (KLAC) closed up more than +3%. Also, Advanced Micro Devices (AMD), Micron Technology (MU), Marvell Technology (MRVL), and Lam Research (LRCX) closed up more than +2%. In addition, ARM Holdings Plc (ARM), Applied Materials (AMAT), and ASML Holding NV (ASML) closed up more than +1%.
Steelcase (SCS) closed up more than +60% after being acquired by HNI for $2.2 billion or about $18.30 per share.
Idexx Labs (IDXX) closed up more than +27% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q2 revenue of $1.11 billion, better than the consensus of $1.07 billion, and raising its full-year EPS forecast to $12.40-$12.76 from a previous forecast of $11.93-$12.43, stronger than the consensus of $12.21.
Wayfair (W) closed up more than +11% after reporting Q2 adjusted EPS of 87 cents, well above the consensus of 33 cents.
Spotify (SPOT) closed up more than +5% after it said it will increase the monthly cost of premium subscriptions in Markets across South Asia, the Middle East, Africa, Europe, and Latin America.
Martin Marietta Materials (MLM) closed up more than +3% after raising its full-year adjusted Ebitda forecast to $2.30 billion from a previous forecast of $2.15 billion-$2.45 billion, stronger than the consensus of $2.27 billion.
Tyson Foods (TSN) closed up more than +2% after reporting Q3 sales of $13.88 billion, above the consensus of $13.55 billion.
ON Semiconductor (ON) closed down more than -16% to lead losers in the S&P 500 and Nasdaq 100 after forecasting Q3 adjusted gross margin of 36.5% to 38.5%, the midpoint weaker than the consensus of 37.7%.
Bruker Corp (BRKR) closed down more than -8% after reporting Q2 revenue of $797.4 million, below the consensus of $810.2 million.
LyondellBasell Industries NV (LYB) closed down more than -4% after reporting Q2 adjusted Ebitda of $715 million, weaker than the consensus of $743.9 million.
Berkshire Hathaway (BRK.B) closed down more than -3% after reporting Q2 operating earnings fell -3.8% y/y to $11.16 billion.
Waters (WAT) closed down more than -1% after forecasting Q3 adjusted EPS of $3.15-$3.25, the midpoint below the consensus of $3.23.
Earnings Reports (8/5/2025)
Advanced Micro Devices Inc (AMD), Aflac Inc (AFL), Amgen Inc (AMGN), Apollo Global Management Inc (APO), Archer-Daniels-Midland Co (ADM), Arista Networks Inc (ANET), Assurant Inc (AIZ), Ball Corp (BALL), Broadridge Financial Solutions (BR), Caterpillar Inc (CAT), Cummins Inc (CMI), DaVita Inc (DVA), Devon Energy Corp (DVN), Duke Energy Corp (DUK), DuPont de Nemours Inc (DD), Eaton Corp PLC (ETN), Expeditors International of Washington (EXPD), Fidelity National Information (FIS), Fox Corp (FOXA), Gartner Inc (IT), Henry Schein Inc (HSIC), International Flavors & Fragrances (IFF), Jacobs Solutions Inc (J), Leidos Holdings Inc (LDOS), Marathon Petroleum Corp (MPC), Marriott International Inc/MD (MAR), Match Group Inc (MTCH), Molson Coors Beverage Co (TAP), Mosaic Co/The (MOS), News Corp (NWSA), Pfizer Inc (PFE), Public Service Enterprise Group (PEG), Skyworks Solutions Inc (SWKS), Super Micro Computer Inc (SMCI), TransDigm Group Inc (TDG), Yum! Brands Inc (YUM), Zebra Technologies Corp (ZBRA), Zoetis Inc (ZTS).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
