The S&P 500 Index ($SPX) (SPY) Tuesday closed down -0.77%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.95%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.88%. June E-mini S&P futures (ESM25) are down -0.83%, and June E-mini Nasdaq futures (NQM25) are down -0.89%.
Stock indexes settled moderately lower on Tuesday after recent comments by various US companies bolstered concern about economic damage from the trade war. In the latest such comment, Ford Motor late Monday pulled its full-year financial guidance due to President Trump’s tariff plans and said the tariffs will reduce 2025 adjusted earnings by about $1.5 billion this year on a net basis, citing “industrywide supply chain disruption.” Trade uncertainty caused by US tariffs also weighs on market sentiment and stock prices.
Tuesday’s US economic news was also negative for stocks after the March US trade deficit was reported at a record -$140.5 billion, wider than expectations of -$137.2 billion and a negative factor for Q1 GDP.
Stocks recovered from their worst levels Tuesday based on comments from Treasury Secretary Bessent, who said trade negotiations with several US partners were “going well,” reiterating that some trade deals may be announced as soon as this week.
The FOMC began its 2-day policy meeting on Tuesday and is expected to keep its federal funds target range unchanged at 4.25%-4.50% when it concludes on Wednesday. Recent economic news has been better than expected, reducing expectations for a rate cut this week. Swap markets now have priced in three 25 bp Fed rate cuts by year-end, down from the four they had priced in a week ago.
This week, the market will focus on tariffs and any changes to US trade policy. On Wednesday, the FOMC is expected to keep its federal funds target range unchanged at 4.25%-4.50%. Post-FOMC comments on Wednesday from Fed Chair Powell will also be studied for any clues as to the future of Fed policy. Thursday brings weekly initial unemployment claims, Q1 nonfarm productivity (expected 0.7%), and Q1 unit labor costs (expected +5.2%).
The markets are discounting the chances at 2% for a -25 bp rate cut after the 2-day FOMC meeting that ends on Wednesday.
Q1 earnings reporting season remains in progress. According to data compiled by Bloomberg Intelligence, the market consensus is for Q1 year-over-year earnings growth of +6.7% for the S&P 500 stocks, down from expectations of +11.1% in early November. So far, of the 365 companies in the S&P 500 companies that have reported quarterly results, 78% have beaten estimates. Full-year 2025 corporate profits for the S&P 500 are seen rising +9.4%, down from the forecast of +12.5% in early January.
Overseas stock markets on Tuesday settled mixed. The Euro Stoxx 50 fell from a 1-month high and closed down -0.37%. China’s Shanghai Composite climbed to a 1-month high and closed up +1.13%. Japan’s Nikkei Stock 225 was closed for a National holiday.
Interest Rates
June 10-year T-notes (ZNM25) Tuesday closed up +8 ticks. The 10-year T-note yield fell -3.7 bp to 4.306%. June T-notes Tuesday recovered from a 1-1/2 week low and moved higher, and the 10-year T-note yield fell from a 1-1/2 week high of 4.375%. Tuesday’s stock slump boosted safe-haven demand for T-notes. Also, Tuesday’s US economic news showed that the Mar trade deficit widened to a record high, which was negative for Q1 GDP and dovish for Fed policy. T-notes raced to their highs Tuesday afternoon on strong demand for the Treasury’s $42 billion auction of 10-year T-notes. The auction had a bid-to-cover ratio of 2.60, better than the 10-auction average of 2.56.
T-notes on Tuesday initially moved lower on negative carryover from today’s weakness in European government bonds. Also, an increase in inflation expectations is bearish for T-notes after the 10-year breakeven inflation rate on Tuesday climbed to a 1-week high of 2.305%.
European government bond yields on Tuesday moved higher. The 10-year German bund yield rose to a 3-week high of 2.558% and finished up +2.3 bp to 2.540%. The 10-year UK gilt yield rose to a 2-week high of 4.575% and finished up +0.5 bp to 4.514%.
Eurozone Mar PPI fell -1.6% m/m and rose +1.9% y/y, weaker than expectations of -1.4% m/m and +2.5% y/y.
The Eurozone Apr S&P composite PMI was revised upward by +0.3 to 50.4 from the previously reported 50.1.
Swaps are discounting the chances at 95% for a -25 bp rate cut by the ECB at the June 5 policy meeting.
US Stock Movers
Pharmaceutical makers and drug stocks retreated Tuesday after President Trump said an announcement related to the cost of medicines and drugs is coming next week. As a result, Regeneron Pharmaceuticals (REGN) closed down more than -7%, and Eli Lilly (LLY), Bristol-Myers Squibb (BMY), and Gilead Sciences (GILD) closed down more than -5%. Also, AbbVie (ABBV), Biogen (BIIB), and Pfizer (PFE) closed down more than -4%. In addition, Merk & Co (MRK) closed down more than -4% to lead losers in the Dow Jones Industrials.
Tuesday’s weakness in chip stocks weighed on the overall market. GlobalFoundries (GFS) and KLA Corp (KLAC) closed down more than -2%. Also, Advanced Micro Devices (AMD), Intel (INTC), NXP Semiconductors NV (NXPI), Marvell Technology (MRVL), Microchip Technology (MCHP), Analog Devices (ADI), Applied Materials (AMAT) and Lam Research (LRCX) closed down more than -1%.
Palantir Technologies (PLTR) closed down more than -12% to lead losers in the Nasdaq 100 after reporting Q1 adjusted EPS of 13 cents, right on expectations and disappointing investors who had been looking for an earnings beat.
Vertex Pharmaceuticals (VRTX) closed down more than -10% after reporting Q1 adjusted net income of $1.05 billion, weaker than the consensus of $1.12 billion.
Coterra Energy (CTRA) closed down more than -9% after reporting Q1 operating revenue of $1.90 billion, weaker than the consensus of $1.99 billion, and cut its full-year CAPEX to $2.0 billion-$2.3 billion from a previous estimate of $2.1 billion to $2.4 billion.
DoorDash (DASH) closed down more than -7% after reporting Q1 revenue of $3.03 billion, weaker than the consensus of $3.10 billion, and after it purchased SevenRooms for $1.2 billion and Deliveroo for $3.9 billion.
Fabrinet (FN) closed down more than -7% after forecasting Q4 adjusted EPS of $2.55 to $2.70, the midpoint below the consensus of $2.67.
Clorox (CLX) closed down more than -2% after reporting Q3 net sales of $1.67 billion, weaker than the consensus of $1.72 billion, and cut its full-year organic sales estimate to up +4% to +5% from a previous estimate of +4% to +7%, below the consensus of +5.42%.
Celanese (CE) closed up more than +9% after reporting Q1 net sales of $2.39 billion, better than the consensus of $2.27 billion.
AngloGold Ashanti Plc (AU) closed up more than +4% to lead gold-mining stocks higher after COMEX gold prices rallied more than +3% to a 2-week high.
Leidos Holdings (LDOS) closed up more than +4% after reporting Q1 revenue of $4.25 billion, stronger than the consensus of $4.09 billion.
Ingredion (INGR) closed up more than +3% after reporting Q1 adjusted EPS of $2.97, above the consensus of $2.41, and raised its full-year adjusted EPS forecast to $10.90-$11.60 from a previous forecast of $10.75-$11.55, stronger than the consensus of $10.99.
Archer-Daniels-Midland (ADM) closed up more than +1% after reporting Q1 adjusted EPS of 70 cents, above the consensus of 66 cents.
Mariott International (MAR) closed up more than +1% after reporting Q1 revenue of $6.26 billion, better than the consensus of $6.20 billion.
Earnings Reports (5/7/2025)
APA Corp (APA), Atmos Energy Corp (ATO), Axon Enterprise Inc (AXON), Bio-Techne Corp (TECH), Bunge Global SA (BG), CDW Corp/DE (CDW), Cencora Inc (COR), CF Industries Holdings Inc (CF), Charles River Laboratories International (CRL), Corteva Inc (CTVA), Dayforce Inc (DAY), Emerson Electric Co (EMR), Fortinet Inc (FTNT), Johnson Controls International (JCI), MarketAxess Holdings Inc (MKTX), NiSource Inc (NI), Occidental Petroleum Corp (OXY), Paycom Software Inc (PAYC), Rockwell Automation Inc (ROK), Skyworks Solutions Inc (SWKS), Texas Pacific Land Corp (TPL), Trimble Inc (TRMB), Uber Technologies Inc (UBER), Verisk Analytics Inc (VRSK), Vistra Corp (VST), Walt Disney Co/The (DIS).
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.
