The S&P 500 Index ($SPX) (SPY) today is down -0.21%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.40%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.04%. June E-mini S&P futures (ESM25) are down -0.14%, and June E-mini Nasdaq futures (NQM25) are down -0.05%.
Stock indexes today are falling as escalating trade tensions between the US and China have sapped confidence in asset markets. China’s Ministry of Commerce today accused the US of unilaterally introducing new discriminatory restrictions, including new guidelines on AI chip export controls, curbs on chip design software sales to China, and the revocation of Chinese student visas, and vowed to take measures to defend its interests. The latest flare-up threatens to worsen trade relations even after President Trump expressed hope he will speak with Chinese President Xi Jinping this week to accelerate a trade truce.
Higher bond yields today are also weighing on stocks. The 10-year T-note yield today is up +3 bp to 4.43% as escalating trade tensions between the US and China have led to a broad selloff of dollar assets, including Treasuries. Also, today’s 4% jump in the price of WTI crude to a 1-1/2 week high has boosted inflation expectations, a hawkish factor for Fed policy.
Stocks remained lower on economic concerns after today’s news showed US manufacturing activity last month unexpectedly contracted by the most in 6 months, and April construction spending unexpectedly declined.
Stock indexes recovered from their worst levels today as energy producers rallied after the price of WTI crude rose more than +3% to a 1-1/2 week high. Also, US steel and aluminum producers are soaring today after President Trump pledged to double tariffs on US steel and aluminum imports to 50% from 25%.
The US May ISM manufacturing index unexpectedly fell -0.2 to 48.5, weaker than expectations of an increase to 49.5 and the steepest pace of expansion in 6 months.
US Apr construction spending unexpectedly fell -0.4% m/m, weaker than expectations of a +0.2% m/m increase.
Comments from Fed Governor Waller were supportive of stocks and bonds when he said, “Assuming that the effective tariff rate settles close to my lower tariff scenario, that underlying inflation continues to make progress to our 2% goal, and that the labor market remains solid, I would be supporting good news rate cuts later this year.”
The markets are discounting the chances at 5% for a -25 bp rate cut at the next FOMC meeting on June 17-18.
The markets this week will focus on any new trade or tariff news. Later today, Fed Chair Powell delivers opening remarks today at the Board of Governors IF 75th Anniversary Conference. On Tuesday, Apr factory orders are expected to fall -3.2% m/m and the Apr JOLTS job openings report is expected to fall by -92,000 to 7.100 million. On Wednesday, the May ADP employment change is expected to climb by +110,000, and the May ISM services index is expected to rise +0.5 to 52.1. On Thursday, weekly initial unemployment claims are expected to fall by -5,000 to 235,000. On Friday, May nonfarm payrolls are expected to climb +125,000, and the May unemployment rate is expected to remain unchanged at 4.2%. Finally, May average hourly earnings are expected to rise +0.3% m/m and +3.7% y/y.
Overseas stock markets today are lower. The Euro Stoxx 50 fell to a 1-week low and is down -0.26%. China’s Shanghai Composite was closed today for the Dragon Boat Day holiday. Japan’s Nikkei Stock 225 closed down -1.30%.
Interest Rates
June 10-year T-notes (ZNM25) today are down -2 ticks. The 10-year T-note yield is up +2.8 bp to 4.428%. June T-notes today are under pressure as escalating trade tensions between the US and China have led to a broad selloff of dollar assets, including Treasuries. Also, a negative carryover from weakness in European government bonds is weighing on T-notes. In addition, today’s 4% jump in the price of WTI crude to a 1-1/2 week high has boosted inflation expectations, a bearish factor for T-notes. Losses in T-notes are limited due to dovish comments from Fed Governor Waller, who laid out a scenario for the Fed to cut interest rates later this year. Also, today’s weaker-than-expected reports on May ISM manufacturing activity and Apr construction spending were bullish for T-notes.
European government bond yields today are moving higher. The 10-year German bund yield is up +1.2 bp at 2.512%. The 10-year UK gilt yield is up +0.6 bp to 4.652%.
The German May S&P manufacturing PMI was revised downward by -0.5 to 48.3 from the previously reported 48.8.
The UK May S&P manufacturing PMI was revised upward by 1.3 to 46.4 from the previously reported 45.1.
Swaps are discounting the chances at 98% for a -25 bp rate cut by the ECB at Thursday’s policy meeting.
US Stock Movers
Adobe (ADBE) is down more than -3% to lead losers in the Nasdaq 100 after the Wall Street Journal reported that Trump administration funding cuts have spread to technology contractors. CDW Corp (CDW) is also down more than -3% on the news.
Science Applications International (SAIC) is down more than -13% after reporting Q1 EPS of $1.92, weaker than the consensus of $2.13.
Tesla (TSLA) is down more than -3% after Tesla May new-vehicle registrations in France fell -57% y/y to an almost 3-year low.
Centene (CNC) is down more than -3% after Barclays downgraded the stock to equal weight from overweight, citing concern about Medicare Part D and individual Affordable Care Act businesses.
Global e-Online Ltd (GLBE) is down more than -3 after Truist Securities initiated coverage of the stock with a sell recommendation and a price target of $31.
JB Hunt Transport Services (JBHT) is down more than -2% after Goldman Sach downgraded the stock to neutral from buy.
US steel and aluminum producers are climbing today after President Trump said he would be increasing tariffs on US steel and aluminum imports to 50% from 25%. Cleveland-Cliffs (CLF) and Century Aluminum (CENX) are up more than +20%. Also, Nucor (NUE) is up more than +9% to lead gainers in the S&P 500. In addition, Steel Dynamics (STLD) is up more than +9%, and Commercial Metals (CMC) is up more than +7%.
Energy producers and energy service providers are moving higher today, with the price of WTI crude up more than +4% at a 1-1/2 week high. APA Corp (APA) is up more than +3%, and Devon Energy (DVN) is up more than +2%. Also, Diamondback Energy (FANG), Haliburton (HAL), ConocoPhillips (COP), and Occidental Petroleum (OXY) are up more than +1%.
Chip stocks are moving higher today to lend support to the overall market. Broadcom (AVGO) is up more than +2%. Also, Advanced Micro Devices (AMD), Marvel Technology (MRVL), Micron Technology (MU), Nvidia (NVDA), and Microchip Technology (MCHP) are up more than +1%.
Zscaler (ZS) is up more than +4% to lead gainers in the Nasdaq 100 after UBS raised its price target on the stock to $315 from $260.
Moderna (MRNA) is up more than +1% after the FDA approved the company’s new Covid vaccine for adults over 65 and anyone over 12 with at least one risk factor for severe disease.
Vera Therapeutics (VERA) is up more than +57% after reporting the primary endpoint was met in a Phase 3 trial of its atacicept for the treatment of immunoglobulin A nephropathy.
Earnings Reports (6/2/2025)
Credo Technology Group Holding (CRDO), Science Applications International Corp (SAIC), The Campbell’s Company (CPB).
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.
