The S&P 500 Index ($SPX) (SPY) rose by +2.59% today, while the Dow Jones Industrial Average ($DOWI) (DIA) increased by +2.34%. The Nasdaq 100 Index ($IUXX) (QQQ) saw an uptick of +3.14%. Additionally, June E-mini S&P futures (ESM25) were up +2.68%, with June E-mini Nasdaq futures (NQM25) up +3.25%.

Stock indexes are sharply higher today, reaching significant multi-month highs, spurred by a recent agreement between the U.S. and China to cut tariffs. The S&P 500 and Nasdaq 100 both achieved 2-1/4 month highs, and the Dow Jones Industrials hit a 1-1/4 month high. This risk-on sentiment was reinforced by Treasury Secretary Bessent’s remarks regarding “robust and productive” trade discussions. The U.S. will lower its tariffs on Chinese products from 145% to 30%, while China will reduce its duties from 125% to 10% for a trial period of three months.

Further supporting the rise in stocks were easing geopolitical tensions, particularly after India and Pakistan agreed to a ceasefire. Ukrainian President Zelenskiy also announced plans to meet with Russian President Putin in Istanbul this Thursday.

In contrast, comments from Fed Governor Kugler tempered some optimism, noting that U.S. tariff policies could increase inflation and hinder economic growth, even with reduced tariffs from China. She mentioned potential “significant effects” on productivity as businesses may curtail investments to adapt to the tariff changes.

Focus on Inflation and Economic Indicators

This week, the markets will keep a close eye on inflation data and potential trade deals. On Tuesday, the April Consumer Price Index (CPI) is projected to rise by +0.3% month-over-month (m/m) and +2.4% year-over-year (y/y). Excluding food and energy, the expected rise is also +0.3% m/m and +2.8% y/y. On Thursday, April retail sales are anticipated to grow +0.1% m/m, with ex-autos sales expected to be +0.3% m/m.

Moreover, April Producer Price Index (PPI) final demand is expected to rise by +0.2% m/m and +2.5% y/y, with the ex-food and energy figure projected at +0.3% m/m and +3.1% y/y. Manufacturing production is expected to decrease by -0.4% m/m. Finally, on Friday, home starts are predicted to increase by +3.1% m/m, while building permits may drop by -1.2% m/m. The preliminary May University of Michigan U.S. consumer sentiment index is also seen rising +1.1 to 53.3.

The current market odds for a -25 basis point rate cut after the June 17-18 Federal Open Market Committee (FOMC) meeting stand at 8%.

Earnings Season Insights

The Q1 earnings reporting season is underway. According to data from Bloomberg Intelligence, the consensus for Q1 year-over-year earnings growth for S&P 500 stocks is +6.7%, down from previous forecasts of +11.1% made in early November. Of the 412 S&P 500 companies that reported so far, 78% exceeded expectations. Full-year corporate profits for the S&P 500 are expected to grow by +9.4%, a reduction from the +12.5% forecast made in January.

Global Market Performance

International stock markets showed strength today. The Euro Stoxx 50 climbed to a 1-1/2 month high with a gain of +0.86%. The Shanghai Composite in China also reached a six-week high, closing up +0.82%. Japan’s Nikkei 225 gained +0.38%, marking its own six-week high.

Interest Rate Movements

June 10-year Treasury notes (ZNM25) fell by -17 ticks, with the 10-year T-note yield rising by +5.5 basis points to 4.433%. The decline in the T-notes coincided with a rally in global equity markets, prompted by reduced U.S.-China trade tensions. The 10-year breakeven inflation rate increased to a five-week high of 2.360%, indicating higher inflation expectations which are generally bearish for bonds.

European bond yields also rose, with the 10-year German bund yield climbing to a one-month high of 2.650%, up +7.5 basis points. Similarly, the 10-year UK gilt yield advanced to a three-and-a-half-week high of 4.655%, rising +7.0 basis points.

Swaps currently indicate an 84% chance of a -25 basis point rate cut from the European Central Bank at its June 5 policy meeting.

Leading Stocks and Sector Movements

Stocks from the “Magnificent Seven” surged today, buoyed by the tariff news. Amazon.com (AMZN) rose more than +7%, while Tesla (TSLA) and Meta Platforms (META) increased over +6%. Additionally, Apple (AAPL) and Nvidia (NVDA) both experienced gains exceeding +4%, with Alphabet (GOOGL) and Microsoft (MSFT) rising more than +2% and +1%, respectively.

The easing U.S.-China trade tensions also fueled gains among semiconductor stocks. Microchip Technology (MCHP) climbed over +9%, while companies like ON Semiconductor (ON), Micron Technology (MU), and Lam Research (LRCX) gained more than +8% each. Other semiconductor stocks like Applied Materials (AMAT) and Texas Instruments (TXN) saw increases of more than +7%.

Travel and cruise sectors rallied in response to improved economic outlooks, with Carnival (CCL) up more than +8%, and Norwegian Cruise Line Holdings (NCLH) and Expedia Group (EXPE) rising over +6%. Airlines also benefited significantly, with United Airlines Holdings (UAL) and Royal Caribbean Cruises (RCL) gaining over +3%.

Trucking stocks soared due to the favorable trade news. XPO Inc (XPO) surged over +14%, and Saia Inc (SAIA) rose more than +10%. JB Hunt Transport Services (JBHT) and Old Dominion Freight Line (ODFL) also posted gains exceeding +8%.

Energy stocks rallied as WTI crude prices increased by more than +2% to reach a two-week high. Consequently, Phillips 66 (PSX) climbed over +6%, while Haliburton (HAL) and Marathon Petroleum (MPC) rose more than +4% each.

In contrast, utility stocks faced downward pressure due to rising T-note yields. Exelon Corp (EXC) led the Nasdaq 100’s declines, falling over -3%. Similarly, key players like Duke Energy (DUK) and American Electric Power (AEP) dropped more than -2%.

Cigna Group (CI) also fell by more than -5% in the S&P 500 following President Trump’s proposal to reduce health costs by eliminating intermediaries in the drug industry. This news similarly affected CVS Health (CVS), which dropped over -2%.

Mining stocks struggled today as lower gold prices fell more than -3%, prompting declines for AngloGold Ashanti Plc (AU) and Gold Fields Ltd (GFI), which dropped over -9%. Newmont (NEM) also saw a decrease of more than -4%.

Notably, NRG Energy (NRG) jumped more than +23% after reporting Q1 adjusted EBITDA of $1.13 billion, surpassing consensus estimates of $891 million, and announcing the acquisition of natural gas assets from LS Power for around $12 billion.

Shopify (SHOP) gained over +12% following news that the stock will replace MongoDB in the Nasdaq 100 Index before trading begins on May 19.

Earnings Reports (5/12/2025)

Key companies reporting include Acadia Healthcare Co Inc (ACHC), DaVita Inc (DVA), Essential Utilities Inc (WTRG), Fortrea Holdings Inc (FTRE), Fox Corp (FOXA), New Fortress Energy Inc (NFE), NRG Energy Inc (NRG), Seaport Entertainment Group In (SEG), Simon Property Group Inc (SPG), Standardaero Inc (SARO), and ZoomInfo Technologies Inc (ZI).

On the date of publication, Rich Asplund did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data within this article are intended solely for informational purposes. For more details, please review the Barchart Disclosure Policy here.

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The views expressed by the author do not necessarily reflect those of Nasdaq, Inc.