US Markets Surge Amid Trade Tariff Deadline Extension

Market Performance Overview

The S&P 500 Index ($SPX) closed up 2.05%, while the Dow Jones Industrials Index ($DOWI) rose 1.78%. The Nasdaq 100 Index ($IUXX) increased by 2.39%. June E-mini S&P futures (ESM25) are up 2.11%, and June E-mini Nasdaq futures (NQM25) are up 2.36%.

Drivers of Stock Market Gains

Stocks rallied sharply after President Trump extended the deadline for imposing 50% tariffs on European Union imports to July 9. This follows a threat to levy tariffs starting June 1. Additionally, National Economic Council Director Hasset indicated further trade deals could happen this week, with India nearing an agreement. The Conference Board reported that the US May consumer confidence index rose more than expected, reaching a three-month high.

Bond Market Response

The drop in bond yields also supported stocks, driven by speculation about Japan potentially altering its debt sales strategy. The yield on the 10-year T-note fell 8 basis points to 4.43%. Japan’s Finance Ministry issued a questionnaire, suggesting possible reductions in government bond issuance, which could boost demand for US debt securities.

Economic Indicators

US April capital goods new orders, excluding defense and aircraft, fell 1.3%, worse than the anticipated decline of 0.2%, marking the largest drop in six months. The March S&P CoreLogic composite-20 home price index rose 4.07% year-over-year, below the expected 4.50%, representing the slowest growth in 18 months. However, the Conference Board’s May consumer confidence index surged by 12.3 points to 98.0, exceeding expectations of 87.1.

Manufacturing and Fed Commentary

The May Dallas Fed manufacturing survey showed a rise of 20.5 points to -15.3, defying expectations of -23.1. Minneapolis Fed President Kashkari advocated for maintaining the federal funds rate until there’s greater clarity on tariffs and their effects on prices. Market anticipation stands at 6% for a 25-basis-point rate cut at the upcoming FOMC meeting on June 17-18.

Upcoming Economic Reports

This week, focus will remain on tariff developments and new trade agreements. Minutes from the May FOMC meeting are scheduled for release on Wednesday. Nvidia will announce its quarterly earnings after the market closes that day. On Thursday, expectations include a modest rise in weekly initial unemployment claims to 230,000 and an unchanged Q1 GDP at -0.3%. Pending home sales are projected to decrease by 1.0% month-over-month. Personal spending and income for April are expected to rise by 0.2% and 0.3% respectively. The April core PCE price index is forecasted to increase by 0.1% month-over-month and 2.5% year-over-year.

Q1 Earnings Summary

The Q1 earnings reporting season is concluding, with over 90% of S&P 500 companies reporting. Approximately 77% of these companies surpassed expectations, the highest rate since Q2 of 2024. Q1 earnings growth stands at 13.1%, in contrast to earlier estimates of 6.6%. Full-year 2025 corporate profit growth projections for the S&P 500 have been revised down to 9.4% from 12.5% in January.

International Market Performance

Overseas markets displayed mixed results on Tuesday. The Euro Stoxx 50 climbed by 0.37%, while China’s Shanghai Composite fell by 0.18%, hitting a 2.5-week low. Japan’s Nikkei 225 gained 0.51%.

Interest Rates Update

June 10-year T-notes closed up by 14 ticks, with the yield dropping 8.5 basis points to 4.426%. The rise in T-notes was fueled by stronger performance in German bunds and weaker-than-expected US economic indicators. However, increased stock demand limited T-note gains. A Treasury auction of $69 billion in 2-year notes showed weaker demand, with a bid-to-cover ratio of 2.57, below the 10-auction average of 2.65.

European Economic Indicators

European government bond yields decreased. The 10-year German bund yield dropped to 2.532%, and the UK’s 10-year gilt fell to 4.666%. The Eurozone’s economic confidence indicator ticked up by 1.0 to 94.8, surpassing expectations.

Stock Movers

The Magnificent Seven stocks, including Tesla (TSLA) and Nvidia (NVDA), showed significant gains, with Tesla rising over 6%. Chip stocks also contributed to overall market strength, with notable increases from Marvel Technology (MRVL) and ARM Holdings (ARM), both up more than 5%.

Travel stocks surged, with Carnival (CCL) and Royal Caribbean Cruises (RCL) both rising over 6%, while Southwest Airlines (LUV) and Host Hotels (HST) gained more than 5%.