The S&P 500 Index ($SPX) (SPY) rose by +0.45%, while the Dow Jones Industrial Average ($DOWI) (DIA) gained +0.34%. The Nasdaq 100 Index ($IUXX) (QQQ) increased by +0.60%. Additionally, June E-mini S&P futures (ESM25) were up +0.42%, and June E-mini Nasdaq futures (NQM25) rose +0.58%.

Bank Stocks Lead Market Gains

Stock indexes were moderately higher today, buoyed by bank stocks, which posted a considerable rise. Bank of America led the charge with a +3% jump after it reported stronger-than-expected Q1 net interest income. Furthermore, lower T-note yields were supportive of equities, with the 10-year T-note yield dropping -3.9 basis points to 4.335%.

Investor sentiment also received a lift from hopes that President Trump might take a gentler approach to tariff policies. On Monday, he indicated he would look into granting temporary exemptions for tariffs on imported vehicles and parts, giving automakers more time to establish U.S. manufacturing operations.

Positive Economic Indicators

Today’s economic news exceeded expectations and was seen as bullish for stocks. For example, the April Empire manufacturing survey showed a rise in general business conditions by +11.9 to -8.1, surpassing the anticipated -13.5. In contrast, the March import price index excluding petroleum remained unchanged month-over-month, missing expectations of a +0.3% increase.

Trade Concerns Weigh on Sentiment

Despite these positive indicators, stocks pulled back from their earlier gains after European Union (EU) trade chief Sefcovic stated that little progress had been made in reconciling trade differences between the EU and the U.S. The EU proposed that both sides eliminate all tariffs on industrial goods, including automobiles, but so far, the U.S. has rejected this offer.

The ongoing U.S.-China trade tensions also limited market gains. Boeing shares fell over -2% after Bloomberg reported that China advised its airlines to halt new deliveries of Boeing jets. In addition, the U.S. Commerce Department announced it had initiated investigations into the national security implications of semiconductor and pharmaceutical imports, suggesting potential new tariffs.

Federal Reserve Policy Outlook

Comments from Atlanta Fed President Bostic on Monday indicated he supports maintaining current monetary policy, emphasizing the need for greater clarity on President Trump’s trade policies. This statement came after recent discussions about tariffs on various consumer goods, including electronics.

Earlier last week, President Trump temporarily exempted some consumer electronics from reciprocal tariffs but kept a 20% tariff on electronics from China. Additionally, he announced a 90-day pause on higher reciprocal tariffs affecting 56 nations while maintaining a new 10% baseline tariff on nearly all countries. The EU has also delayed the implementation of 25% tariffs on $21 billion worth of U.S. goods for 90 days.

Market Dynamics and Global Influence

U.S. tariffs have pressured stock markets over the past five weeks, raising concerns about their impact on economic growth and corporate earnings. Notably, on March 4, President Trump imposed 25% tariffs on goods from Canada and Mexico and increased tariffs on Chinese imports. Following these announcements, the dollar index fell to a three-year low, and gold prices surged to an all-time high, as markets grapple with the fallout from these trade policies.

The dollar faces a confidence crisis as tariffs are leveraged, potentially diminishing its status as a reserve currency. This situation has prompted some foreign investors to reduce their dollar holdings.

Focus on Upcoming Economic Reports

This week is significant, particularly with economic data scheduled for release. On Wednesday, March U.S. retail sales are projected to rise by +1.4% month-over-month, while retail sales excluding autos are expected to climb +0.4%. Manufacturing production for March is anticipated to increase by +0.3% as well. Fed Chair Powell is set to speak at the Economic Club of Chicago regarding the economic outlook.

In contrast, Thursday’s projections for March housing starts predict a decline of -5.7% month-over-month to 1.416 million, with building permits expected to fall -0.6% to 1.450 million.

The probability of a -25 basis point rate cut after the May 6-7 FOMC meeting stands at 19%.

First Quarter Earnings Season

Earnings season commenced last Friday, with major U.S. banks reporting their quarterly results. According to Bloomberg Intelligence, the consensus estimate is for Q1 year-over-year earnings growth of +6.7% for S&P 500 companies, down from earlier expectations of +11.1%. Projections for full-year 2025 corporate profits indicate a rise of +9.4%, reduced from a prior forecast of +12.5%.

Overseas Market Performance

International markets exhibited upward movement today. The Euro Stoxx 50 gained +1.21%, China’s Shanghai Composite closed up +0.15%, and Japan’s Nikkei 225 increased by +0.84%.

Interest Rates Overview

June 10-year T-notes (ZNM25) rose +7 ticks today while the 10-year T-note yield decreased by -3.9 basis points to 4.335%. The modest gains in T-notes reflect easing price pressures, following weaker-than-expected increases in import prices. However, losses in German bunds limited the advance for U.S. T-notes.

European bond yields showed mixed results today. The 10-year German bund yield increased by +2.6 basis points to 2.537%, while the 10-year UK gilt yield fell -1.0 basis point to 4.650%.

In the Eurozone, February industrial production increased by +1.1% month-over-month, surpassing expectations of +0.3% and marking the largest gain in six months. Meanwhile, the April ZEW survey showed a decline in expectations for German economic growth, falling from -65.6 to a 1.75-year low of -14.0, contrasting sharply with the expected reading of 10.0.

Swaps are currently indicating a 96% likelihood of a -25 basis point rate cut during the ECB’s upcoming April 17 policy meeting.

U.S. Stock Movers

Bank stocks continued their ascent today, led by Bank of America (BAC), which reported Q1 net interest income of $14.44 billion.