The S&P 500 Index ($SPX) (SPY) finished Thursday with a slight increase of +0.13%, while the Dow Jones Industrials Index ($DOWI) (DIA) declined by -1.33%. The Nasdaq 100 Index ($IUXX) (QQQ) remained unchanged. Additionally, June E-mini S&P futures (ESM25) rose by +0.19%, and June E-mini Nasdaq futures (NQM25) gained +0.10%.

Overall, stock indexes presented a mixed performance on Thursday. Some upward momentum came from encouraging signs in the initial US-Japan trade discussions, which raised hopes for future agreements with US trading partners. President Trump reported significant advancements in these talks and expressed optimism about finalizing a trade deal with the EU. The broader market benefited from a surge in energy stocks as WTI crude oil prices climbed over +3% to reach a one-and-a-half-week high.

Further support for stocks came from a surprising drop in US weekly jobless claims, which fell to a two-month low. However, other economic data offered a mixed picture; housing starts saw a decline, while building permits indicated a rise. Moreover, the Philadelphia Fed business outlook survey fell to a two-year low.

Impact of Health Insurance Sector on the Market

Health insurance companies experienced notable weakness on Thursday, negatively affecting the Dow Jones Industrials and hindering broader market gains. UnitedHealth Group’s substantial decline of over -22% was a primary contributor to this situation following its lowered full-year earnings outlook. Also notable was a continued decline in semiconductor stocks, with Nvidia falling -2% after a previous -6% drop. This downturn followed the US government’s restriction on Nvidia’s H20 chip sales to China.

In further labor market news, weekly initial jobless claims saw a decrease of -9,000, landing at a lower-than-expected 215,000. In real estate statistics, March housing starts dropped -11.4 month-over-month to 1.324 million, falling short of the anticipated 1.420 million. Conversely, in March, building permits rose unexpectedly by +1.6% month-over-month to 1.482 million, exceeding the predicted drop to 1.450 million.

The Philadelphia Fed business outlook survey for April recorded a sharp decline of -38.9 to a two-year low of -26.4, significantly weaker than the expected figure of 2.2.

Monetary Policy and Economic Outlook

New York Fed President Williams remarked that the US economy appears strong and does not require immediate changes to the federal funds rate. Current market expectations cite an 11% chance of a -25 basis point rate cut after the forthcoming FOMC meeting on May 6-7.

As the Q1 earnings reporting season commenced last Friday with major US banks sharing their results, Bloomberg Intelligence reported a consensus expectation for Q1 year-over-year earnings growth of +6.7% for S&P 500 companies. This is a decline from earlier predictions of +11.1% recorded in November. Additionally, corporate profits for the S&P 500 in full-year 2025 are projected to increase by +9.4%, down from the +12.5% expectation noted in January.

Global Market Overview

International stock markets offered mixed results on Thursday. The Euro Stoxx 50 ended down -0.63%, while China’s Shanghai Composite gained +0.13%, reaching a two-week high, and Japan’s Nikkei Stock 225 increased by +1.35%.

Recent Developments in Tariff Policies

In summary of recent tariff updates, President Trump announced last Friday a temporary exemption for consumer electronics from reciprocal tariffs and a baseline 10% global tariff. Nonetheless, a 20% tariff remains for electronics imported from China. Furthermore, a 90-day delay on higher reciprocal tariffs affecting 56 nations was announced, though the new 10% baseline tariff on nearly all countries will remain intact. The EU also stated it would delay for 90 days the implementation of new 25% tariffs on US goods valued at 21 billion euros.

Back on March 4, President Trump implemented 25% tariffs on goods from Canada and Mexico and raised tariffs on Chinese goods from 10% to 20%. On April 2, he signed a proclamation for a 25% tariff on US auto imports, initially affecting fully assembled vehicles from outside the US and set to include auto parts by May 3. A general 10% baseline tariff took effect on April 5.

In retaliation, China increased tariffs on all US goods from 84% to 125%, escalating ongoing trade tensions. This included an order from China for airlines to halt further deliveries of Boeing jets and the US government’s prohibition on Nvidia’s chip sales to China.

Interest Rate Updates

On Thursday, June 10-year T-notes (ZNM25) closed down -8 ticks, with the yield on the 10-year T-note increasing by +4.8 basis points to 4.325%. The T-notes experienced moderate losses on reduced safe haven demand stemming from improved trade outlooks. The comments from President Trump regarding substantial progress in negotiations with Japan and the EU were noteworthy. Additionally, earlier comments from Fed Chair Powell indicated that trade tensions could potentially elevate inflation and impede growth, signaling that the Fed is not in a rush to cut interest rates. However, T-notes found some support from a rally in European government bonds following recent ECB interest rate cuts.

European bond yields declined on Thursday. The yield on the 10-year German bund fell to a one-and-a-half-week low of 2.452%, ultimately finishing down -3.7 basis points at 2.472%. Similarly, the 10-year UK gilt yield dropped to a one-and-a-half-week low of 4.547%, closing down -3.7 basis points at 4.566%.

In Germany, the March PPI decreased -0.2% year-over-year, a more significant fall than the anticipated +0.4% increase, marking the largest decline in five months. On Thursday, the ECB lowered the deposit facility rate by -25 basis points to 2.25%, citing deteriorating growth outlook due to rising trade tensions in their post-meeting statement, which omitted the term “restrictive” regarding current monetary policy.

ECB President Lagarde highlighted increased downside risks to economic growth, suggesting that various indicators show inflation may return to the target of 2% over the medium term. Market expectations currently assign a 92% likelihood of a -25 basis point rate cut by the ECB at the June 5 policy meeting.

Notable Stock Movements

Energy producers experienced a notable rally on Thursday as WTI crude surged over +3% to a recent high. Diamondback Energy (FANG) was a standout, closing up more than +5%, leading the Nasdaq 100 gainers. Other significant increases included APA Corp (APA) and Halliburton (HAL), both closing up over +4%, while ConocoPhillips (COP), Devon Energy (DVN), and Occidental Petroleum (OXY) rose more than +3%. Additionally, Exxon Mobil (XOM), Marathon Petroleum (MPC), Phillips 66 (PSX), Valero Energy (VLO), and Schlumberger (SLB) all recorded gains exceeding +2%.

On the contrary, health insurance stocks faced significant selling pressure on Thursday. The downturn was primarily driven by UnitedHealth Group (UNH), which plummeted -22% after revising its full-year earnings forecast downward.