US Stock Markets Decline Amid Trade Uncertainty and Earnings Reports

The S&P 500 Index ($SPX) (SPY) closed down -0.64% on Monday, while the Dow Jones Industrial Average ($DOWI) (DIA) fell -0.24%, and the Nasdaq 100 Index ($IUXX) (QQQ) dropped -0.67%. June E-mini S&P futures (ESM25) are down -0.66%, and June E-mini Nasdaq futures (NQM25) are down -0.71%.

Stock indexes fell on Monday due to uncertainties surrounding U.S.-China trade relations. President Trump announced that he would not be speaking with Chinese President Xi Jinping anytime soon. However, he indicated that trade agreements could be finalized with some U.S. partners as early as this week. Later in the day, stock indexes recovered slightly after an unexpected increase in the U.S. April ISM services index eased fears of a looming recession.

Energy Sector Takes a Hit

Energy producers experienced a selloff on Monday, with WTI crude oil prices dropping -2% to a 3.5-week low. OPEC+ agreed on Saturday to raise crude production levels by 411,000 barrels per day in June, which could exacerbate an existing global crude oil glut. Additionally, Saudi Arabia indicated that further production increases could follow, a strategy aimed at lowering prices and discouraging excessive output from member countries such as Kazakhstan and Iraq.

Economic Indicators and Focus for the Week

The U.S. April ISM services index unexpectedly rose +0.8 to 51.6, surpassing predictions of a decline to 50.2. The ISM services prices paid sub-index also increased by +4.2 to a 2.25-year high of 65.1, again higher than expectations of 61.4.

This week, attention will be directed towards tariffs and changes in U.S. trade policy. The March trade deficit is expected to widen to -$136.7 billion on Tuesday, while the Federal Open Market Committee (FOMC) is anticipated to maintain its federal funds target range at 4.25%-4.50% during its meeting on Wednesday. Comments from Fed Chair Powell following the meeting will be scrutinized for insights into future Fed policy. Thursday will also bring weekly initial unemployment claims, Q1 nonfarm productivity (expected at 0.7%), and Q1 unit labor costs (anticipated to rise +5.2%).

The market currently assigns a 2% probability for a -25 basis point rate cut following the FOMC meeting.

Earnings Season Continues

As the Q1 earnings reporting season progresses, Bloomberg Intelligence data indicates a consensus year-over-year earnings growth of +6.7% for S&P 500 companies, down from earlier expectations of +11.1% in November. Among the 365 S&P 500 companies that have reported results, 78% have exceeded estimates. Projections for full-year 2025 corporate profits for the S&P 500 are now forecasted to rise +9.4%, a decrease from the previous +12.5% forecast made in early January.

Global Market Overview

International stock markets also closed lower on Monday. The Euro Stoxx 50 ended down -0.04%, while China’s Shanghai Composite was closed for the Labor Day holiday. Japan’s Nikkei 225 was likewise closed for Children’s Day.

Interest Rate Movements

June 10-year T-notes (ZNM25) closed down -3 ticks. The yield on the 10-year T-note rose by +3.0 basis points to 4.338%. T-notes hit a 1-week low on Monday, while the yield reached a 1-week high of 4.369%. The increase in the ISM services index along with the sharp rise in the ISM prices-paid index intensified inflation concerns, contributing to the retreat in T-note prices. Furthermore, cautious sentiment ahead of Wednesday’s FOMC decision likely exerted additional pressure, given the consensus view that a dovish tone is unlikely. Demand for the Treasury’s $58 billion 3-year T-notes auction was weak, resulting in a bid-to-cover ratio of 2.56, just below the 10-auction average of 2.61.

Despite declines in equities, T-notes found some support from safe-haven demand on Monday. There was also carryover strength from 10-year German bunds, which reinforced T-note prices.

In Europe, government bond yields fell on Monday. The yield on the 10-year German bund decreased by -1.6 basis points, settling at 2.517%. The 10-year UK gilt yield did not trade due to the May Day holiday in the UK.

Investor Sentiment and ECB Predictions

The Eurozone’s May Sentix investor confidence index rose +11.4 points to -8.1, outperforming expectations of -11.5. Market swaps indicate a 97% likelihood for a -25 basis point rate cut by the European Central Bank during its policy meeting on June 5.

US Stock Movements

Energy stocks faced significant declines on Monday, with WTI crude prices down more than -2%. Apa Corp (APA) fell over -5%, while Occidental Petroleum (OXY) dropped more than -4%. ConocoPhillips (COP) and Halliburton (HAL) both fell by over -3%. Other notable declines included Diamondback Energy (FANG), Exxon Mobil (XOM), Chevron (CVX), Schlumberger (SLB), and Devon Energy (DVN), all down more than -2%.

Media stocks also suffered on Monday following President Trump’s announcement of a potential 100% tariff on films produced internationally. This news adversely affected companies like Netflix (NFLX), Paramount Global (PARA), and Warner Bros Discovery (WBD), each closing down more than -1%.

Zimmer Biomet Holdings (ZBH) was the top decliner in the S&P 500, falling over -11% after lowering its full-year adjusted diluted earnings per share (EPS) estimate to $7.90-$8.10 from $8.15-$8.35.

ON Semiconductor (ON) led losses in the Nasdaq 100, decreasing more than -8%, despite stronger-than-expected Q1 revenue. The company forecast Q2 adjusted gross margins of 36.5% to 38.5%, below the consensus of 39%.

Tyson Foods (TSN) closed down more than -7%, reporting Q2 sales of $13.07 billion that fell short of the $13.12 billion consensus estimate.

Among the Dow’s top losers, Apple (AAPL) fell more than -3% as the company priced a four-part debt offering. Berkshire Hathaway (BRK.B) also saw a decline of more than -5% following CEO Warren Buffet’s announcement of his upcoming retirement.

Noteworthy Gainers

Gold Fields (GFI) rose more than +7%, leading gold-mining stocks upward after gold prices increased by over +2% on Monday. AngloGold Ashanti Plc (AU) gained more than +4%, while Newmont (NEM) closed up by more than +2%.

Howard Hughes Holdings (HHH) gained more than +3% after announcing an agreement for Pershing Square Capital to invest $900 million to acquire 9 million shares.

Freshpet (FRPT) also climbed over +3% after reporting Q1 net sales of $263.2 million, exceeding the $259.9 million consensus estimate. Similarly, Axsome Therapeutics (AXSM) increased by more than +3% after reporting Q1 cash and cash equivalents of $300.9 million, which surpassed the $255.5 million consensus forecast.

EQT Corp (EQT) gained more than +2% after UBS upgraded the stock from neutral to buy, setting a price target of $64. Henry Schein (HSIC) increased by more than +1% after announcing Q1 adjusted EPS of $1.15, higher than the consensus estimate of $1.11, and projecting full-year adjusted EPS between $4.80-$4.94, exceeding the midpoint consensus of $4.86.

Earnings Reports (5/6/2025)

Upcoming earnings reports include: Advanced Micro Devices Inc (AMD), American Electric Power Co Inc (AEP), Archer-Daniels-Midland Co (ADM), Arista Networks Inc (ANET), Assurant Inc (AIZ), Ball Corp (BALL), Constellation Energy Corp (CEG), Corpay Inc (CPAY), Devon Energy Corp (DVN), DoorDash Inc (DASH), Duke Energy Corp (DUK), Electronic Arts Inc (EA), Expeditors International of Washington (EXPD), Fidelity National Information (FIS), Gartner Inc (IT), Gen Digital Inc (GEN), Global Payments Inc (GPN), International Flavors & Fragrances (IFF), IQVIA Holdings Inc (IQV), Jack Henry & Associates Inc (JKHY), Jacobs Solutions Inc (J), Leidos Holdings Inc (LDOS), Marathon Petroleum Corp (MPC), Marriott International Inc/MD (MAR), Mosaic Co/The (MOS), Super Micro Computer Inc (SMCI), TransDigm Group Inc (TDG), Waters Corp (WAT), WEC Energy Group Inc (WEC), Wynn Resorts Ltd (WYNN), and Zoetis Inc (ZTS).

On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information and data in this article are for informational purposes only. Please refer to the Barchart Disclosure Policy here.

 

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