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Market Summary: S&P 500 and Dow Decline Amid Mixed Signals

The S&P 500 Index ($SPX) (SPY) is down -0.02%, while the Dow Jones Industrials Index ($DOWI) (DIA) has decreased by -0.08%. In contrast, the Nasdaq 100 Index ($IUXX) (QQQ) is showing signs of strength, up +0.40%. June E-mini S&P futures (ESM25) are down -0.03%, whereas June E-mini Nasdaq futures (NQM25) are up +0.41%.

Market Movements and Economic Influences

Today’s stock indexes are mixed, with the S&P 500 and Dow Jones Industries hitting 1-1/2 week lows. Initially, stocks declined following the rise in bond yields prompted by President Trump’s tax and spending bill passing through the House. The 10-year T-note yield reached a 3-1/4 month high of 4.625%.

However, as bond yields fell from their peaks and stabilized, stocks gained some ground, buoyed by dovish remarks from Fed Governor Waller. He indicated that if the tariffs on US trading partners settle around 10% this summer, the Fed might consider rate cuts in the latter half of the year. Additionally, US economic news reported a drop in weekly jobless claims to a 1-month low and an unexpected rise in the May S&P manufacturing PMI.

Focus on Legislation and Economic Impact

The market is closely monitoring the specifics of President Trump’s tax and spending bill, aimed at averting a year-end tax increase while potentially increasing the US deficit. The bill is headed to the Senate, where Republican factions are seeking substantial amendments. A vote on the bill is expected by August. Concerns linger over the possibility that this tax package could add trillions to an already sizable deficit, especially amid waning foreign investment interest in US assets due to the ongoing trade war, a recent Moody’s downgrade of the US credit rating, and the negative budget deficit forecast in the Republicans’ reconciliation bill.

This week’s initial unemployment claims data showed an unexpected decrease of -2,000 to a 1-month low of 227,000, indicating a stronger labor market than anticipated.

Manufacturing and Housing Data

The May S&P manufacturing PMI also provided a positive surprise, rising +1.9 to 52.3, contrary to predictions of a decline to 49.9. However, existing home sales for April unexpectedly fell by -0.5% m/m to a 7-month low of 4.00 million, underperforming expectations of an increase to 4.10 million.

Bitcoin and Tariff Developments

Bitcoin (^BTCUSD) is experiencing notable gains, up over +2% to reach a new record high as stablecoin legislation progresses in the US Senate following a reduction in opposition from a group of Democrats. The Senate is currently debating a regulatory bill aimed at stablecoins, with hopes of passing it this week.

As the week unfolds, the markets will prioritize updates on tariffs and new trade agreements. The G-7 finance ministers and central bank governors convene from Tuesday through Thursday in Braniff, Canada. Additionally, new home sales for April are projected to decline by -4.7% m/m to 690,000.

Rate Cut Speculation and Earnings Reports

Currently, the market is pricing in a 5% chance of a -25 bp rate cut at the upcoming FOMC meeting on June 17-18. As the Q1 earnings reporting season concludes, nearly 90% of S&P 500 companies have reported quarterly results, with 77% surpassing estimates, the highest rate since Q2 2024. Q1 earnings growth stands at +13.1%, significantly exceeding the previous expectation of +6.6%. Full-year 2025 corporate profit growth for the S&P 500 is projected at +9.4%, a drop from the initial forecast of +12.5% made in January.

Global Market Performance

International stock markets are trending lower today. The Euro Stoxx 50 is down -0.68%, China’s Shanghai Composite slipped -0.22%, and Japan’s Nikkei 225 fell -0.84% to a 2-week low.

Interest Rate Movements

June 10-year T-notes (ZNM25) have increased by +4 ticks, with the 10-year T-note yield down -1.0 bp to 4.589%. T-notes initially fell after the House approved President Trump’s tax and spending package, which is expected to elevate the US budget deficit. The latest drop in weekly jobless claims suggests labor market strength, which may influence Fed policy and create bearish conditions for T-notes.

In Europe, government bond yields are rising. The 10-year German bund yield is up +0.1 bp at 2.647%, while the 10-year UK gilt yield has climbed to a 6-week high of 4.799%. In Eurozone data, the May S&P manufacturing PMI rose +0.4 to a 2-3/4 year high of 49.4, albeit lower than expected. Conversely, the May S&P composite PMI fell -0.9 to a 6-month low of 49.5, disappointing projections.

The April 16-17 ECB meeting summary indicated concerns about the negative economic ramifications of US tariffs, hinting at a potential preference for further monetary easing. Policymakers also suggested that, despite anticipated government spending on defense and infrastructure, Eurozone growth could be weaker than earlier forecasts in 2025.

The German May IFO business climate index rose +0.6 to reach an 11-month high of 87.5, beating expectations of 87.3. However, the Bundesbank noted that output might stagnate in Q2 due to various negative factors, including US trade tariffs affecting German exporters.

In the UK, the May S&P manufacturing PMI unexpectedly decreased -0.3 to 45.1, falling short of the projected increase to 46.1. Swaps are currently reflecting a 95% likelihood of a -25 bp rate cut by the ECB in their upcoming June 5 meeting.

US Stock Movers

The “Magnificent Seven” stocks are contributing positively to the overall market. Alphabet (GOOGL) has surged more than +3% to lead gains in the Nasdaq 100, while Tesla (TSLA) is up over +2%. Other notable rises include Microsoft (MSFT) with an increase of +1%, Nvidia (NVDA) up +0.83%, Amazon.com (AMZN) increasing by +0.70%, and Meta Platforms (META) rising +0.43%.

Advanced Auto Parts (AAP) is experiencing significant growth, up more than +47% after reporting Q1 net sales of $2.58 billion, surpassing the consensus of $2.50 billion. The company forecasts full-year net sales between $8.40 billion and $8.60 billion, with the midpoint exceeding estimates of $8.47 billion.

Urban Outfitters (URBN) has also performed well, up more than +21% following a Q1 net sales report of $1.33 billion, stronger than the consensus figure of $1.29 billion.

Snowflake (SNOW) has gained more than +10% after…

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Market Update: Earnings Reports and Stock Movements Drive Market Activity

Reporting its Q1 revenue of $1.04 billion, Seagate Technology Holdings Plc (STX) exceeded the consensus estimate of $1.01 billion. The company also raised its full-year product revenue forecast to $4.33 billion, up from $4.28 billion, surpassing the consensus of $4.29 billion.

Seagate’s stock rose over +5%, leading the gainers in the S&P 500, following the board’s approval to repurchase up to $5 billion in shares.

Ralph Lauren (RL) also saw a boost, increasing more than +1% after delivering Q4 net revenue of $1.70 billion, which is higher than the expected $1.65 billion.

Nike (NKE) gained over +1% as it announced its return to Amazon.com’s online store after previously leaving in 2019. This move is seen as a significant shift in its sales strategy.

Managed Healthcare Stocks Decline

In contrast, managed healthcare stocks are experiencing pressure today. The Centers for Medicare & Medicaid Services announced an upcoming “significant expansion” of its auditing efforts for Medicare Advantage plans. As a result, Humana (HUM) has declined more than -4%. Additionally, Elevance Health (ELV), Molina Healthcare (MOH), CVS Health Corp (CVS), and Centene (CNC) have dropped over -2%. UnitedHealth Group (UNH) also leads the losers in the Dow Jones Industrials with a decline of more than -1%.

Energy Sector Weakens

The energy sector is facing declines as the price of WTI crude oil fell more than -1% to reach a one-week low. Consequently, APA Corp (APA) is down over -2%. Similarly, Devon Energy (DVN), Diamondback Energy (FANG), Exxon Mobil (XOM), Occidental Petroleum (OXY), ConocoPhillips (COP), and Schlumberger (SLB) are all down by more than -1%.

Williams-Sonoma Reports Weak Margins

Williams-Sonoma (WSM) has dropped more than -8% after reporting a Q1 gross margin of 44.3%, falling short of the consensus estimate of 45.2%.

Further, W. R. Berkley (WRB) is down more than -1% after Goldman Sachs downgraded the stock to neutral from buy, citing a reserve position that is “relatively worse” than its peers.

Upcoming Earnings Reports

Earnings Reports (5/22/2025):

• Analog Devices Inc (ADI)
• Autodesk Inc (ADSK)
• Copart Inc (CPRT)
• Deckers Outdoor Corp (DECK)
• Intuit Inc (INTU)
• Ralph Lauren Corp (RL)
• Ross Stores Inc (ROST)
• Williams-Sonoma Inc (WSM)
• Workday Inc (WDAY)

On the date of publication, Rich Asplund did not hold any positions, directly or indirectly, in the securities mentioned in this article. All information is for informational purposes only. For more information, please view the Barchart Disclosure Policy here.

The views expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.