The S&P 500 Index ($SPX) (SPY) on Thursday closed down by -0.40%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down by -0.34%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down by -0.46%.  September E-mini S&P futures (ESU25) fell -0.40%, and September E-mini Nasdaq futures (NQU25) fell -0.45%. 

Stock indexes settled lower on Thursday, with the Dow Jones Industrials falling to a 1-week low.  Concerns about consumer spending weighed on stocks after Walmart reported weaker-than-expected Q2 EPS.  Also, higher bond yields undercut stocks, with the 10-year T-note yield climbing +4 bp to 4.33% on hawkish Fed comments and stronger-than-expected manufacturing and existing home sales reports. 

Thursday’s weekly US jobless claims report showed a weaker labor market.  US weekly initial unemployment claims rose by +11,000 to a 2-month high of 235,000, showing a weaker labor market than expectations of an increase to 225,000.  Weekly continuing claims rose +30,000 to a 3.75-year high of 1.972 million, higher than expectations of 1.960 million, showing people out of work are finding it harder to land a new job.

The US Aug Philadelphia Fed business outlook survey fell -16.2 to -0.3, weaker than expectations of 6.5.

The US Aug S&P manufacturing PMI unexpectedly rose +4.5 to a 3-year high of 53.3, better than expectations of a decline to 49.7.

US July existing home sales unexpectedly rose +2.0% m/m to 4.01 million, stronger than expectations of -0.3% m/m to 3.92 million.

Kansas City Fed President Jeffrey Schmid said inflation risks are marginally higher than risks to the labor market, and “modestly restrictive” monetary policy is still appropriate. 

Cleveland Fed President Beth Hammack said, “We have inflation that’s too high and has been trending upwards over the past year.  With the information I have, if the FOMC meeting were tomorrow, I would not see a case for reducing interest rates.”

On the geopolitical front, US Vice President Vance said negotiations over ending Russia’s war in Ukraine are focused on security guarantees for Ukraine and territory Russia wants to control, including Ukrainian territory that it currently isn’t occupying, as the US tries to broker a peace deal between the two countries. The US is working to set up a meeting between President Putin and Zelensky, and if that meeting goes well, President Trump said he’ll look to follow up with a trilateral summit with the leaders.  The outcome of the negotiations could have macroeconomic implications regarding tariffs and oil prices, and could, of course, have significant consequences for European security. 

The focus of the markets this week will be on any new tariff news and signs of progress toward a Ukraine peace deal.  On Friday, Fed Chair Powell speaks on the economic outlook at the Federal Reserve’s annual symposium at Jackson Hole, Wyoming. 

Regarding tariffs, President Trump widened steel and aluminum tariffs to include more than 400 consumer items that contain the metals, such as motorcycles, auto parts, furniture components, and tableware.  The change went into effect on Monday and did not exclude goods already in transit.  Last Friday, Mr. Trump said, “I’ll be setting tariffs next week and the week after on steel and on, I would say chips – chips and semiconductors, we’ll be setting sometime next week, week after.” Mr. Trump last week said he planned a 100% tariff on semiconductors but would exempt companies that move chip manufacturing to the US.  Mr. Trump also mentioned 200% or 300% tariffs on chips.

In other recent tariff news, Mr. Trump last Tuesday extended the tariff truce with China for another 90 days until November.  On August 6, Mr. Trump announced that he will double tariffs on US imports from India to 50% from the current 25% tariff, due to India’s purchases of Russian oil.  On August 5, Mr. Trump said that US tariffs on pharmaceutical imports would be announced “within the next week or so.” According to Bloomberg Economics, the average US tariff will rise to 15.2% if rates are implemented as announced, up from 13.3% earlier, and significantly higher than the 2.3% in 2024 before the tariffs were announced.

Federal funds futures prices are discounting the chances for a -25 bp rate cut at 72% at the September 16-17 FOMC meeting, down from 93% last Thursday.  The markets are discounting the chances at 49% for a second -25 bp rate cut at the following meeting on October 28-29.

Earnings reports indicate that S&P 500 earnings for Q2 are on track to rise +9.1% y/y, much better than the pre-season expectations of +2.8% y/y and the most in four years, according to Bloomberg Intelligence.  With over 93% of S&P 500 firms having reported Q2 earnings, about 83% of companies exceeded profit estimates. 

Overseas stock markets on Thursday settled mixed.  The Euro Stoxx 50 closed down -0.19%.  China’s Shanghai Composite rallied to a new 10-year high and closed up +0.13%.  Japan’s Nikkei Stock 225 fell to a 1-week low and closed down -0.65%.

Interest Rates

September 10-year T-notes (ZNU5) on Thursday closed down -10 ticks, and the 10-year T-note yield rose +3.7 bp to 4.328%. Sep T-notes were under pressure Thursday on hawkish Fed comments.  Kansas City Fed President Jeffrey Schmid said “modestly restrictive” monetary policy is still appropriate due to inflation risks, and Cleveland Fed President Beth Hammack said she does not favor cutting interest rates.  T-notes added to their losses today after the Aug S&P manufacturing PMI expanded by the most in three years and after July existing home sales unexpectedly increased. 

T-notes saw support from Fed-friendly US economic news that showed weekly jobless claims rose more than expected to a 2-month high, and the Aug Philadelphia Fed business outlook survey fell more than expected.

Fed Governor Lisa Cook said she intends to remain at the Fed despite calls from President Trump for her to resign over allegations that she committed mortgage fraud.  If Cook is fired or resigns, Mr. Trump could appoint another Fed Governor who favors his lower interest rate policies.

European government bond yields on Thursday moved higher.  The 10-year German bund yield rose +4.0 bp to 2.757%. The 10-year UK gilt yield rose +5.7 bp to 4.729%.

The Eurozone Aug S&P manufacturing PMI unexpectedly rose +0.7 to 50.5, stronger than expectations of a decline to 49.5 and the fastest pace of expansion in 3 years.  The Aug composite PMI unexpectedly rose +0.2 to a 15-month high of 51.1, stronger than expectations of a decline to 50.6.

The Eurozone Aug consumer confidence index fell -0.8 to a 4-month low of -15.5, weaker than expectations of no change at -14.7.

Swaps are discounting the chances at 3% for a -25 bp rate cut by the ECB at the September 11 policy meeting.

US Stock Movers

Walmart (WMT) closed down more than -4% to lead losers in the Dow Jones Industrials after reporting Q2 adjusted ESP of 68 cents, weaker than the consensus of 74 cents.  Costco Wholesale (COST) also closed down more than -2% on the news to lead losers in the Nasdaq 100. 

SharkNinja Inc. (SN) closed down -3% after Chairman Wang sold 5 million shares in an overnight registered block trade between $116 and $118 per share. 

Gilead Sciences (GILD) closed down more than -2% after Reuters reported that CVS Health declined to add the company’s HIV prevention shot to its drug coverage lists.

Airline stocks were under pressure Thursday after crude oil prices rallied to a 2-week high, which boosts jet fuel costs and lowers airlines’ profits.  As a result, United Airlines Holdings (UAL) and Delta Air Lines (DAL) closed down more than -2%, and American Airlines Group (AAL) and Alaska Air Group (ALK) closed down more than -1%. 

Maplebear Inc (CART) closed down more than -2% after Wedbush downgraded the stock to underperform from neutral with a price target of $42. 

Monday.com Ltd (MNDY) closed down more than -1% after Bank of America Global Research downgraded the stock to neutral from buy.

Packaging stocks rose Thursday after Barclays said the announced closures of International Paper plants will reduce US containerboard capacity by about 2.5%.  As a result, Packaging Corporation of America (PKG) closed up more than +6%, Smurfit WestRock (SW) closed up more than +4%, and International Paper (IP) closed up more than +2%.

PDD Holdings (PDD) closed up more than +4% to lead gainers in the Nasdaq 100 on bullish optimism for Chinese stocks after the Shanghai Composite rallied to a 10-year high today.

Nordson (NDSN) closed up +3% after reporting Q3 sales of $741.5 million, stronger than the consensus of $722.3 million. 

Hewlett-Packard Enterprise (HPE) closed up more than +3% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $28. 

Dayforce (DAY) closed up more than +2% after Thoma Bravo agreed to buy the company for $12.3 billion, or about $70 a share.

Humana (HUM) closed up more than +1% after RBC Capital Markets raised its price target on the stock to $322 from $283.

Earnings Reports(8/22/2025)

BJ’s Wholesale Club Holdings Inc (BJ), Buckle Inc/The (BKE), New Fortress Energy Inc (NFE), Ubiquiti Inc (UI).