The financial markets saw a mixed day of trading, with the S&P 500 Index remaining unchanged, the Dow Jones Industrials Index down by 0.55%, and the Nasdaq 100 Index up by 0.51%. Futures for September showed a slight uptick, with the S&P and Nasdaq both showing gains.
The early rally in stock indexes was attributed to a positive core CPI print of 0.2% month-on-month. However, the gains were short-lived as T-note prices fell and expectations for a Fed rate cut in September were slightly reduced. The bond market saw a rise in yields, with the 10-year T-note yield up by 4.8 basis points and the 30-year T-bond yield crossing the 5% mark for the first time in weeks.
Negative breadth in the Dow was led by declines in Merck and American Express stocks. The CPI report for June received mixed reactions, with some positive attention on the slightly weaker-than-expected core CPI increase, driven by lower car prices. However, there were signs of upside pressure from tariffs, which are expected to increase in the coming months.
US CPI for June showed a 0.3% month-on-month increase, in line with expectations, while the year-over-year figure of 2.7% was slightly worse than expected. The core CPI rose by 0.2% month-on-month and 2.9% year-on-year. Expectations for a Fed rate cut were little changed for the July meeting but slightly reduced for September.
In positive trade news, Treasury Secretary Bessent mentioned that US-China trade talks were in a good place, easing concerns in the market about tariffs. There were indications of a flexible deadline for US-China negotiations, with hopes for further discussions in August.
Recent US trade news, including tariffs on imports from the EU, Mexico, and Canada, has impacted stock markets. The Empire manufacturing index report for July beat expectations, indicating resilience in the manufacturing sector.
Bitcoin prices saw a decline due to long liquidation pressure following a recent rally. The House Committee on Ways and Means is set to hold a hearing on crypto regulation, potentially leading to more favorable regulations.
The week ahead will focus on news related to tariffs and trade deals. Earnings season kicked off with big bank reports, with expectations for modest growth in Q2 earnings. Overseas stock markets showed mixed results, with European government bond yields also seeing a varied trend.
Interest rates saw a rise in T-note yields, driven by reduced expectations for Fed easing. The bearish sentiment in the bond market was fueled by concerns over Fed Chair Powell’s tenure and the potential for politically-driven interest rate cuts.
Stock movers included gains in chip stocks following news of looser restrictions on chip sales to China. Cryptocurrency-exposed stocks saw mixed results, with Tesla opening its first showroom in India. Earnings reports for the day included BlackRock and JPMorgan Chase, with some stocks trading lower on less-than-expected inflows or raised guidance.
Looking ahead, the focus will be on fresh news on tariffs, manufacturing data, retail sales, and housing market indicators. The markets are bracing for more earnings reports throughout the week, with a cautious outlook on overall earnings growth.
