The S&P 500 Index ($SPX) (SPY) on Thursday closed up +0.80%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.94%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.94%.  September E-mini S&P futures (ESU25) rose +0.75%, and September E-mini Nasdaq futures (NQU25) rose +0.92%. 

Stock indexes rallied on Thursday, with the S&P 500 posting a 4-month high, the Dow Jones Industrials posting a 3-3/4 month high, and the Nasdaq 100 posting a new all-time high.  Strength in chip makers boosted the broader market.  Stocks also saw support from Thursday's news of stronger-than-expected initial claims, core capital goods orders, and pending home sales reports. 

Equity prices mainly received support as the 10-year T-note yield fell to a two-month low on a Wall Street Journal report that President Trump may announce the replacement of Fed Chair Powell as early as September, an unusually early appointment. That reinforced expectations of a more dovish-leaning Fed, following Mr. Trump's criticism of Powell for holding interest rates steady.  Because Powell's term expires in May 2026, announcing a new Fed Chair far earlier than the traditional 3-4 month transition period could allow the chair-in-waiting to dovishly influence expectations about the likely path for interest rates.   

On the negative side for stocks was Thursday's news of an unexpected downward revision to Q1 GDP. Also, the May trade deficit was wider than expected, a negative factor for Q2 GDP.

US weekly initial unemployment claims fell -7,000 to 236,000, showing a stronger labor market than expectations of 243,000.  However, weekly continuing claims rose +37,000 to a 3-1/2 year high of 1.974 million, above expectations of 1.950 million, signaling more people are staying out of work for longer.

US Q1 GDP was revised lower to -0.5% (q/q annualized), weaker than expectations of no change at -0.2% as Q1 personal consumption was revised downward to 0.5% from 1.2%.  The Q1 core PCE price index was revised higher to +3.5% (q/q annualized), stronger than expectations of no change at +3.4%.

US May capital goods new orders nondefense ex-aircraft rose +1.7% m/m, stronger than expectations of +0.1% m/m and the largest increase in 4 months.

The US May trade deficit of -$96.6 billion was wider than expectations of -$86.1 billion, a negative factor for Q2 GDP.

US May pending home sales rose +1.8% m/m, stronger than expectations of +0.1% m/m.

Richmond Fed President Barkin said he expects tariffs to put upward pressure on prices, and with so much still uncertain, he favors waiting for more clarity before adjusting interest rates.

San Francisco Fed President Daly said she is seeing increased evidence that tariffs may not lead to a large or sustained inflation surge, which supports her view that the Fed could begin cutting interest rates again in the fall.

The markets this week will watch to see if the ceasefire holds between Israel and Iran. Also, any new tariff news or trade deals will be scrutinized.  Friday brings May personal spending (expected +0.1% m/m) and May personal income (expected +0.3% m/m).  Also on Friday, the May core PCE price index, the Fed's preferred price gauge, is expected to rise by +0.1% m/m and +2.6% y/y.  Finally, Friday's June University of Michigan US consumer sentiment index is expected to be revised lower by -0.2 points to 60.3. 

Federal funds futures prices are discounting the chances at 21% for a -25 bp rate cut at the July 29-30 FOMC meeting.

Overseas stock markets closed mixed on Thursday.  The Euro Stoxx 50 closed down -0.15%.  China's Shanghai Composite fell from a 6-1/4 month high and closed down -0.22%.  Japan's Nikkei Stock 225 rallied to a 4-3/4 month high and closed up +1.65%.

Interest Rates

September 10-year T-notes (ZNU25) on Thursday rose by +12.5 ticks and posted a 2-month high. The 10-year T-note yield fell -5.1 bp to 4.240% and posted a new 2-month low. 

T-note prices moved higher on a Wall Street Journal report that President Trump is considering naming the successor to Fed Chair Powell as early as September, well before his term expires next May, making him a lame duck and spurring speculation that interest rates could eventually fall faster than markets are currently pricing.  T-notes also found support after Q1 GDP was revised lower.

Limiting gains in T-notes was stronger-than-expected initial claims, core capital goods orders, and pending home sales reports.  Also, the upward revision to the Q1 core PCE price index was bearish for T-notes.  In addition, hawkish comments from Richmond Fed President Barkin weighed on T-notes when he said he favors waiting for more clarity before adjusting interest rates.  Supply pressures were negative for T-notes as the Treasury auctioned $44 billion of 7-year T-notes.

European government bond yields ended mixed.  The 10-year German bund yield rose +0.4 bp to 2.569%.  The 10-year UK gilt yield fell -0.9 bp to 4.472%.

The German Jun GfK consumer confidence index unexpectedly fell -0.3 to -20.3, weaker than expectations of an increase to -19.2.

Swaps are discounting the chances at 9% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

Strength in chip makers boosted technology stocks and the overall market.  Marvel Technology (MRVL) rallied more than +5% to lead gainers in the Nasdaq 100.  Broadcom (AVGO) closed up more than +2%.  Qualcomm (QCOM), Intel (INTC), Analog Devices (ADI), and KLA Corp (KLAC) all closed up more than +1%.

Micron Technology (MU) initially rallied after reporting stronger-than-expected Q3 EPS and giving an upbeat forecast for the current quarter, driven by demand for artificial intelligence equipment.    However, Micron fell back and closed the day down about -1%.

Managed healthcare stocks moved higher.  Cigna Group (CI) closed up more than +4%.  CVS Health (CVS) closed up more than +2%.  Universal Health Services (UHS) and HCA Healthcare (HCA) closed up nearly +1%.

Copper mining stocks showed strength, with COMEX copper prices posting a new 2-3/4 month high and closing up +2.55%.  Southern Copper (SCCO) closed up more than +7%, Freeport McMoRan (FCX) closed up more than +6%, and Rio Tinto Plc (RIO) closed up more than +3%.   

McCormick & Co (MKC) rallied more than +5% after reporting Q2 EPS of 69 cents, better than the consensus of 66 cents, and forecasting full-year adjusted EPS of $3.03-$3.08, above the consensus of $3.02. 

Sandisk Corp (SNDK) closed up +0.40% after Citigroup initiated coverage of the stock with a buy recommendation and a price target of $57.

Truist Financial Corp (TFC) closed up more than +2% after Citigroup upgraded the stock to buy from neutral with a price target of $55. 

Equinix Inc (EQIX) fell more than -9% to lead losers in the S&P 500 after BMO Capital Markets downgraded the stock to market perform from outperform.

Unity Software (U) fell more than -3% after Bank of America Global Research initiated coverage of the stock with a recommendation of underperform and a price target of $15. 

Trade Desk (TTD) fell more than -2% to lead losers in the Nasdaq 100 after Wells Fargo Securities downgraded the stock to equal weight from overweight. 

Kratos Defense & Security Solutions (KTOS) fell more than -2% after announcing it intends to sell $500 million of shares of its common stock in an underwritten offering. 

Jeffries Financial Group (JEF) rose +0.30% despite reporting Q2 EPS of 40 cents, weaker than the consensus of 44 cents.

Earnings Reports (6/27/2025)

Apogee Enterprises Inc (APOG) and Immersion Corp (IMMR).