The S&P 500 Index ($SPX) (SPY) today is up by +0.17%, the Dow Jones Industrials Index ($DOWI) (DIA) is up by +0.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up by +0.14%.  September E-mini S&P futures (ESU25) are up +0.19%, and September E-mini Nasdaq futures (NQU25) are up +0.13%. 

Stock indexes are moving higher today as bond yields decline on expectations that the Fed will start cutting interest rates as soon as this month.  Signs of a weaker US labor market are knocking bond yields lower and reinforcing speculation that the Fed will cut rates as soon as the September 16-17 FOMC meeting after today’s Aug ADP employment change rose less than expected and weekly jobless claims rose to a 10-week high.  The 10-year T-note yield fell to a 4-month low of 4.17% today, and the swaps market shows the chances of a Fed rate cut this month rising to 99%. 

Meanwhile, stocks are being undercut by weakness in chipmakers, led by a -5% fall in Texas Instruments after CFO Lizardi cautioned that the recovery in chip demand is not quite snapping back as some have hoped. 

The Aug ADP employment change rose +54,000, weaker than expectations of +68,000.

US weekly initial unemployment claims rose by +8,000 to a 10-week high of 237,000, showing a weaker labor market than expectations of 230,000.

US Q2 nonfarm productivity was revised upward to +3.3% from the previously reported +2.4%, better than expectations of +2.7%.  Q2 unit labor costs were revised downward to +1.0% from the previously reported +1.6%, weaker than expectations of +1.2%.

The remainder of this week’s US economic calendar is busy.  Later today, the Aug ISM services index is expected to climb by +0.9 to 51.0.  On Friday, Aug nonfarm payrolls are expected to rise by +75,000, and the Aug unemployment rate is expected to rise by 0.1 to 4.3%.  Aug average hourly earnings are expected to increase +0.3% m/m and +3.7% y/y.

Regarding tariffs, a federal appeals court ruled late last Friday that President Trump exceeded his authority by imposing global tariffs without Congressional approval, but the court let the tariffs remain in place while appeals continue.  The US Court of Appeals for the Federal Circuit Court said, “The statute bestows significant authority on the President to undertake a number of actions in response to a declared national emergency, but none of these actions explicitly include the power to impose tariffs, duties, or the like, or the power to tax.” The case now appears to be headed to the Supreme Court for a final decision.  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 of a -25 bp rate cut at 99% at the next FOMC meeting on September 16-17.  The markets are discounting the chances at 56% for a second -25 bp rate cut at the following meeting on October 28-29.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is up +0.20%.  China’s Shanghai Composite fell to a 2-week low and closed down -1.25%.  Japan’s Nikkei Stock 225 closed up +1.53%.

Interest Rates

December 10-year T-notes (ZNZ5) today are up +5 ticks, and the 10-year T-note yield is down -2.9 bp to 4.188%. 

Dec T-notes climbed to a 4.75-month high today, and the 10-year T-note yields fell to a 4-week low of 4.168%.  Signs of a slowdown in the US labor market are bullish for T-notes after today’s weaker-than-expected ADP employment report and the rise in weekly initial unemployment claims to a 10-week high.  The labor market weakness has boosted the chances of a Fed rate cut at the September 16-17 FOMC meeting to 99%, according to the swaps market. Also, today’s upward revision to Q2 nonfarm productivity and downward revision to Q2 unit labor cost are supportive for T-note prices.  In addition, T-notes garnered support from today’s 1% fall in WTI crude prices to a 2-week low, which reduced inflation expectations as the 10-year breakeven inflation rate fell to a 1.5-week low of 2.395%. 

European government bond yields today are moving lower.  The 10-year German bund yield is down -2.5 bp to 2.716%.  10-year UK gilt yield is down -2.8 bp to 4.720%.

Eurozone July retail sales fell -0.5% m/m, weaker than expectations of -0.3% m/m and the biggest decline in 13 months.

Swaps are discounting the chances at 2% for a -25 bp rate cut by the ECB at the September 11 policy meeting.

US Stock Movers

Homebuilders are climbing today after the 10-year T-note yield fell to a 4-month low, a bullish factor for housing demand.  PulteGroup (PHM), Lennar (LEN), DR Horton (DHI), and Toll Brothers (TOL) are up more than +1%. 

T. Rowe Price Group (TROW) is up more than +10% to lead gainers in the S&P 500 after Goldman Sachs said it will invest as much as $1 billion in the company and team up with the asset manager to sell private-market products to retail investors.

American Eagle Outfitters (AEO) is up more than +31% after reporting Q2 net revenue of $1.28 billion, better than the consensus of $1.23 billion. 

Ciena (CIEN) is up more than +26% after reporting Q3 adjusted EPS of 67 cents, stronger than the consensus of 53 cents. 

Credo Technology Group (CRDO) is up more than +10% after reporting Q1 adjusted EPS of 52 cents, well above the consensus of 35 cents.

Brinker International (EAT) is up more than +5% after Evercore ISI upgraded the stock to outperform from in line with a price target of $210.

Genuine Parts (GPC) is up more than +1% after appointing two new directors to its board in cooperation with Elliott Investment Management.

Copart (CPRT) closed up more than +1% after HSBC upgraded the stock to buy from hold with a price target of $62.

Salesforce (CRM) is down more than -7% to lead losers in the S&P 500 and Dow Jones Industrials after forecasting Q3 revenue of $10.24 billion to $10.29 billion, the midpoint below the consensus of $10.29 billion.   

Science Applications International (SAIC) is down more than -5% after reporting Q2 revenue of $1.77 billion, weaker than the consensus of $1.86 billion, and cutting its 2026 revenue forecast to $7.25 billion-$7.33 billion from a previous forecast of $7.60 billion-$7.75 billion, well below the consensus of $7.63 billion.  

Texas Instruments (TXN) is down more than -5% to lead losers in the Nasdaq 100 and weigh on chip makers after CFO Lizardi cautioned that the recovery in chip demand is not quite snapping back as some have hoped.  Also, NXP Semiconductors NV (NXPI) and Advanced Micro Devices (AMD) are down more than -2%.  In addition, GlobalFoundries (GFS), Analog Devices (ADI), Microchip Technology (MCHP), and Qualcomm (QCOM) are down more than -1%. 

Caleres (CAL) is down more than -10% after reporting Q2 gross margin of 43.4%, below the consensus of 44.6%.   

Gitlab Inc (GTLB) is down more than -7% after forecasting 2026 revenue of $936 million to $942 million, the midpoint below the consensus of $940 million. 

Old Dominion Freight Line (ODFL) is down more than -3% after reporting less-than-truckload (LTL) tons per day for Aug fell -9.2% y/y. 

Earnings Reports(9/4/2025)

Broadcom Inc (AVGO), Ciena Corp (CIEN), Copart Inc (CPRT), Docusign Inc (DOCU), Guidewire Software Inc (GWRE), Lululemon Athletica Inc (LULU), Samsara Inc (IOT), Science Applications International (SAIC), Toro Co/The (TTC), UiPath Inc (PATH).