The S&P 500 Index ($SPX) (SPY) Wednesday closed down -0.56%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.58%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.45%.  June E-mini S&P futures (ESM25) are down -0.50%, and June E-mini Nasdaq futures (NQM25) are down -0.40%. 

Stock indexes on Wednesday gave up an early advance and turned lower as an increase in bond yields undercut support for equities.  The 10-year T-note yield on Wednesday rose +4 bp to 4.48%. Stock losses accelerated Wednesday afternoon as US chip software designers plunged when the Financial Times reported that President Trump told a group of US companies offering software to design semiconductors to stop selling their services to China.

Stocks on Wednesday initially moved higher, with the S&P 500 and Dow Jones Industrials posting 1-week highs and the Nasdaq 100 posting a 3-month high.  Stocks have carryover support from President Trump's action over the weekend to extend the deadline for a 50% tariff on US imports from the EU until July 9 after threatening to impose that tariff starting June 1.  The markets are awaiting Nvidia's earnings results after the close Wednesday to gauge the impact of the trade war and the outlook for artificial intelligence.

US MBA mortgage applications fell -1.2% in the week ended May 23, with the purchase mortgage sub-index up +2.7% and the refinancing sub-index down -7.1%.  The average 30-year fixed rate mortgage rose +6 bp to 6.98% from 6.92% in the prior week.

The US May Richmond Fed manufacturing survey rose by +4 to -9, right on expectations.

The minutes of the May 6-7 FOMC meeting signaled policymakers were satisfied to keep interest rates on hold as the minutes stated, "Participants agreed that with economic growth and the labor market still solid and current monetary policy moderately restrictive, the committee was well positioned to wait for more clarity on the outlooks for inflation and economic activity."

The markets are discounting the chances at 2% for a -25 bp rate cut at the next FOMC meeting on June 17-18.

The markets this week will focus on any tariff news or signs of new trade deals.  After Wednesday's close, Nvidia will report its quarterly earnings.  On Thursday, weekly initial unemployment claims are expected to climb +3,000 to 230,000.  Also, Q1 GDP is expected to be unrevised at -0.3% (q/q annualized).  In addition, Apr pending home sales on Thursday are expected to fall -1.0% m/m.  On Friday, Apr personal spending is expected to be up +0.2% m/m, and Apr personal income is expected to be up +0.3% m/m.  Also, the Apr core PCE price index, the Fed's preferred inflation gauge, is expected to rise +0.1% m/m and +2.5% y/y.  Finally, on Friday, the University of Michigan May consumer sentiment index is expected to be revised upward by +0.2 points to 51.0 from the previously reported 50.8.

Q1 earnings reporting season is winding down.  So far, more than 90% of companies in the S&P 500 have reported quarterly results, and 77% have beaten estimates, the highest percentage since Q2 of 2024.  Earnings growth in Q1 is running at +13.1%, compared with just +6.6% expected before the start of the season.  Full-year 2025 corporate profits for the S&P 500 are seen rising +9.4%, down from the forecast of +12.5% in early January.  

Overseas stock markets on Wednesday settled mostly lower.  The Euro Stoxx 50 closed down -0.68%.  China's Shanghai Composite closed down -0.02%.  Japan's Nikkei Stock 225 fell from a 2-week high and closed unchanged.

Interest Rates

June 10-year T-notes (ZNM25) Wednesday closed down -9.5 ticks.  The 10-year T-note yield rose +3.1 bp to 4.475%.  June T-notes were under pressure Wednesday from carryover weakness in European government bonds.  Also, supply pressures undercut T-notes as the Treasury auctioned $28 billion of 2-year floating-rate notes and $70 billion of 5-year T-notes.  The minutes of the May 6-7 FOMC meeting were slightly hawkish and weighed on T-notes as policymakers expressed their support for keeping interest rates on hold. 

European government bond yields on Wednesday moved higher.  The 10-year German bund yield rose +2.2 bp to 2.554%. The 10-year UK gilt yield rose +6.2 bp to 4.727%.

The ECB Apr 1-year CPI expectations rose +3.1% y/y, stronger than expectations of +2.8% y/y and the highest in 14 months.  The ECB Apr 3-year CPI expectations were unchanged from Mar at +2.5% y/y, right on expectations.

German May unemployment rose by +34,000, higher than expectations of +12,000 and the most in 2-3/4 years.  The May unemployment rate was unchanged at 6.3%, right on expectations.

The German Apr import price index fell -1.7% m/m, a bigger decline than expectations of -1.4% m/m and the largest drop in more than two years.

Swaps are discounting the chances at 98% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

US Stock Movers

US chip software designers plunged Wednesday when the Financial Times reported that President Trump told a group of US companies offering software to design semiconductors to stop selling their services to China. Cadence Design Systems (CDNS) closed down more than -10% to lead losers in the S&P 500 and Nasdaq 100.  Also, Synopsys (SNPS) closed down more than -9%.  In addition, ANSYS Inc (ANSS) closed down more than -5%, and Keysight Technologies (KEYS) closed down more than -2%. 

Okta (OKTA) closed down more than -15% after forecasting its Q2 current remaining performance obligation of $2.20 billion to $2.21 billion, below the consensus of $2.23 billion. 

AO Smith (AOS) closed down more than -6% after Lennox International announced a joint venture with Ariston Group to enter the residential water heater market in the US and Canada. 

Galaxy Digital (GLXY) closed down more than -6% after announcing an underwritten offering of 29 million shares of its Class A common stock.

PDD Holdings (PDD) closed down more than -4% after UOB double-downgraded the ADRs to sell from buy with a price target of $90.

Homebuilding stocks and homebuilding suppliers were under pressure Wednesday due to higher T-note yields, a negative factor for housing demand. As a result, DR Horton (DHI), Mohawk Industries (MHK), Toll Brothers (TOL), and Builders FirstSource (BLDR) closed down more than -3%.  Also, Lennar (LEN) and PulteGroup (PHM) closed down more than -2%.

Booze Allen Hamilton Holding (BAH) closed down more than -4% after Goldman Sachs downgraded the stock to sell from neutral with a price target of $94.

Healthcare stocks moved higher after Elevance Health reaffirmed its full-year adjusted profit forecast.  As a result, CVS Health (CVS) and UnitedHealth Group (UNH) closed up more than +1%.  Also, Elevance Health (ELV) and Humana (HUM) closed up +0.52%

Fair Isaac (FICO) closed up more than +7% to lead gainers in the S&P 500 after Baird upgraded the stock to outperform from neutral with a price target of $1,900.

Box Inc (BOX) closed up more than +17% after boosting its full-year revenue forecast to $1.17 billion from $1.16 billion, stronger than the consensus of $1.15 billion.   

Abercrombie & Fitch (ANF) closed up more than +15% after reporting Q1 net sales of $1.10 billion, above the consensus of $1.07 billion, and boosted the high-end of its full-year net sales forecast to +3% to +6% from a previous estimate of +3% to +5%.

Vail Resorts (MTN) closed up more than +9% after reaffirming its fiscal 2025 guidance and saying it reappointed Rob Katz as CEO, succeeding Kirsten Lynch, who has stepped down from the role. 

Noble Corp (NE) closed up more than +1% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $30. 

Earnings Reports (5/29/2025)

Bath & Body Works Inc (BBWI), Best Buy Co Inc (BBY), Burlington Stores Inc (BURL), Cooper Cos Inc/The (COO), Costco Wholesale Corp (COST), Dell Technologies Inc (DELL), Elastic NV (ESTC), Gap Inc/The (GAP), Hormel Foods Corp (HRL), Kohl's Corp (KSS), Marvell Technology Inc (MRVL), NetApp Inc (NTAP), Roivant Sciences Ltd (ROIV), UiPath Inc (PATH), Ulta Beauty Inc (ULTA), Zscaler Inc (ZS).