The S&P 500 Index ($SPX) (SPY) Wednesday closed up +0.10%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.21%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.57%.  June E-mini S&P futures (ESM25) are up +0.07%, and June E-mini Nasdaq futures (NQM25) are up +0.57%. 

Stock indexes on Wednesday settled mixed, with the Nasdaq 100 posting a 2-1/2 month high.  The strength in chip makers Wednesday supported gains in the broader market.  The Trump administration is expected to sign agreements to give Saudi Arabia and the United Arab Emirates wider access to advanced AI chips, with companies like Nvidia, Advanced Micro Devices, and Amazon.com investing in projects, including data centers and AI infrastructure.  On Tuesday, the Commerce Department said it is rescinding the AI diffusion rule launched by President Biden, and the Trump administration plans to overhaul regulations on the export of semiconductors used in artificial intelligence that could shift toward negotiating individual deals with countries.

However, stocks fell back from their best levels Wednesday and traded mixed after the 10-year T-note yield rose to a 1-month high on hawkish comments from Fed Vice Chair Jefferson, who said he's lowered his 2025 US growth forecast but still sees expansion and "If the increase in tariffs announced so far are sustained, they are likely to interrupt progress on disinflation and generate at least a temporary rise in inflation."

US MBA mortgage applications rose +1.1% in the week ended May 9, with the purchase mortgage sub-index up +2.3% and the refinancing mortgage sub-index down -0.4%.  The average 30-year fixed rate mortgage rose +2 bp to 6.86% from 6.84% in the prior week.

This week, the markets will focus on tariff news and the prospects for additional trade deals.  On Thursday, Apr retail sales are expected to remain unchanged m/m, and Apr retail sales ex-autos are expected at +0.3% m/m.  Also, on Thursday, Apr PPI final demand is expected at +0.2% m/m and +2.5% y/y, with Apr PPI ex-food and energy expected at +0.3% m/m and +3.1% y/y.  In addition, Fed Chair Powell will give remarks on Thursday at the Thomasa Laubach Research Conference.  Finally, on Thursday, Apr manufacturing production is expected to fall by -0.3% m/m.  On Friday, Apr housing starts are expected to be up +2.9% m/m to 1.363 million, while Apr building permits are expected to be down -1.2% m/m to 1.450 million.  Also, on Friday, the preliminary May University of Michigan US consumer sentiment index is expected to rise +1.2 points to 53.4. 

The markets are discounting the chances at 8% for a -25 bp rate cut after the June 17-18 FOMC meeting.

Q1 earnings reporting season is winding down.  So far, over 80% of companies in the S&P 500 have reported quarterly results, and 77% have beaten estimates, the highest 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 mixed.  The Euro Stoxx 50 closed down -0.24%.  China's Shanghai Composite rose to a 1-3/4 month high and closed up +0.86%.  Japan's Nikkei Stock 225 closed down -0.14%.

Interest Rates

June 10-year T-notes (ZNM25) Wednesday closed down -8 ticks.  The 10-year T-note yield rose +6.7 bp to 4.532%.  June T-notes on Wednesday dropped to a 1-month low, and the 10-year T-note yield climbed to a 1-month high of 4.538%.  T-notes on Wednesday gave up an early advance and turned lower on negative carryover from weakness in European government bonds.  Also, rising inflation expectations are bearish for T-notes after the US 10-year breakeven inflation rate rose to a 6-week high Wednesday of 2.398%.  Losses in T-notes accelerated on hawkish comments from Fed Vice Chair Jefferson, who said inflation could rise from US tariff policies. 

European government bond yields Wednesday moved higher.  The 10-year German bund yield rose to a 1-month high of 2.701% and finished up +1.9 bp at 2.699%.  The 10-year UK gilt yield rose to a 1-month high of 4.723% and ended up +4.3 bp to 4.713%.

Swaps are discounting the chances at 86% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

US Stock Movers

Chip stock strength was a supportive factor for the overall market. ARM Holdings Plc (ARM) closed up more than +5% to lead gainers in the Nasdaq 100, and Advanced Micro Devices (AMD) and Nvidia (NVDA) closed up more than +4%.  Also, KLA Corp (KLAC) and Qualcomm (QCOM) closed up more than +1%. 

Pharmaceutical stocks and drug makers retreated on Wednesday.  Moderna (MRNA), AbbVie (ABBV), and Bristol-Myers Squibb (BMY) closed down more than -5%.  Also, Merk & Co (MRK), Eli Lilly (LLY), and West Pharmaceutical Services (WST) closed down more than -4%.  In addition, Pfizer (PFE), Amgen (AMGN), and Gilead Sciences (GILD) closed down more than -3%. 

Super Micro Computer (SMCI) closed up more than +16% to lead gainers in the S&P 500, extending Tuesday's +15% rally after Saudi Arabia-based data center company DataVolt signed a multi-year partnership agreement with the company.

Exelixis (EXEL) closed up more than +20% after reporting Q1 total revenue of $555.4 million, well above the consensus of $495.6 million, and raised its full-year revenue forecast to $2.25 billion-$2.35 billion from a previous forecast of $2.15 billion-$2.25 billion, better than the consensus of $2.25 billion.

Dynatrace (DT) closed up more than +5% after reporting Q4 revenue of $445.2 million, better than the consensus of $435.2 million, and forecast 2026 revenue of $1.95 billion-$1.97 billion, stronger than the consensus of $1.93 billion. 

International Paper (IP) closed up more than +4% after Truist Securities said a Fastmarkets RISI report that Geogia-Pacific will permanently close its Cedar Springs, GA containerboard mill is positive for International Paper. 

Tesla (TSLA) closed up more than +4% after Reuters reported that the company plans to start shipping components from China to the US to produce Cybercab and Semi trucks from the end of this month.

Homebuilders declined Wednesday after the 10-year T-note yield rose to a 1-month high, a negative factor for housing demand.  PulteGroup (PHM) closed down more than -4%, and Lennar (LEN), DR Horton (DHI), and Toll Brothers (TOL) closed down more than -3%.

Loar Holdings (LOAR) closed down more than -10% after shareholders planned to sell nine million shares via a one-day marketed offering that may price after the close on Wednesday.  D.A. Davidson downgraded the stock to underperform from neutral with a price target of $21.

American Eagle Outfitters (AEO) closed down more than -6% after withdrawing its fiscal year 2025 guidance due to macroeconomic uncertainty.

Target (TGT) closed down more than -3% after Oppenheimer cut its price target on the stock to $130 from $150.

Cboe Global Markets (CBOE) closed down more than -2% after Morgan Stanley double-downgraded the stock to underweight from overweight with a price target of $215. 

Consolidated Edison (ED) closed down more than -1% after KeyBanc Capital Markets downgraded the stock to underweight from sector weight with a price target of $90.

Earnings Reports (5/15/2025)

Advanced Drainage Systems Inc (WMS), Applied Materials Inc (AMAT), Birkenstock Holding Plc (BIRK), Cava Group Inc (CAVA), Deere & Co (DE), Doximity Inc (DOCS), Globant SA (GLOB), Take-Two Interactive Software (TTWO), Walmart Inc (WMT).