The S&P 500 Index ($SPX) (SPY) Thursday closed up +0.58%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.62%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.98%.  June E-mini S&P futures (ESM25) are up +0.61%, and June E-mini Nasdaq futures (NQM25) are up +0.97%. 

Stock indexes settled higher Thursday, with the S&P 500 and Nasdaq 100 climbing to 6-week highs and the Dow Jones Industrials posting a 5-week high. Stocks rose Thursday after President Trump announced a “major” trade deal with the UK, bolstering optimism the US was making headway in tariff negotiations.  The announcement raised hopes that President Trump’s tariffs will be negotiated down, averting lasting economic damage to economic growth and corporate profits.  Stocks rose to their highs Thursday after President Trump said investors should buy stocks now because tariffs could be lowered if US-China trade talks this weekend go well.

Semiconductor stocks on Thursday extended Wednesday’s rally on a Bloomberg report that said the Trump administration plans to rescind Biden-era AI chip curbs as part of a broader effort to revise semiconductor trade restrictions.

The weakness in drug makers and pharmaceutical companies Thursday was a bearish factor for stocks.  Politico reported that President Trump plans to revive an effort to cut drug costs dramatically by tying the amount the government pays for some medicines to lower prices abroad. 

Thursday’s US economic news pushed bond yields higher and was negative for stocks after weekly initial unemployment claims fell more than expected, a sign of labor market strength.  Meanwhile, Q1 nonfarm productivity declined for the first time in almost 3 years, and Q1 unit labor costs rose by the most in a year. 

US weekly initial unemployment claims fell -13,000 to 228,000, showing a stronger labor market than expectations of 230,000.

US Q1 nonfarm productivity fell -0.8%, right on expectations and the first decline in 2-3/4 years.  Q1 unit labor costs rose +5.7%, more than expectations of +5.1% and the most in a year.

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

Q1 earnings reporting season remains in progress.  According to data compiled by Bloomberg Intelligence, the market consensus is for Q1 year-over-year earnings growth of +6.7% for the S&P 500 stocks, down from expectations of +11.1% in early November.  So far, of the 386 companies in the S&P 500 companies that have reported quarterly results, 78% have beaten estimates.  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 Thursday settled higher.  The Euro Stoxx 50 climbed to a 5-week high and closed up +1.12%.  China’s Shanghai Composite rallied to a 5-week high and closed up +0.28%.  Japan’s Nikkei Stock 225 rose to a 1-1/4 month high and closed up +0.41%.

Interest Rates

June 10-year T-notes (ZNM25) Thursday closed down -24 ticks.  The 10-year T-note yield rose +10.4 bp to 4.373%.  June T-notes tumbled to a 2-week low Thursday, and the 10-year T-note yield rose to a 2-week high of 4.382%.  T-notes came under pressure Thursday on reduced safe-have demand as stocks rallied sharply on signs of easing trade tensions after President Trump announced a trade deal with the UK.  T-notes also have some negative carryover from Wednesday when Fed Chair Powell said the Fed was in no hurry to adjust interest rates.  In addition, rising inflation expectations are bearish for T-notes after the 10-year breakeven inflation rate rose to a 1-1/2 week high Thursday at 2.313%.

T-note prices dropped to their lows Thursday on weak demand for the Treasury’s $25 billion 30-year T-bond auction, which had a bid-to-cover ratio of 2.31 that was below the 10-auction average of 2.42. 

European government bond yields on Thursday moved higher.  The 10-year German bund yield rose +6.0 bp to 2.535%. The 10-year UK gilt yield rose +8.6 bp to 4.546%.

German Mar industrial production rose +3.0% m/m, stronger than expectations of +1.0% m/m and the biggest increase in almost 3-1/2 years.

German trade news was mixed as German Mar exports rose +1.1% m/m, stronger than expectations of +1.0% m/m.  However, Mar imports unexpectedly fell -1.4% m/m versus expectations of a +0.4% m/m increase.

The BOE, as expected, cut the official bank rate by -25 bp to 4.25% from 4.50%, and BOE Governor Bailey said, “Inflationary pressures have continued to ease, so we’ve been able to cut rates again today.”

Swaps are discounting the chances at 93% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

US Stock Movers

Chip stocks on Thursday extended Wednesday’s gains on a Bloomberg report that said the Trump administration plans to rescind Biden-era AI chip curbs.  Marvell Technology (MRVL), Intel (INTC), Micron Technology (MU), and ON Semiconductor (ON) closed up more than +3%.  Also, Microchip Technology (MCHP) and GlobalFoundries (GFS) closed up more than +2%.  In addition, Advanced Micro Devices (AMD), Analog Devices (ADI), KLA Corp (KLAC), and NXP Semiconductors NV (NXPI) closed up more than +1%. 

Energy stocks rallied Thursday after the price of WTI crude oil rose more than +2%.  As a result, Occidental Petroleum (OXY) closed up more than +6%, and Devon Energy (DVN) and Diamondback Energy (FANG) closed up more than +5%.  Also, APA Corp (APA), Haliburton (HAL), and Valero Energy (VLO) closed up more than +4%.  In addition, Marathon Petroleum (MPC), Phillips 66 (PSX), and Schlumberger (SLB) closed up more than +3%. 

Cryptocurrency-exposed stocks jumped Thursday after the price of Bitcoin rose more than +4% to a 3-month high.  Coinbase Global (COIN), MicroStrategy (MSTR), MARA Holdings (MARA), and Riot Platforms (RIOT) closed up more than +6%.  

Axon Enterprises (AXON) closed up more than +14% to lead gainers in the S&P 500 and Nasdaq 100  after boosting its full-year revenue estimate to $2.60 billion to $2.70 billion from a prior view of $2.55 billion to $2.65 billion. 

EPAM Systems (EPAM) closed up more than +13% after reporting Q1 adjusted EPS of $2.41, better than the consensus of $2.27, and raising its full-year adjusted EPS forecast to $10.70-$10.95 from a previous forecast of $10.45-$10.75, above the consensus of $10.50.

AppLovin (APP) closed up more than +11% after reporting Q1 revenue of $1.48 billion, stronger than the consensus of $1.38 billion.

Carvana (CVNA) closed up more than +11% after reporting Q1 revenue of $4.23 billion, stronger than the consensus of $3.95 billion.

MercadoLibre (MELI) closed up more than +6% after reporting Q1 adjusted Ebitda of $935.0 million, well above the consensus of $804.9 million. 

Tapestry (TPR) closed up more than +4% after reporting Q3 net sales of $1.58 billion, stronger than the consensus of $1.53 billion.

Drug makers and pharmaceutical stocks were under pressure Thursday following a Politico report that said President Trump plans to revive an effort to dramatically cut drug costs by tying the amount the government pays for some medicines to lower prices abroad.  As a result, AstraZeneca Plc (AZN) and Eli Lilly (LLY) closed down more than -3%.  Also, Regeneron Pharmaceuticals (REGN) closed down more than -2%, and  AbbVie (ABBV), Vertex Pharmaceuticals (VRTX), Amgen (AMGN), Merck & Co (MRK) and Bristol-Meyers Squibb (BMY) closed down more than -1%. 

Match Group (MTCH) closed down more than -9% to lead losers in the S&P 500 after forecasting Q2 adjusted operating income of $295 million-$300 million, below the consensus of $309.4 million and announced a -13% reduction in its workforce.

Fortinet (FTNT) closed down more than -8% to lead losers in the Nasdaq 100 after forecasting full-year billings between $7.20 billion and $7.40 billion, the midpoint below the consensus of $7.35 billion. 

Arm Holdings (ARM) closed down more than -6% after forecasting Q1 adjusted EPS of 30 cents to 38 cents, weaker than the consensus of 42 cents. 

Molson Coors Beverage (TAP) closed down more than -4% after reporting Q1 underlying EPS of 50 cents, much weaker than the consensus of 81 cents.

Genpact Ltd (G) closed down more than -14% after cutting its full-year revenue forecast to $4.86 billion-$5.01 billion from a previous forecast of $5.03 billion-$5.13 billion, weaker than the consensus of $5.08 billion.

Earnings Reports (5/9/2025)

Starwood Property Trust Inc (STWD), Ubiquiti Inc (UI).