Stocks Ease Back From Record High Ahead Of Tariff Deadline, Earnings Flood

US equity futures are flat at the end of a hectic earnings week and the return of meme traders in force. The market is waiting for next week’s trading deluge when nearly 30% of the S&P reports, as well as additional trade deal headlines ahead of the Aug 1 tariff deadline, with focus on a potential 15% tariff rate deal with the EU. As of 8:00am ET S&P and Nasdaq futures are unchanged. Pre-market, megacap tech stocks are mixed with AAPL (+0.4%) leading gains and TSLA lagging (-0.9%); Energy is outperforming. Yields are higher as is the USD; 2-, 5-, 10-, 30-yr yields are 0.49bp, 1.25bp, 1.81bp, 2.69bp higher, with the 10Y tradinbg at 4.41%. Commodities are mixed with oil higher, while base and precious metals are lower. On today’s calendar we get the June preliminary durable goods orders (8:30am) and July Kansas City Fed services activity (11am).

In premarket trading, magnificent Seven stocks are mixed (Apple +0.3%, Meta +0.3%, Microsoft +0.3%, Amazon +0.4%, Alphabet +0.3%, Nvidia -0.2%, Tesla -0.3%). 

• AST SpaceMobile (ASTS) falls 8% after offering convertible notes as well as common stock in a separate, registered direct offering.
• Booz Allen Hamilton (BAH) climbs about 1% after the after the defense contractor posted 1Q profit that beat the average analyst estimate.
• Charter Communications (CHTR) falls 6% after the cable company reported second-quarter earnings that missed expectations.
• Centene (CNC) tumbles 12% after the health insurer reported adjusted loss per share for the second quarter, surprising analysts who’d forecasted a profit.
• Comfort Systems (FIX) is up 14% after the HVAC company reported revenue for the second quarter that beat the average analyst estimate.
• Coursera (COUR) jumps 28% after the online education company reported second-quarter results that beat expectations.
• Deckers Outdoor (DECK) rises 11% after the company reported net sales for the first quarter that beat the average analyst estimate.
• Edwards Life (EW) shares are up 7% after the medical devices company raised the low end of its sales forecast range for the year.
• Intel Corp. (INTC) falls 8% after Chief Executive Officer Lip-Bu Tan sparked concerns that he was more focused on cost cutting than restoring the chipmaker’s technological edge.
• Newmont Corp (NEM) advances 2% after the precious metals miner reported adjusted earnings per share for the second quarter that beat the average analyst estimate.
• Synovus Financial Corp. (SNV) falls 9% after Pinnacle Financial Partners Inc. (PNFP) agreed to acquire the company in an all-stock transaction valued at $8.6 billion. Pinnacle (PNFP) shares are down 5%.
• Sarepta (SRPT) tumbles 11% after an evaluating committee of the European Medicines Agency recommended against the approval of the company’s gene therapy Elevidys.

Traders have eased back on a rally that took the S&P 500 to its 10th record high in 19 days amid optimism around trade deals and corporate earnings. Next week is the busiest of the earnings season and investors are looking to the Federal Reserve’s interest-rate meeting on July 30 after data reduced the case for further cuts. 

“Markets now see a greater chance that the Fed Chair will maintain a hawkish tone at the upcoming meeting” said Hebe Chen, an analyst at Vantage Markets in Sydney. “Political dynamics and economic indicators reinforce a more cautious Fed stance.”

Bubbly valuations are also giving BofA’s Michael Hartnett pause, although there are no signs of a reversal yet and the S&P 500 is set to notch a third month of solid gains. Hartnett warned of a “bigger retail, bigger liquidity, bigger volatility, bigger bubble” as global central banks ease policy and governments loosen financial regulation. US margin debt is starting to run too hot — a potentially concerning sign for the credit market, according to Deutsche Bank credit strategists. As shown below, brokerages have extended a record $1 trillion in margin credit to clients in June.

Europe’s Stoxx 600 falls 0.3% as disappointing earnings fueled worries about the impact of tariffs. The financial services and telecommunications sectors were the biggest laggards, while consumer products and automobile stocks outperformed. Here are the biggest movers Friday:

• Remy Cointreau shares rose as much as 5.5% after the French group raised its operating profit target and reported higher than expected revenues for the first quarter
• Nexity shares jump as much as 16%, the most since 2009, after the French real estate firm reported first half-year results which CIC Market Solutions said reflect “tangible operational improvement in a still challenging real estate environment”
• Close Brothers shares gain as much as 13%, after the financial services group agreed to sell its execution and securities business Winterflood Securities to Marex Group in an attempt to pare its footprint ahead of a court verdict over UK motor lending
• European mining stocks are among the worst-performers in the Stoxx 600 benchmark on Friday, after iron ore futures dropped as much as 2.5% in Singapore, the most since April 9, pressured by signs of rising supply
• Puma shares fall as much as 19% after the German sportswear maker issued what Jefferies analysts described as a “major profit warning”
• Signify shares plunge as much as 13%, the most since March 2020, after the Dutch light and lamps manufacturer reported adjusted Ebita for the second quarter that missed expectations
• Valeo shares fall as much as 16%, the most since March 2020, after a sales guidance cut as analysts note broad underperformance across all regions in the French firm’s results
• Michelin shares fall as much as 4.5% after the French car parts firm’s earnings missed expectations, with analysts noting concerns around FX and weaker volumes
• Vallourec falls as much as 4.5%, the most since May 26, after the steel producer reported net income for the second quarter that missed the average analyst estimate

Earlier in the session, Asian stocks fell, ending a six-day rally, as investors braced for the US tariff deadline and a Federal Reserve policy decision due next week. The MSCI Asia Pacific Index dropped as much as 1.2%, set for its worst loss since June 19. Tencent and Alibaba were among the biggest drags, while Shin-Etsu Chemical shares sank in Tokyo on weak guidance. Hong Kong led declines among regional gauges, with notable losses also in Japan, mainland China and India. Japanese stocks slipped as investors took profits from this week’s strong rally, while disappointing earnings from some manufacturers hurt sentiment. The Nikkei gauge fell 0.9%. Elsewhere, Vietnamese shares rose to a record high, aided by the return of foreign fund inflows amid optimism about a trade deal with the US. The benchmark VN Index rose 0.7% at the close, surpassing its last high in January 2022.

In FX, the Bloomberg Dollar Spot Index is up 0.3%, rising for a second day after US President Trump downplayed his clash with Fed Chair Jerome Powell during a tour of the central bank’s renovation project on Thursday. The yen is the weakest of the G-10 currencies, falling 0.6% against the greenback having only found a modicum of support after Bloomberg reported Bank of Japan officials see the possibility of mulling another interest-rate hike this year. The pound also underperforms after UK retail sales rose less than forecast.

In rates, ten-year US Treasury yields rose two basis points to 4.42%. Euro-area government bonds extended their post-ECB selloff as traders continue to reduce their bets on a final interest-rate cut by the central bank this year this year. German 10-year yields rise another 5 bps to 2.76%. Gilts also decline, albeit to a lesser extent.

In commodities, gold extended a decline on Friday as the dollar rose after Donald Trump downplayed his clash with Federal Reserve Chairman Jerome Powell. Oil was steady on optimism over US trade talks ahead of a key deadline next week, and as tightness in diesel markets boosts sentiment. WTI rises 0.2% to near $66.19 a barrel. Spot gold falls $21 to near $3,347/oz. Bitcoin drops 3% and below $116,000.

On today’s calendar, we have only the June preliminary durable goods orders (8:30am) and July Kansas City Fed services activity (11am). Fed officials remain in a communications blackout ahead of their July 30 rate decision.

Market Snapshot

• S&P 500 mini little changed
• Nasdaq 100 mini little changed
• Russell 2000 mini +0.1%
• Stoxx Europe 600 -0.3%
• DAX -0.5%
• CAC 40 +0.1%
• 10-year Treasury yield +2 basis points at 4.42%
• VIX little changed at 15.38
• Bloomberg Dollar Index +0.3% at 1198.84
• euro -0.1% at $1.1737
• WTI crude +0.5% at $66.35/barrel

Top Overnight News

• The dollar gained after Donald Trump downplayed his clash with Jerome Powell over the Fed’s renovation costs, saying it wasn’t reason enough to fire him. Trump said during his visit to the Federal Reserve that it is a tough construction job, while Trump and Powell briefly voiced disagreement over renovation figures and he reiterated that he wants Powell to lower interest rates. Trump later commented that he talked with Fed Chair Powell on rates and the meeting was productive, and noted that there was no tension, while he repeated several times that he believes Powell will do the right thing. Trump also said he has maybe three names in mind for Powell’s replacement but stated it is not necessary to fire Powell which would be a big move. BBG
• China’s budget deficit reached a record 5.25 trillion yuan ($733 billion) in the first half, as the government boosts domestic demand amid reduced US exports. BBG
• Boeing has been a big winner of Trump’s tariff wars as the firm sees a spike in int’l orders in conjunction w/White House trade deals. NYT
• Trump’s trade deal with Tokyo opens scope for the Bank of Japan to raise interest rates again this year, sources say, a prospect the central bank may start to telegraph by offering a less gloomy view on the economic outlook. RTRS
• Consumer inflation in Tokyo eased slightly in July, suggesting that the BOJ can take more time to gauge the economic impact of U.S. tariffs before raising interest rates. Headline number came in at +2.9% (down from +3.1% in June and below the Street’s +3% forecast) while core came in at +3.2% (inline with the Street, but down from +3.4% in June). WSJ
• Japan’s right-wing populists are gaining influence as voters rebel against rising prices and foreigners. The shift is fueling calls for tax cuts or more spending, and threatening Japan’s status as a global haven. BBG
• The ECB’s Martins Kazaks said in an interview that there’s “no urgent need” to move on rates, adding to expectations for a hold at the September meeting. BBG
• The U.S. has collected an additional $55 billion in tariffs this year. Corporate America has largely shouldered the bill for now, but that could change as firms gradually adjust prices to account for the new tariffs that are the highest level we have seen in decades. WSJ
• INTC (Intel) -8% in the pre on eps last night, concern the chipmaker is more focused on cutting costs than restoring its technological edge. CEO Lip-Bu Tan called investments begun under his predecessor excessive and unwise. BBG

Tariffs/Trade

• US Treasury Secretary Bessent said the US is in a pretty good place with China on trade and he will talk to China about them buying sanctioned oil from Russia and Iran, while Bessent separately commented that he met with Singapore’s Trade Minister.
• UK PM Starmer is to press US President Trump over a deal to cut tariffs on UK steel imports, according to FT.
• India’s Commerce Minister said he was optimistic that India could reach an agreement with the US ahead of the August 1st deadline and he had some wonderful engagement with his “friend and colleague from the US”. Furthermore, he said they are making fantastic progress with the US on a trade deal and hopes they’ll be able to conclude a “very consequential partnership”.
• Chinese Foreign Ministry says China is willing to import more marketable high-quality European products; says EU should relax restrictions on exports of high-tech products to China.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were lower after the mixed performance in the US and with light catalysts for markets outside of earnings. ASX 200 mildly retreated with the downside led by underperformance in key industries including mining, materials, resources and financials, while Whitehaven Coal failed to benefit despite posting higher quarterly output and sales. Nikkei 225 gave back some of this week’s gains amid profit taking despite a weaker currency and mostly softer  Tokyo CPI. Hang Seng and Shanghai Comp conformed to the downbeat mood but with the downside in the mainland cushioned after a firm PBoC liquidity effort which resulted in a net daily injection of around CNY 602bln via 7-day reverse repos, while participants await next week’s US-China trade discussions in Sweden.

Top Asian News

• PBoC Deputy Governor Zou Lan wrote that the PBoC will promote the Treasury’s role in cash and liquidity management, according to PBoC-backed Financial News.
• Japanese PM Ishiba held meetings with party leaders, although Japan’s CDP leader Noda said PM Ishiba did not mention his future in talks with party leaders, while Japan Innovation Party co-Leader Maehara said he is not considering joining PM Ishiba’s coalition.
• BoJ reportedly sees a potential rate hike environment this year, via Bloomberg citing sources; expects to have enough data by end-2025 to consider a move. No requirement to make a significant change to the outlook. US deal reduces uncertainty.
• China will implement proactive fiscal policy to promote economic recovery.

European bourses (STOXX 600 -0.4%) opened lower across the board, continuing the downbeat mood seen in the APAC session. Downside which extended in the morning, but more recently a slight bounce has been seen across a few major indices such as the Euro Stoxx 50 and STOXX 600. European sectors hold a strong negative bias, with only a couple of industries holding afloat. Autos were initially the underperformer, but then flicked into the green as Volkswagen (+4%) pared initial losses, as traders fully digested the results and CEO commentary. Though its not all good for the sector, with Traton firmly in the red after it slashed its 2025 outlook amid US tariff uncertainty. LVMH (+4.5%) also bounced off lows seen at the open, to currently trade higher – the Co. reported a deeper than expected sales decline but its commentary on China was a little more upbeat.

European Earnings

• Volkswagen (VOW3 GY) – Headline metrics missed and cut guidance. Q2 (EUR): Revenue 80.8bln (exp. 82.19bln), -3% Y/Y. Op. Margin 4-5% (prev. guided 5.5-6.5%)
• Puma (PUM GY) – Co. cut its FY outlook, and now expects a loss in adj. EBIT terms, citing weak demand and tariff concerns.
• NatWest (NWG LN) – Strong NII and NII. Raises FY Income guidance and starts a GBP 750mln share buyback programme.

Top European News

• UK and Australia are to sign a GBP 20bln nuclear-powered submarine deal, according to The Times.
• ECB’s Villeroy says the increases in US tariffs and the extent of which is still uncertain, are not expected to cause inflation to rise, it is important to remain completely open about future monetary policy decisions.
• ECB’s Rehn says ECB will base policy decisions on a meeting-specific assessment of the inflation outlook and the risks surrounding it.
• ECB’s Kazaks says no urgent need to move rates and noted value holding rates at the current level.
• ECB’s Rehn says ECB will base policy decisions on a meeting-specific assessment of the inflation outlook and the risks surrounding it.
• ECB Survey of Professional Forecasters (Q3): Headline inflation expectations revised down for 2025-26 but unchanged for 2027 and the longer term
• UK Chancellor Reeves is reportedly considering overruling the Supreme Court in the scenario that they uphold all of the appeal court ruling that customers could be entitled to billions in compensation, via Guardian citing sources.

FX

• DXY is a touch higher, in an extension of yesterday’s upside, which was brought about by upside in US yields in the wake of weekly claims and PMI metrics. That being said, DXY is still down by the best part of 1% on the week alongside the flattening of the US yield curve and a pick-up in the JPY earlier in the week. Focus today will be on US Durable Goods and Atlanta Fed GDPNow. DXY briefly eclipsed yesterday’s best at 97.55 before topping out at 97.63.
• EUR remains more resilient than peers vs. the USD in the wake of Thursday’s “hawkish” ECB policy announcement. To recap, the GC stood pat on policy as expected given the current uncertainties surrounding the trade outlook. The greatest source of traction came after Lagarde reiterated that policy remains in a good place, suggesting that policymakers are not in a rush to adjust policy. Elsewhere, German IFO metrics came in a touch below expected but failed to engineer any traction in EUR. EUR/USD remains within Thursday’s 1.1731-88 range.
• JPY is continuing to give back some of its gains vs. the USD seen earlier in the week on account of the US-Japan trade deal. Today’s price action has been aided by softer-than-expected Tokyo CPI data, which showed the headline and core readings retreated beneath the 3% level for the first time since March. Attention is now pivoting to next week’s BoJ policy announcement, which is widely-expected to see policymakers stand pat on rates. Source reporting today via Bloomberg noted that the BoJ sees a potential rate hike environment this year and expects to have enough data by end-2025 to consider a move.
• GBP is pressured vs. the USD in the wake of softer-than-expected June retail sales metrics. M/M retail sales printed at 0.9% vs. Exp. 1.2% (prev. -2.8%), Y/Y came in at 1.7% vs. Exp. 1.8% (prev. -1.1%). Nonetheless, GBP was sent lower vs. both the USD and EUR with markets despondent regarding the current UK macro environment, which is one characterised by slowing growth, a loosening labour market and stubborn inflation. Cable has delved as low as 1.3460 but still holding comfortably above the weekly trough from Monday at 1.3402.
• Antipodeans are both softer vs. the USD alongside this morning’s soft risk tone and a lack of pertinent antipode-specific drivers.
• Barclays month-end rebalancing: weak USD selling against all majors.
• PBoC set USD/CNY mid-point at 7.1419 vs exp. 7.1609 (Prev. 7.1385).

Fixed Income

• A softer start to the session for USTs. However, once again, the magnitude of price action is relatively modest for USTs at this point in time. Some focus on Trump’s meeting with Fed Chair Powell, where the President called for cuts but said it is not necessary to fire him and doing so would be a big move. Attention now turns to US Durable goods & Atlanta Fed’s GDPNow tracker. Thus far, USTs are at the low-end of a 110-24+ to 110-31 band, entirely within Thursday’s 110-19+ to 111-02 parameter.
• Bunds are also in the red but under much more pressure than USTs. At most, lower by over 70 ticks to a 128.84 trough and a fresh low for the week. Overnight action was contained, in-fitting with peers, with selling emerging in the early-European morning, gradually at first but then intensifying into the cash equity open despite the weaker start there – no real driver for the move. As such, it appears the move is a continued repricing of the ECB after the meeting yesterday where Lagarde said they are in a good policy place. Since, source reports via Bloomberg and Reuters outline that the baseline for September is for rates to be maintained. No move to Ifo this morning, the series printed softer than forecast across the board.
• Gilts are softer, between USTs and Bunds in terms of magnitude. Lower by 20 ticks at most in a 91.32-55 band and entirely within Thursday’s 91.18-69 parameters. The only update of note so far has been Retail Sales, which saw a bounce in-line with the direction of analyst expectations, though disappointing the strong consensus view. Nonetheless, Pantheon Macro maintains their Q2 GDP growth view of 0.2% Q/Q.

Commodities

• WTI and Brent held an upward bias following Thursday’s gains on the back of trade optimism, with desks pointing out that Chevron’s resumption of operations in Venezuela overlooked against the backdrop of trade developments. More recently some pressure has been seen across the crude complex, to take WTI and Brent towards the unchanged mark. Today’s session has been lacking on pertinent updates, still awaiting the readout of the Iran/E3 meeting. WTI resides in a USD 66.05-66.74/bbl range with its Brent counterpart in a USD 69.21-69.86/bbl range at the time of writing.
• Precious metals are lower despite the cautious risk tone but amid a firmer Dollar as assets are seemingly sold in favour of cash heading into the weekend. Spot gold dipped under yesterday’s low (USD 3,351.46/oz) as it eyes the 50 DMA to the downside (USD 3,341.27/oz) as it trades in a USD 3,344.64-3,373.50/oz parameter.
• Mixed trade across base metals in line with the broader tentativeness across the markets amid a lack of fresh catalysts. 3M LME copper resides in a narrow USD 9,821.45-9,887.75/t range at the time of writing.

US Event Calendar

• 8:30 am: Jun P Durable Goods Orders, est. -10.71%, prior 16.4%
• 8:30 am: Jun P Durables Ex Transportation, est. 0.1%, prior 0.5%
• 8:30 am: Jun P Cap Goods Orders Nondef Ex Air, est. 0.1%, prior 1.7%
• 8:30 am: Jun P Cap Goods Ship Nondef Ex Air, est. 0.2%, prior 0.4%

DB’s Jim Reid concludes the overnight wrap

The risk-on tone just about continued yesterday, as another batch of strong US data supported investor optimism, with the S&P 500 (+0.07%) ending a quiet session at a 4th consecutive all-time high. But whilst equities were rallying, sovereign bonds struggled across the board, as the latest data and a hawkish-leaning ECB decision saw investors dial back the likelihood of near-term rate cuts, particularly in Europe. So the 2yr yield in Germany (+9.1bps) and France (+9.0bps) both posted their biggest jump since May, and US Treasuries lost ground across the curve.

In terms of that ECB decision, the main headline was much as expected, with rates being left unchanged for the first time in a year. However, there were several aspects that leant in a more hawkish direction, which led to growing doubts about whether they’d deliver another cut anytime soon. The statement kept their options open with the ECB “not pre-committing to a particular rate path.”, while Lagarde said that they were “in a good place now to hold and to watch how these risks develop over the course of the next few months.” Moreover, Lagarde did not rule out the possibility of the next move being a hike when asked.

That meeting led to a clear reaction among European sovereign bonds, with yields on 10yr bunds (+6.3bps), OATs (+7.9bps) and BTPs (+8.9bps) all ending the day higher. That came as investors grew more sceptical that the ECB would cut again this year, and there was additional momentum after the flash PMIs for July were a bit stronger than expected. For instance, the Euro Area composite PMI rose to an 11-month high of 51.0 (vs. 50.7 expected), so it added to the sense that the European economy had held up after Liberation Day.

Later in the session, there was then a Bloomberg article which said that those pushing for another cut “face an uphill battle”, and that another hold “looks like the baseline for September”. So that fit into the message from the press conference, and meant that yields got a fresh push higher into the close. Our own European economists see the ECB as signaling an extended pause and while another rate cut is possible, it may not be immediate. They also think the first hike could come sooner than most assume. See their full reaction here.

In the meantime, US Treasuries also struggled thanks to a strong batch of US data. In particular, the weekly initial jobless claims fell for a 6th consecutive week, falling to 217k over the week ending July 19 (vs. 226k expected). Bear in mind that this series had seen a decent move higher in May, with the 4-week moving average up to its highest in almost two years, so that had contributed to fears the labour market might be softening. So the recent run of declines has led to a lot more optimism, and the 4-week moving average also fell to a 3-month low. And that came alongside some better-than-expected flash PMIs, with the composite reading for the US up to a 7-month high of 54.6 (vs. 52.8 expected).
With that strong data in hand, investors dialled back the likelihood of Fed rate cuts this year, and the amount priced in by the December meeting fell -1.9bps on the day to 43bps, the joint lowest it has been since February. And in turn, that meant US Treasury yields moved higher, with the 2yr yield up +3.6bps to 3.92%, whilst the 10yr yield was up +1.5bps to 4.40%.

Yesterday also saw Trump visit the Fed’s renovation project, whose cost overruns have drawn criticism from the President and Congressional Republicans. Trump again brought up the project costs and his desire for lower rates during the visit, but he largely downplayed his clash with Powell. Trump claimed there was “no tension” between him and the Fed Chair and said “I just don’t think it’s necessary” to fire him. However there was an open disagreement between the two live on camera about the scope of the renovation works at the Fed which was a remarkable spectacle to watch. You’ll be able to see a similar clash tonight at my home as the scope and budget of our redecoration work continue to get debated over pizza and a glass of wine. 

For equities, it was another (slightly) up day thanks to the robust data, with the S&P 500 (+0.07%) and NASDAQ (+0.18%) both hitting a fresh record high. There were bits of softness, with the equal-weighted version of the S&P 500 down -0.33%, but overall it was a quiet session with the S&P seeing a trading range of just 0.35%, its narrowest since February. Tesla (-8.20%) was one of the worst performers as investors reacted to their earnings results after the previous day’s close. So that meant the Magnificent 7 ended up falling -0.21%, despite gains for each of the other 6 companies. Meanwhile in Europe, the STOXX 600 (+0.24%) moved up to a two-week high, and the FTSE 100 (+0.85%) reached another all-time high. 

Overnight S&P 500 (+0.21%), Nasdaq (+0.16%) and STOXX 50 (+0.04%) futures are edging up even if most of Asia is on the decline. The Hang Seng (-1.13%) is the largest underperformer, while the CSI (-0.53%) and the Shanghai Composite (-0.34%) are also retreating, although they are on track for a robust week. Elsewhere, Japanese shares have been the standout performers this week; however, mixed inflation data is dampening some of the optimism, with the Nikkei (-0.75%) and the Topix (-0.74%) both trading significantly lower. Meanwhile, South Korea’s KOSPI stands out today, increasing by +0.30% following some favorable earnings reports.

Coming back to Japan, the Tokyo Consumer Price Index (CPI) mostly eased more than anticipated in July, but core-core stayed at 3.1% YoY as expected marking the fifth month above 3% YoY. The core CPI rose by +2.9% year-on-year in July, falling short of the expected +3.0%, and down from the +3.1% recorded in the previous month. Additionally, headline CPI inflation was also a tenth lower than expected at 2.9% in July, down from the prior month’s 3.1%. 10 and 30yr JGBs are -1bps and -3bps lower respectively. 10yr USTs are -1bps in a quiet session. 

To the day ahead now, and data releases include the Ifo’s business climate indicator for Germany in July, UK retail sales for June, US preliminary durable goods orders for June, and the Euro Area M3 money supply for June.