The S&P 500 Index ($SPX) (SPY) Tuesday closed down by -0.59%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up by +0.02%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down by -1.39%.  September E-mini S&P futures (ESU25) fell -0.54%, and September E-mini Nasdaq futures (NQU25) fell -1.37%. 

Stock indexes settled mixed on Tuesday, with the Nasdaq 100 falling to a 1.5-week low and the Dow Jones industrials posting a new all-time high. Tuesday’s selloff in chip makers and the Magnificent Seven megacap technology stocks weighed on the overall market. 

On the positive side, Home Depot recovered from early losses and closed up more than +3% to push the Dow Jones industrials to a new record high after it reported a +3% jump in July comparable same-store sales.  Lowes and Target will report their earnings on Wednesday, and Walmart will report on Thursday.

Lower bond yields on Tuesday were supportive of stocks, as the 10-year T-note yield fell -3 bp to 4.30%.  US government debt garnered support Tuesday after S&P Global Ratings affirmed its AA+ long-term rating and A-1+ short-term rating on US debt and said the US can maintain its credit strength despite the fiscal hit of its recent spending bill because tariff revenues will “generally offset weaker fiscal outcomes.”

Tuesday’s US housing news was mixed.  US Jul housing starts unexpectedly rose +5.2% m/m to a 5-month high of 1.428 million, stronger than expectations of a decline to 1.297 million.  However, Jul building permits, a proxy for future construction, fell -2.8% m/m to a 5-year low of 1.354 million, weaker than expectations of -0.5% m/m to 1.386 million. 

Diplomatic talks over the war in Ukraine continue to make headway.  Ukrainian President Zelenskiy said he came away with a commitment from President Trump late Monday to join security guarantees for any peace deal and reserve discussion on territorial swaps with Russia for later.  President Trump is pushing for a summit between Presidents Putin and Zelenskiy soon, and European leaders are discussing a plan to send British and French troops to Ukraine as part of a peace agreement.  The outcome of the talks could have macroeconomic implications regarding tariffs and oil prices, and could, of course, have significant consequences for European security. 

The focus of the markets this week will be on any new tariff news and signs of progress toward a Ukraine peace deal.  On Wednesday, the minutes of the July 29-30 FOMC meeting will be released.  On Thursday, weekly initial unemployment claims are expected to climb by +1,000 to 225,000 and the Aug Philadelphia Fed business outlook survey is expected to fall to 6.7 from 15.9 in July.  Also, the Aug S&P manufacturing PMI is expected to remain unchanged at 49.8.  In addition, Jul existing home sales are expected to fall -0.3% m/m to 3.92 million.  On Friday, Fed Chair Powell speaks on the economic outlook at the Federal Reserve’s annual symposium at Jackson Hole, Wyoming. 

Regarding tariffs, President Trump widened steel and aluminum tariffs to include more than 400 consumer items that contain the metals, such as motorcycles, auto parts, furniture components, and tableware.  The change went into effect on Monday and did not exclude goods already in transit.  Last Friday, Mr. Trump said, “I’ll be setting tariffs next week and the week after on steel and on, I would say chips – chips and semiconductors, we’ll be setting sometime next week, week after.” Mr. Trump last week said he planned a 100% tariff on semiconductors but would exempt companies that move chip manufacturing to the US.  Mr. Trump also mentioned 200% or 300% tariffs on chips.

In other recent tariff news, Mr. Trump last Tuesday extended the tariff truce with China for another 90 days until November.  On August 6, Mr. Trump announced that he will double tariffs on US imports from India to 50% from the current 25% tariff, due to India’s purchases of Russian oil.  On August 5, Mr. Trump said that US tariffs on pharmaceutical imports would be announced “within the next week or so.” 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 for a -25 bp rate cut at 87% at the September 16-17 FOMC meeting, down from 93% last Thursday.  The markets are discounting the chances at 54% for a second -25 bp rate cut at the following meeting on October 28-29.

Earnings reports indicate that S&P 500 earnings for Q2 are on track to rise +9.1% y/y, much better than the pre-season expectations of +2.8% y/y and the most in four years, according to Bloomberg Intelligence.  With over 92% of S&P 500 firms having reported Q2 earnings, about 82% of companies exceeded profit estimates. 

Overseas stock markets on Tuesday settled mixed.  The Euro Stoxx 50 rose to a 4.75-month high and closed up +0.89%.  China’s Shanghai Composite fell from a 10-year high and closed down -0.02%.  Japan’s Nikkei Stock 225 retreated from a new record high and closed down -0.38%.

Interest Rates

September 10-year T-notes (ZNU25) Tuesday closed up +8 ticks, and the 10-year T-note yield fell -3.2 bp to 4.302%.  Sep T-notes rallied Tuesday after S&P Global Ratings said that higher revenues from tariffs will help soften the blow to the US’s fiscal health from the president’s tax cuts, enabling the country to maintain its AA+ long-term credit rating. The weakness in stocks on Tuesday also supported safe-haven demand for T-notes.  Gains in T-notes were limited due to concerns that last week’s bearish US July CPI and PPI reports could keep the Fed from cutting interest rates at next month’s FOMC meeting.

European government bond yields on Tuesday were mixed.  The 10-year German bund yield fell -1.3 bp to 2.750%. The 10-year UK gilt yield rose to a 2.5-month high of 4.756% and finished up by +0.2 bp to 4.740%.

Swaps are discounting the chances at 7% for a -25 bp rate cut by the ECB at the September 11 policy meeting.

US Stock Movers

The weakness in the Magnificent Seven stocks on Tuesday was a drag on the overall market.  Nvidia (NVDA) closed down more than -3%, and Meta Platforms (META) closed down more than -2%.  Also, Alphabet (GOOGL), Amazon (AMZN), Microsoft (MSFT), and Tesla (TSLA) closed down more than -1%.  In addition, Apple (AAPL) fell -0.14%.

Advanced Micro Devices (AMD) closed down more than -5% to lead chipmakers lower after GF Securities downgraded the stock to hold from buy.  Also, Marvell Technology (MRVL) closed down more than -5%, and ARM Holdings Plc (ARM) closed down more than -4%.  In addition, Broadcom (AVGO) closed down more than -3%, and Qualcomm (QCOM), Microchip Technology (MCHP), ON Semiconductor (ON), GlobalFoundries (GFS), NXP Semiconductors NV (NXPI), and Micron Technology (MU) closed down more than -1%.

Viking Therapeutics (VKTX) closed down more than -42% after a Phase 2 trial of its oral weight loss drug showed 28% of patients discontinued treatment over tolerability concerns. 

Fabrinet (FN) closed down more than -12% after it said it expects to see a sequential dip in datacom segment revenue in its fiscal Q1, citing supply constraints for some critical components. 

Amer Sports (AS) closed down more than -4% after forecasting Q3 adjusted operating margin of 12% to 13%, below the consensus of 13%. 

Vertiv Holdings (VRT) closed down more than -4% after GLJ Research initiated coverage on the stock with a recommendation of sell and a price target of $112. 

Medtronic Plc (MDT) closed down more than -2% after reporting Q1 adjusted operating margin of 23.6%, weaker than the consensus of 23.7%.

Intel (INTC) closed up more than +6% to lead gainers in the S&P 500 and Nasdaq 100 after SoftBank Group Corp agreed to buy $2 billion of the company’s stock. 

Trucking companies moved higher on Tuesday.  JB Hunt Transport Services (JBHT) and Knight-Swift Transportations Holdings (KNX) closed up more than +3%.  Also, Old Dominion Freight Line (ODFL), FedEx (FDX), and Schneider National (SNDR) closed up more than +2%.  In addition, CSX Corp (CSX) closed up more than +1%. 

Home Depot (HD) recovered from an early decline and closed up more than +3% to lead gainers in the Dow Jones Industrials after reporting that July comparable same-store sales rose more than +3%. 

Prologis (PLD) closed up more than +5% after Mizuho Securities upgraded the stock to outperform from neutral with a price target of $118.

Best Buy (BBY) closed up more than +3% after announcing the launch of a new third-party seller platform, which more than doubles the number of its available products online. 

Palo Alto Networks (PANW) closed up more than +3% after it forecast 2026 revenue of $10.48 billion-$10.53 billion, stronger than the consensus of $10.44 billion. 

Earnings Reports(8/20/2025)

Analog Devices Inc (ADI), Coty Inc (COTY), Estee Lauder Cos Inc/The (EL), Lowe’s Cos Inc (LOW), Nordson Corp (NDSN), Target Corp (TGT), TJX Cos Inc/The (TJX).