Oleksandr Pylypenko
10 min read
In This Article:
September S&P 500 E-Mini futures (ESU25) are trending up +0.28% this morning amid renewed optimism about trade deals, while investors await the release of the Federal Reserve’s first-line inflation gauge.
U.S. Commerce Secretary Howard Lutnick said late on Thursday that the U.S. and China had finalized an understanding on trade, and added that the White House is close to reaching agreements with 10 major trading partners ahead of a July 9th deadline when reciprocal tariffs are set to take effect. Also, the Treasury Department announced an agreement with G-7 allies that will exempt U.S. companies from certain foreign-imposed taxes in exchange for dropping the “revenge tax” provision from U.S. President Donald Trump’s tax bill.
In yesterday’s trading session, Wall Street’s major indices closed higher. Enphase Energy (ENPH) surged over +12% and was the top percentage gainer on the S&P 500 on signs that Congress may not eliminate tax credits for rooftop solar panels. Also, chip stocks gained ground, with Marvell Technology (MRVL) climbing more than +5% to lead gainers in the Nasdaq 100 and Broadcom (AVGO) rising over +2%. In addition, McCormick & Co. (MKC) gained more than +5% after the spice maker posted better-than-expected FQ2 adjusted EPS and reaffirmed its full-year guidance. On the bearish side, Equinix (EQIX) slumped over -9% and was the top percentage loser on the S&P 500 after BMO Capital and Raymond James downgraded the stock.
The U.S. Bureau of Economic Analysis’ third estimate showed on Thursday that the economy contracted at a 0.5% annualized pace in the first quarter, revised from the prior estimate of -0.2%. Also, U.S. durable goods orders shot up +16.4% m/m in May, stronger than expectations of +8.6% m/m, while core durable goods orders, which exclude transportation, rose +0.5% m/m, stronger than expectations of +0.1% m/m. In addition, U.S. pending home sales rose +1.8% m/m in May, stronger than expectations of +0.2% m/m. Finally, the number of Americans filing for initial jobless claims in the past week fell -10K to 236K, compared with the 244K expected.
“The economy is slowing, but remains resilient. While the numbers as a whole don’t necessarily make a compelling case for bulls or bears, for the time being, the market appears fixated on tech strength and the S&P 500’s potential return to record levels,” said Chris Larkin at E*Trade from Morgan Stanley.
Richmond Fed President Tom Barkin said on Thursday that he expects tariffs to exert upward pressure on prices, and with significant uncertainty still lingering, the central bank should wait for greater clarity before making any changes to interest rates. Also, Chicago Fed President Austan Goolsbee said the central bank could resume rate cuts if inflation shows a clear path toward the policymakers’ 2% target and uncertainty surrounding the economic outlook diminishes. In addition, San Francisco Fed President Mary Daly said she’s observing increasing evidence that tariffs may not trigger a significant or sustained inflation spike, supporting the argument for a rate cut in the fall.
