The S&P 500 Index ($SPX) (SPY) Tuesday closed up +0.72%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.30%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.26%.  March E-mini S&P futures (ESH25) rose by +0.68%, and March E-mini Nasdaq futures (NQH25) rose by +1.26%. 

Stock indexes Tuesday settled moderately higher.  Stock index futures rallied in overnight trade after President Trump late Monday agreed to delay 25% tariffs on Canada for a month.  Stocks extended their gains on Tuesday on strength in megacap technology stocks.

Stocks moved higher Tuesday despite the US imposing a 10% tariff on Chinese goods.  China retaliated immediately and announced 15% tariffs on US coal and liquified natural gas and 10% levies on US oil and agriculture equipment.  China also declared export control on tungsten-related materials, and the State Administration for Market Regulation said it would launch a probe into Google regarding anti-trust law breaches.  The Chinese tariffs are set to take effect on February 10, potentially leaving room for negotiation.

Stocks also found support after T-note yields declined on Tuesday's weaker-than-expected US economic reports.  Dec JOLTS job openings fell -556,000 to 7.6 million, showing a weaker labor market than expectations of 8.0 million.  Also, Dec factory orders fell -0.9% m/m, weaker than expectations of -0.8% m/m and the biggest decline in 6 months.

Fed comments were on the hawkish side.  Monday evening, Chicago Fed President Goolsbee said, "The Fed has got to be a little more careful and more prudent of how fast interest rates can come down because there are risks that inflation is about to start kicking back up again."  On Tuesday, San Francisco Fed President Daly said the US economy is in a good position and "the Fed can take its time to look at what's coming in, both on the economy and any policy changes" before deciding on interest rates.

Corporate earnings results on Tuesday were mixed.  Palantir Technologies closed up more than +23% after reporting better-than-expected Q4 revenue and forecasting full-year revenue above consensus.  Also, Cummins closed up more than +4% after reporting stronger-than-expected Q4 net sales.  On the negative side, Estee Lauder closed down more than -16% after forecasting Q3 organic net sales below consensus.  Also, Merck closed down more than -9% after projecting weaker-than-expected full-year total sales. 

Earnings season is in full swing as companies report Q4 earnings results.  Megacap technology companies Alphabet and Advanced Micro Devices are set to report earnings after Tuesday's close.  Qualcomm will release earnings on Wednesday.  Amazon.com will release its quarterly results on Thursday.  According to Bloomberg Intelligence, analysts estimate S&P 500 earnings grew by +7.5% y/y in Q4, the second-highest pre-season forecast in the past three years.

The markets are discounting the chances at 15% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets Tuesday settled higher.  The Euro Stoxx 50 closed up +0.895%.  China's Shanghai Composite Index did not trade Tuesday and will reopen Wednesday after the week-long Lunar New Year holiday.  Japan's Nikkei Stock 225 closed up +0.72%.

Interest Rates

March 10-year T-notes (ZNH25) Tuesday closed up +8 ticks.  The 10-year T-note yield fell -3.8 bp to 4.517%.  March T-notes Tuesday recovered from a 1-week low and moved higher, and the 10-year T-note yield fell from a 1-week high of 4.596%.   T-notes recovered early losses and posted moderate gains as short covering emerged on Tuesday's weaker-than-expected US economic reports on Dec JOLTS job openings and Dec factory orders. 

T-notes initially moved lower as the safe-haven demand for T-notes subsided after President Trump delayed imposing tariffs on Canada and Mexico for a month.  T-notes were also weighed down by negative carryover from Tuesday's rise in European government bond yields.  In addition, T-notes were undercut by the inflationary implications of the 10% US tariffs on Chinese goods, which are hawkish for Fed policy. 

European government bond yields Tuesday moved higher.  The 10-year German bund yield rose +1.1 bp to 2.396%. The 10-year UK gilt yield rose +3.5 bp to 4.522%.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at the March 6 policy meeting.

US Stock Movers

Palantir Technologies (PLTR) closed up more than +23% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q4 revenue of $827.5 million, stronger than the consensus of $775.9 million, and forecast full-year revenue of $3.74 billion-$3.76 billion, well above the consensus of $3.54 billion. 

Megacap technology stocks rose Tuesday to give the overall market a boost.  Alphabet (GOOGL), Apple (AAPL), and Tesla (TSLA) closed up more than +2%.  Also, Nvidia (NVDA), Amazon.com (AMZN), and Meta Platforms (META) closed up more than +1%. 

Super Micro Computer (SMCI) closed up more than +8% after saying it would give a business update on February 11 after being given an extension to file its financial reports for the fiscal year ended June 30 and the quarterly report for the period ended September 30. 

Xylem Inc (XYL) closed up more than +5% after reporting Q4 revenue of $1.26 billion, stronger than the consensus of $2.18 billion. 

Fox Corp (FOXA) closed up more than +5% after reporting Q2 revenue of $5.08 billion, better than the consensus of $4.85 billion.

Regeneron Pharmaceuticals (REGN) closed up more than +4% after reporting Q4 adjusted EPS of $12.07, well above the consensus of $11.32.

Cummins (CMI) closed up more than +4% after reporting Q4 net sales of $8.45 billion, better than the consensus of $8.12 billion.

Spotify Technology (SPOT) closed up more than +13% after reporting Q4 monthly active users of 675 million, better than the consensus of 664.94 million, and forecast Q1 monthly active users of 678 million, better than the consensus of 667.61 million. 

Estee Lauder (EL) closed down more than -16% to lead losers in the S&P 500 after forecasting Q3 organic net sales falling -8% to -10%, weaker than the consensus of -5.08%. 

PayPal Holdings (PYPL) closed down more than -13% to lead losers in the Nasdaq 100 after reporting Q4 total payment volume in its unbranded payment-processing business rose +2%, well below the +29% growth seen in the same quarter last year.   

Merck & Co (MRK) closed down more than -8% to lead losers in the Dow Jones Industrials after saying it was halting shipments of its cancer-preventing Gardasil vaccine to China to at least through mid-year and projected full-year total sales between $64.1 billion-$65.6 billion, weaker than the consensus of $67.4 billion. 

Ball Corp (BALL) closed down more than -6% after reporting Q4 net sales of $2.88 billion, weaker than the consensus of $2.91 billion.

Centene (CNC) closed down more than -5% after reporting Q4 its Q4 profit was aided by a settlement related to payments insured through Obamacare plans.  The settlement boosted 2024 earnings by 29 cents a share, accounting for almost all of its 33 cents-a-share outperformance for 2024 adjusted earnings. 

Illumina (ILMN) closed down more than -5%, and PVH Corp (PVH) closed down more than -1% after China placed the companies on a blacklist of entities, citing infringement of market transaction principles and damaging actions against Chinese companies. 

Archer-Daniels-Midland (ADM) closed down more than -5% after forecasting 2025 adjusted EPS of $4.00 to $4.75, the midpoint below the consensus of $4.66.

PepsiCo (PEP) closed down more than -4% after reporting Q4 net revenue of $27.78 billion, below the consensus of $28.05 billion.

Earnings Reports (2/5/2025)

Aflac Inc (AFL), Align Technology Inc (ALGN), Allstate Corp/The (ALL), AvalonBay Communities Inc (AVB), Bio-Techne Corp (TECH), Boston Scientific Corp (BSX), Bunge Global SA (BG), CDW Corp/DE (CDW), Cencora Inc (COR), Cognizant Technology Solutions (CTSH), Corpay Inc (CPAY), Corteva Inc (CTVA), Dayforce Inc (DAY), Emerson Electric Co (EMR), Fiserv Inc (FI), Ford Motor Co (F), Globe Life Inc (GL), Hologic Inc (HOLX), Illinois Tool Works Inc (ITW), Johnson Controls International (JCI), McKesson Corp (MCK), MetLife Inc (MET), Mid-America Apartment Communities (MAA), Molina Healthcare Inc (MOH), News Corp (NWSA), Old Dominion Freight Line Inc (ODFL), O'Reilly Automotive Inc (ORLY), PTC Inc (PTC), QUALCOMM Inc (QCOM), Skyworks Solutions Inc (SWKS), Stanley Black & Decker Inc (SWK), STERIS PLC (STE), T Rowe Price Group Inc (TROW), Uber Technologies Inc (UBER), UDR Inc (UDR), Walt Disney Co/The (DIS).