The S&P 500 Index ($SPX) (SPY) Wednesday closed up +0.47%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.02%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.73%.  September E-mini S&P futures (ESU25) are up +0.37%, and September E-mini Nasdaq futures (NQU25) are up +0.61%. 

Stock indexes settled mostly higher on Wednesday, with the S&P 500 posting a new all-time high.  Strength in semiconductor makers on Wednesday led the broader market higher.  Also, Wednesday's +3% rally in WTI crude oil prices underpinned energy producers.  Stocks added to their gains after President Trump announced that the US had reached a trade deal with Vietnam.

However, gains in the broader market were limited by concern that the US labor market is weakening, following the June ADP employment report, which showed that employment at US companies unexpectedly declined for the first time in more than two years.  Weakness in health insurance stocks also weighed on the overall market, led by a -40% plunge in Centene after it withdrew its 2025 guidance due to insurance market trends that differed from its initial assumptions.

The markets are awaiting a House vote on the Senate version of President Trump's tax and spending bill.  Also, trade talks are in focus ahead of the July 9 deadline for reciprocal tariff implementation.  Late Tuesday, President Trump said a trade deal with Japan is unlikely, so the country will most likely pay a tariff of 30%, 35%, or "whatever the number is that we determine."  

On Tuesday, the Senate passed the Republican reconciliation bill by a 51-50 vote.  The bill is currently being considered by the House, where a vote is expected sometime this week.  Speaker Johnson said the House "will work quickly" to try to pass the bill by July 4.  The nonpartisan Congressional Budget Office estimates that the bill would add nearly $3.3 trillion to US budget deficits over the next decade.  The reconciliation bill has the debt ceiling hike that is necessary to avert a Treasury default when the Treasury runs out of borrowing authority on the so-called “X-date,” which falls sometime between mid-August and late September. 

US MBA mortgage applications rose +2.7% in the week ended June 27, with the purchase mortgage sub-index up +0.1% and the refinancing mortgage sub-index up +6.5%.  The average 30-year fixed rate mortgage fell -9 bp to 6.79% from 6.88% in the prior week.

US June ADP employment unexpectedly fell -33,000, weaker than expectations of a +98,000 increase and the first decline in 2-1/4 years.

Richmond Fed President Barkin said the numbers on the US economy remain solid and there's no urgency to change monetary policy at the moment.

On the negative side for stocks is the upcoming earnings season, which begins next week.  Bloomberg Intelligence data show that the consensus for Q2 earnings of S&P 500 companies is for a rise of +2.8% year-over-year, the smallest increase in two years.  Also, only six of the 11 S&P 500 sectors are projected to post an increase in earnings, the fewest since Q1 of 2023, according to Yardeni Research.

During this holiday-shortened week, the markets will look for additional trade and tariff news along with progress in the possible passage of President Trump's tax bill.  On Thursday, June nonfarm payrolls are expected to climb by +106,000, and the June employment rate is expected to tick up +0.1 to 4.3%.  Also, June average hourly earnings are expected to rise +0.3% m/m and +3.8% y/y.  In addition, weekly initial unemployment claims are expected to climb +5,000 to 241,000, and May factory orders are expected to jump +8.1% m/m.  Finally, the June ISM services index is expected to climb +0.7 to 50.6. 

Federal funds futures prices are discounting the chances at 23% for a -25 bp rate cut at the July 29-30 FOMC meeting.

Overseas stock markets on Wednesday settled mixed.  The Euro Stoxx 50 closed up +0.69%.  China's Shanghai Composite closed down -0.09%.  Japan's Nikkei Stock 225 closed down -0.56%.

Interest Rates

September 10-year T-notes (ZNU25) Wednesday closed down by -7.5 ticks.  The 10-year T-note yield rose +4.5 bp to 4.287%. 

T-notes were under pressure on Wednesday due to carryover weakness in European government bonds.  Also, speculation that Congress is close to passing President Trump's tax and spending bill sparked some weakness in T-note prices.  The Congressional Budget Office estimates that the bill would add nearly $3.3 trillion to US deficits over the next decade, which would boost Treasury security sales to fund the deficits.  Rising inflation expectations also undercut T-note prices, as the 10-year breakeven inflation expectations rate rose to a one-week high Wednesday of 2.323%.  Losses in T-notes were limited after the June ADP employment report unexpectedly declined for the first time in more than two years, a dovish factor for Fed policy. 

European government bond yields on Wednesday moved higher.  The 10-year German bund yield jumped to a 1-1/2 month high of 2.675% and finished up +9.0 bp to 2.664%.  The 10-year UK gilt yield rose to a 3-week high of 4.633% and finished up +15.8 bp to 4.612%.

The Eurozone May unemployment rate unexpectedly rose +0.1 to 6.3%, showing a weaker labor market than expectations of no change at 6.2%

ECB Governing Council member Centeno said the ECB "is not in a hurry" to cut interest rates further despite inflation being at its 2% target.

ECB Governing Council member Rehn said he's "concerned about inflation being below the ECB's target for an extended period of time" as the ECB is projecting 18 months of inflation below its goal due to US tariffs and the Eurozone economy's struggle to expand.

Swaps are discounting the chances at 5% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

Strength in semiconductor stocks on Wednesday was supportive of the overall market.  NXP Semiconductor NV (NXPI) and ON Semiconductor (ON) closed up more than +4%, and Applied Materials (AMAT) closed up more than +3%.  Also, Nvidia (NVDA), Texas Instruments (TXN), and KLA Corp (KLAC) closed up more than +2%.  In addition, Microchip Technology (MCHP), Lam Research (LRCX), Advanced Micro Devices (AMD), and Analog Devices (ADI) closed up more than +1%.

Energy producers and energy service providers rallied Wednesday after the price of WTI crude oil jumped more than +3% to a 1-week high.  As a result, APA Corp (APA), Baker Hughes (BKR), Devon Energy (DVN), Phillips 66 (PSX), Valero Energy (VLO), ConocoPhillips (COP), and Occidental Petroleum (OXY) closed up more than +2%. 

Tesla (TSLA) closed up more than +4% after reporting June Shanghai deliveries rose +0.8% y/y to 71,599 units, the first increase in Chinese shipments this year. 

Verint Systems (VRNT) closed up more than +14% after Bloomberg News reported that buyout firm Thoma Bravo is in talks to acquire the company.

Nike (NKE) closed up more than +4% to lead gainers in the Dow Jones Industrials after President Trump said the US reached a trade deal with Vietnam.

Constellation Brands (STZ) closed up more than +4% after forecasting 2026 comparable EPS of $12.60 to $12.90, the midpoint above the consensus of $12.68. 

Apple (AAPL) closed up more than +2% after Jeffries upgraded the stock to hold from underperform.

Health insurance stocks sold off Wednesday, led by a -40% plunge in Centene (CNC) after it withdrew its 2025 guidance, citing insurance market trends that differed from its assumptions and threatened $1.8 billion in revenue.  Also, Molina Healthcare (MOH) closed down by more than -21%, and Elevance Health (ELV) closed down by more than -11%.  In addition, UnitedHealth Group (UNH) closed down more than -5% to lead losers in the Dow Jones Industrials.  Finally, CVS Health (CVS) and Cigna Group (CI) closed down more than -4%, and Humana (HUM) and HCA Healthcare (HCA) closed down more than -2%. 

Insurance stocks retreated Wednesday.  American International Group (AIG) closed down more than -4%.  Also, Travelers Cos (TRV), Hartford Insurance Group (HIG), and Globe Life (GL) closed down more than -3%.  In addition, Assurant (AIZ), Aflac (AFL), Allstate (ALL), Chubb Ltd (CB), and Erie Indemnity (ERIE) closed down more than -2%.

BrightView Holdings (BV) closed down more than -10% after cutting its full-year revenue forecast to $2.68 billion-$2.73 billion from a previous forecast of $2.75 billion-$2.84 billion, below the consensus of $2.78 billion. 

Oscar Health (OSCR) closed down more than -19% after Barclays initiated coverage of the stock with a recommendation of underweight and a price target of $17. 

Intel (INTC) closed down more than -4% to lead losers in the Nasdaq 100 after Reuters reported CEO Tan is exploring a strategy shift in Intel's foundry business that would entail no longer marketing certain chipmaking technology to external customers, potentially resulting in a charge that could total hundreds of millions of dollars. 

Adobe Inc (ADBE) closed down more than -3% after Rothchild & Co downgraded the stock to sell from hold with a price target of $280. 

Earnings Reports (7/3/2025)

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