The S&P 500 Index ($SPX) (SPY) Tuesday closed up +0.58%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.51%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.79%.  June E-mini S&P futures (ESM25) are up +0.58%, and June E-mini Nasdaq futures (NQM25) are up +0.81%. 

Stock indexes on Tuesday shook off early losses and rallied, with the S&P 500 posting a 3-month high, the Dow Jones Industrials posting a 2-week high, and the Nasdaq 100 posting a 3-1/4 month high.  Strength in chip makers on Tuesday boosted technology stocks and supported gains in the broader market.  Stocks extended their gains on signs of a healthy US labor market after the Apr JOLTS job openings report showed an unexpected increase in job listings.  

The upside in stocks was muted Tuesday after the OECD cut its 2025 global GDP forecast for the second time this year, citing trade barriers and uncertainty that are weighing on economic confidence.  Also, the steeper-than-expected decline in US April factory orders was bearish for equity prices.  In addition, the heightened trade tensions between the US and China continue to weigh on stock prices following China’s Ministry of Commerce’s accusation on Monday that the US had unilaterally introduced new discriminatory restrictions. 

US Apr factory orders fell -3.7% m/m, weaker than expectations of -3.2% m/m and the biggest decline in 15 months.

US Apr JOLTS job openings unexpectedly rose +191,000 to 7.391 million, showing a stronger labor market than expectations of a decline to 7.100 million.

Comments on Tuesday from Atlanta Fed President Bostic were slightly hawkish and negative for stocks and bonds when he said he’s in no rush to cut interest rates as “there’s still a way to go in terms of progress on inflation.”

The Organization for Economic Cooperation and Development (OECD) cut its global 2025 GDP forecast to +2.9% from a March forecast of +3.1%, citing the impact of tariffs and uncertainty on confidence and investment.

Weakness in Chinese manufacturing activity is negative for global growth prospects.  The China May Caixin manufacturing PMI unexpectedly fell -2.1 to 48.3, weaker than expectations of an increase to 50.7 and the lowest level in more than 2-1/2 years.

The markets are discounting the chances at 1% for a -25 bp rate cut at the next FOMC meeting on June 17-18.

The markets this week will focus on any new trade or tariff news. On Wednesday, the May ADP employment change is expected to climb by +110,000, and the May ISM services index is expected to rise +0.5 to 52.1.  On Thursday, weekly initial unemployment claims are expected to fall by -5,000 to 235,000.  On Friday, May nonfarm payrolls are expected to climb +125,000, and the May unemployment rate is expected to remain unchanged at 4.2%.  Finally, May average hourly earnings are expected to rise +0.3% m/m and +3.7% y/y. 

Overseas stock markets on Tuesday settled mixed.  The Euro Stoxx 50 closed up +0.38%.  China’s Shanghai Composite closed up +0.43%.  Japan’s Nikkei Stock 225 closed down -0.06%.

Interest Rates

September 10-year T-notes (ZNU25) Tuesday close down -0.5 of a tick.  The 10-year T-note yield rose +1.8 bp to 4.458%.  Sep T-notes on Tuesday gave up early gains and turned lower after the US Apr JOLTS job openings unexpectedly rose, a hawkish factor for Fed policy.  Also, hawkish comments from Atlanta Fed President Bostic weighed on T-notes when he said he’s in no rush to cut interest rates.  In addition, Tuesday’s rally in the S&P 500 to a 3-month high reduced safe-haven demand for T-notes.

T-notes on Tuesday initially moved higher on positive carryover from a rally in European government bonds due to an ECB-friendly Eurozone May CPI report.  Also, Tuesday’s action by the OECD to cut its global 2025 GDP forecast for the second time this year was supportive of T-notes.  In addition, the slide in US Apr factory orders by the most in 15 months was supportive for T-notes.

European government bond yields on Tuesday were mixed.  The 10-year German bund yield rebounded from a 3-1/2 week low of 2.485% and finished up +0.1 bp to 2.525%.  The 10-year UK gilt yield dropped to a 3-week low of 4.601% and finished down -2.9 bp to 4.638%.

Eurozone May CPI eased to +1.9% y/y from +2.2% y/y in Apr, better than expectations of +2.0% y/y and the smallest increase in 8 months.  May core CPI eased to +2.3% y/y from +2.7% y/y in Apr, better than expectations of +2.4% y/y and the smallest increase in 3-1/3 years.

The Eurozone Apr unemployment rate fell -0.1 and matched the record low of 6.2%, right on expectations.

Swaps are discounting the chances at 97% for a -25 bp rate cut by the ECB at Thursday’s policy meeting.

US Stock Movers

Strength in chip stocks supported gains in the broader market.  ON Semiconductor Corp (ON) closed up more than +11% to lead gainers in the Nasdaq 100.  Also, Microchip Technology (MCHP) closed up more than +6%, and Micron Technology (MU) closed up more than +4%.  In addition, NXP Semiconductors NV (NXPI) and Broadcom (AVGO) closed up more than +3%, and Nvidia (NVDA) closed up more than +2% to lead gainers in the Dow Jones Industrials.  Finally, Advanced Micro Devices (AMD), Applied Materials (AMAT), GlobalFoundries (GFS), ARM Holdings Plc (ARM), and Texas Instruments (TXN) closed up more than +2%.

Dollar General (DG) closed up more than +15% to lead gainers in the S&P 500 after reporting Q1 net sales of $10.44 billion, stronger than the consensus of $10.28 billion, and raising its 2026 net sales forecast to +3.7% to +4.7% from a previous view of +3.4% to +4.4%.

MoonLake Immunotherapeutics (MLTX) closed up more than +18% after the Financial Times reported that Merck held talks to acquire the company. 

Ferguson Enterprises (FERG) closed up more than +17% after reporting Q3 revenue of $7.62 billion, above the consensus of $7.41 billion. 

Signet Jewelers (SIG) closed up more than +12% after reporting Q1 sales of $1.54 billion, above the consensus of $1.52 billion, and raising its 2026 adjusted EPS forecast to $7.70-$9.38 from a previous forecast of $7.31-$9.10, the midpoint above the consensus of $8.39. 

Pinterest (PINS) closed up more than +3% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $40.

Lululemon Athletica (LULU) closed up more than +3%6after Evercore ISI raised its price target on the stock to $400 from $320. 

Real Estate Investment Trust companies (REITs) retreated Tuesday. Mid-America Apartment Communities (MAA) closed down more than -2%.  Also, Welltower (WELL), Healthpeak Properties (DOC),  AvalonBay Communities (AVB), Equity Residential (EQR), and Essex Property Trust (ESS) closed down more than -1%.

Kenvue (KVUE) closed down more than -5% to lead losers in the S&P 500 after CEO Mongon warned that seasonal demand is behind last year and the company’s expectations.

EchoStar (SATS) closed down more than -11% after deciding not to make a $183 million cash interest payment due June 2 in light of uncertainty raised by an FCC review.

Earnings Reports (6/4/2025)

Dollar Tree Inc (DLTR), Five Below Inc (FIVE), MongoDB Inc (MDB), PVH Corp (PVH), Thor Industries Inc (THO).