The S&P 500 Index ($SPX) (SPY) Monday closed up +1.76%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.42%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +2.16%. June E-mini S&P futures (ESM25) are up +1.74%, and June E-mini Nasdaq futures (NQM25) are up +2.07%.
Stock indexes on Monday rallied sharply, with the S&P 500, the Dow Jones Industrials, and the Nasdaq 100 posting 2-week highs. Stocks rallied Monday on reports over the weekend that said the upcoming US reciprocal tariffs next week would be more targeted than previously stated and narrower than initially planned, with some countries exempt and existing tariffs on steel and other metals possibly not being cumulative. President Trump is preparing a “Liberation Day” tariff announcement on April 2 that will include a significant expansion of reciprocal tariffs but will be more focused than the wide-ranging global tariffs that Mr. Trump has threatened, calming market fears about the impact on global trade and growth. Gains in stocks accelerated Monday when President Trump said that some nations will receive possible exemptions or reductions from next week’s tariffs, saying, “I may give a lot of countries breaks.”
Strength in the Magnificent Seven stocks and chip stocks Monday led the overall market higher. Also, increased M&A activity supported stocks after James Hardie Industries agreed to acquire Azek Co for $8.75 billion in cash and stock. Also, Clearlake Capital Group agreed to acquire Dun & Bradstreet Holdings for about $4.1 billion.
Monday’s US economic news was mixed for stocks after the Feb Chicago Fed national activity index and the Mar S&P Global services PMI rose more than expected, but the Mar S&P Global manufacturing PMI unexpectedly contracted.
The US Feb Chicago Fed national activity index unexpectedly rose +0.26 to 0.18, stronger than expectations of a decline to -0.17.
The US Mar S&P Global manufacturing PMI fell -2.9 to 49.8, weaker than expectations of 51.7. However, the Mar S&P Global services PMI rose +3.3 to 54.3, stronger than expectations of no change at 51.0.
Monday’s hawkish comments from Atlanta Fed President Bostic were bearish for stocks and bonds when he said he sees just one 25 bp rate cut by the Fed this year “because I think we’re going to see inflation be very bumpy and not move dramatically and in a clear way to the 2% target.”
This week’s attention will focus on Tuesday’s reports on Feb new home sales (expected +3.5% m/m to 680,000) and the Conference Board’s US Mar consumer confidence index (expected -4.7 to 93.6). On Wednesday, the Feb capital goods new orders nondefense ex-aircraft and parts report is expected unchanged m/m. On Thursday, Q4 GDP is expected to be unrevised at +2.3% (q/q annualized), and Mar pending home sales are expected +1.0% m/m. On Friday, Feb personal spending is expected +0.5% m/m, and Feb personal income is expected +0.4% m/m. Also, the Feb core PCE price index, the Fed’s preferred inflation gauge, is expected +0.3% m/m and +2.7% y/y. Finally, on Friday, the revised Mar University of Michigan consumer sentiment index is expected to remain unchanged at 57.9.
Heightened geopolitical risks in the Middle East are negative for stocks. Israel continues its airstrikes across Gaza, ending a two-month ceasefire with Hamas, and Israeli Prime Minister Netanyahu vowed to act “with increasing military strength” to free hostages and disarm Hamas. Also, the US continues to launch strikes on Yemen’s Houthi rebels. US Defense Secretary Hegseth said strikes would be “unrelenting” until the group stops attacking vessels in the Red Sea. The Houthi rebels said they would respond by attacking US vessels in the Red Sea.
Stocks have been under pressure over the past three weeks due to fears that US tariffs will weaken economic growth and corporate earnings. On March 4, President Trump imposed 25% tariffs on Canadian and Mexican goods and doubled the tariff on Chinese goods to 20% from 10%. On March 8, Mr. Trump reiterated that he would impose reciprocal tariffs and additional sector-specific tariffs on foreign nations on April 2.
The markets are discounting the chances at 16% for a -25 bp rate cut after the May 6-7 FOMC meeting.
Overseas stock markets on Monday settled mixed. The Euro Stoxx 50 closed down -0.15%. China’s Shanghai Composite Index recovered from a 1-1/2 week low and closed up +0.15%. Japan’s Nikkei Stock 225 closed down -0.18%.
Interest Rates
June 10-year T-notes (ZNM25) Monday closed down -17.5 ticks. The 10-year T-note yield rose +8.3 bp to 4.329%. June T-notes retreated on Monday after stocks rallied sharply on reports that President Trump’s reciprocal tariffs on April 2 will be more targeted than previously expected, curbing safe-haven demand for T-notes. Rising inflation expectations are bearish for T-notes after the 10-year breakeven inflation rate rose to a 2-1/2 week high Monday of 2.357%. Supply pressures also weighed on T-notes as the Treasury will auction $211 billion of T-notes and floating-rate notes this week, beginning with Tuesday’s auction of $69 billion of 2-year T-notes. Losses in T-notes accelerated Monday on hawkish comments from Atlanta Fed President Bostic, who said he sees just one 25 bp rate cut by the Fed this year.
European bond yields on Monday were mixed. The 10-year German bund yield rose +0.6 bp to 2.771%. The 10-year UK gilt yield fell from a 1-week high of 4.742% and finished unchanged at 4.713%.
The Eurozone Mar S&P manufacturing PMI rose +1.1 to a 2-year high of 48.7, stronger than expectations of 48.2.
The UK Mar S&P manufacturing PMI unexpectedly fell -1.7 to 44.6, weaker than expectations of an increase to 47.2 and the steepest pace of contraction in 1-1/2 years.
ECB Executive Board member Cipollone said the ECB’s case to keep cutting interest rates has strengthened since its last decision earlier this month.
Swaps are discounting the chances at 65% for a -25 bp rate cut by the ECB at the April 17 policy meeting.
US Stock Movers
The Magnificent Seven stocks rallied Monday and boosted the overall market. Tesla (TSLA) closed up more than +11% to lead gainers in the S&P 500 and Nasdaq 100. Also, Nvidia (NVDA), Amazon.com (AMZN), and Meta Platforms (META) closed up more than +3%. In addition, Alphabet (GOOGL) and Apple (AAPL) closed up more than +1%, and Microsoft (MSFT) closed up +0.47%.
Chip stocks pushed higher on Monday to provide support to the broader market. Advanced Micro Devices (AMD) closed up more than +7%, and NXP Semiconductors NV (NXPI) closed up more than +5%. Also, ARM Holdings Plc (ARM), ON Semiconductor (ON), and Microchip Technology (MCHP) close up more than +4%. In addition, Analog Devices (ADI), Marvell Technology (MRVL), KLA Corp (KLAC), and Texas Instruments (TXN) closed up more than +3%.
Cryptocurrency-exposed stocks surged on Monday after the price of Bitcoin jumped more than +4% to a 2-week high. As a result, Coinbase Global (COIN), MicroStrategy (MSTR), MARA Holdings (MARA), and Riot Platforms (RIOT) closed up more than +6%.
Azek Co (AZEK) closed up more than +17% after James Hardie Industries agreed to buy the company for $8.75 billion in cash and stock.
Coherent Corp (COHR) closed up more than +12% after Raymond James upgraded the stock to strong buy from outperform with a price target of $91.
Viasat Inc. (VSAT) closed up more than +14% after Deutsche Bank upgraded the stock to buy from hold with a price target of $15.
FedEx (FDX) closed up more than +5% after Jeffries upgraded the stock to buy from hold with a price target of $275.
Pinterest (PINS) closed up more than +4% after Guggenheim Securities upgraded the stock to buy from neutral with a price target of $40.
Dun & Bradstreet Holdings (DNB) closed up more than +2% after Clearlake Capital Group agreed to acquire the company for about $4.1 billion.
With Monday’s broad market rally, defensive food and beverage producers and their packagers were under pressure. As a result, Hormel Foods (HRL) closed down more than -2% to lead losers in the S&P 500. Also, Brown-Forman (BF.B) closed down more than -2%, and Kraft Heinz (KHC) closed down more than -1%.
Super Micro Computer (SMCI) closed down more than -1% after Goldman Sachs downgraded the stock to sell from neutral with a price target of $32.
Lockheed Martin (LMT) closed down more than -1%, adding to last Friday’s -4% loss after the US government picked rival Boeing to build the next-generation US fighter jet. Also, Melius Research LLC downgraded the stock to hold from buy.
Earnings Reports (3/25/2025)
Core & Main Inc (CNM), Crown Holdings Inc (CCK), GameStop Corp (GME), McCormick & Co Inc/MD (MKC).
