The S&P 500 Index ($SPX) (SPY) on Wednesday closed up +0.29%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.47%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.12%.  September E-mini S&P futures (ESU25) rose +0.33%, and September E-mini Nasdaq futures (NQU25) closed up +0.11%.

Stocks ended the day higher after President Trump denied that he intends to summarily fire Fed Chair Powell, although he left open the possibility of firing him for cause. Stocks temporarily dropped during midday after reports circulated that Mr. Trump had told Republican House members that he met with on Tuesday that he wanted to fire Mr. Powell.

Stocks found support early in the session on the soft PPI report, which was dovish for Fed policy.  Stocks also found support after the 10-year T-note yield ended the day down -3 bp. The afternoon Beige Book report was supportive of stocks, as it indicated a small improvement in economic activity compared to the previous report.

The Nasdaq 100 index was undercut by weakness in chip stocks after ASML's disappointing guidance, although some chip stocks recovered later in the day.

Wednesday's June PPI report was favorable, as both the month-over-month and year-over-year figures were better than expected, suggesting that tariff inflation has not yet hit the producer level.  The PPI report sparked some inflation optimism after Tuesday's mixed CPI report.

Specifically, the June final-demand PPI was unchanged m/m and +2.3% y/y, which was weaker than expectations of +0.2% m/m and +2.5% y/y.  The June core PPI report of unchanged m/m and +2.6% y/y was weaker than expectations of +0.2% m/m and +2.6% y/y.  The year-over-year figures of +2.3% (nominal) and +2.6% y/y (core) were down from the revised May figures of +2.7% and +3.2%, respectively.

Wednesday's June US industrial production report of +0.3% m/m was slightly stronger than market expectations of +0.1%, and May was revised higher to unchanged from -0.2%. The June US manufacturing production report of +0.1% m/m was slightly stronger than expectations of unchanged.

The July New York Fed services business activity index rose to -9.3 from -13.2 in June.

The Fed's Beige Book survey of the US regional economies showed that US economic activity "increased slightly between late May and early July." The report said, "That represented an improvement over the previous report, in which half of the districts reported at least slight declines in activity." The report added, "Uncertainty remained elevated, contributing to the ongoing caution by businesses." 

Regarding inflation, the Beige Book stated that all districts reported price increases, with businesses experiencing "modest to pronounced input cost pressures related to tariffs." The report added, "Many firms passed on at least a portion of the cost increases to consumers through price hikes or surcharges, although some held off raising prices because of customers' growing price sensitivity, resulting in compressed profit margins."

Expectations for Fed policy ended the day little changed after some movement on the Powell news. Federal funds futures prices are discounting the chances for a -25 bp rate cut at 3% at the July 29-30 FOMC meeting and 58% at the following meeting on Sep 16-17.

Bitcoin (^BTSUSD) rallied +2.3% on Wednesday, overcoming part of Tuesday's -3.3% decline.  Bitcoin rose after President Trump said he talked right-wing House Republicans into supporting the stablecoin bill the House is considering, although House Speaker Johnson still couldn't get a procedural vote approved by late afternoon.  Bitcoin has rallied sharply in the past several weeks, driven by hopes for favorable crypto regulation from Washington.

On the trade front, President Trump said Wednesday that he intends to send a tariff letter to more than 150 countries, giving the entire group the same tariff.  He said that group wouldn't be the "big" countries.

Recent trade and tariff news has been mixed.  There was some positive trade news Tuesday after Treasury Secretary Bessent said that US-China trade talks are in a "very good place" and told market participants "not to worry about August 12," the deadline for US-China trade talks.  There was also some positive trade news on Tuesday after President Trump announced that his administration had reached a trade deal with Indonesia.

However, stocks were undercut by negative trade news that emerged last week and during this past weekend.  Over the weekend, President Trump announced that the US will impose 30% tariffs on US imports from the European Union and Mexico, effective August 1.  Mr. Trump said last Thursday that a 35% tariff on some Canadian products would take effect on August 1, up from the current 25%. Last week, Mr. Trump imposed a 50% tariff on copper imports, which will include semi-finished goods, and stated that drug companies could face tariffs as high as 200% on imports if they don't relocate production to the US within the next year.

The markets will focus on any fresh news regarding tariffs or trade deals during the remainder of this week.  On Thursday, June retail sales are expected to climb by +0.1% m/m and +0.3% ex-autos, and weekly initial unemployment claims are expected to climb by +7,000 to 234,000.  Also, on Thursday, the July Philadelphia Fed business outlook survey is expected to climb +3.0 points to -1.0, and the July NAHB housing market index is expected to rise +1 to 33.  On Friday, June housing starts are expected to climb +3.3% m/m to 1.298 million, and June building permits are expected to slip -0.6% m/m to 1.386 million.  Also, the University of Michigan's US July consumer sentiment index is expected to climb +0.8 to 61.5.

Earnings season began in earnest this week with a focus on big bank earnings results.  The consensus is for S&P 500 companies to show Q2 earnings growth of +2.8% y/y, the smallest increase in two years, according to Bloomberg Intelligence.  Also, only six of the eleven S&P 500 sectors are projected to post an increase in earnings, the fewest since Q1 of 2023, according to Yardeni Research. 

Overseas stock markets today are lower.  The Euro Stoxx 50 closed down -1.05%.  China's Shanghai Composite closed down -0.03%.  Japan's Nikkei Stock 225 closed down -0.04%.

Interest Rates

September 10-year T-notes (ZNU25) rose +10.5 ticks.  The 10-year T-note yield fell -3.2 bp to 4.449%.  Bullish factors included the favorable PPI report and some safe-haven demand amidst the latest tariff threats.  Bearish factors included the stronger-than-expected US industrial production and Beige Book reports, and the +1.0 bp rise in the 10-year inflation expectations rate to 2.424%.

The short end of the Treasury curve saw some temporary support from reports that President Trump wants to fire Fed Chair Powell, which could result in a near-term cut in the Fed's federal funds rate target range by Powell’s replacement.  However, the long end of the Treasury curve would view a Powell firing as a bearish development due to the inflation risks of a politically driven central bank potentially pursuing artificially low interest rates.

European government bond yields ended mixed.  The 10-year German bund yield fell -2.4 bp to 2.687%.  The 10-year UK gilt yield rose +1.4 bp to 4.639%.

Swaps are discounting the chances at 2% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

The Magnificent Seven stocks closed mixed, with four gainers and three losers.  The largest movers were Tesla (TSLA), with a gain of more than +3.5%, and Amazon (AMZN), with a loss of -1.4%.

Wall Street firms reported generally positive results early Wednesday.  Goldman Sachs (GS) ended the day up +0.9% after reporting a Wall Street record of $4.3 billion of equity-trading revenue.  Also, management fees in asset and wealth management rose +11% y/y.

Bank of America (BAC) closed the day down -0.3% despite reporting that its trading division posted a record quarter and that net interest income was better than expected.

Morgan Stanley (MS) ended the day down -1.3% despite reporting strong equity-trading income and boosting net new assets in its wealth management division.

ASML (ASML) fell more than -8% after issuing cautious guidance for next year.  The report dampened enthusiasm for the chip sector, which generally turned lower after Tuesday's rally on optimism about the Trump administration's move to loosen some chip sale restrictions to China.   

Micron Technology (MU) closed down more than -3%, while Marvell Technology (MRVL) and Applied Materials (AMAT) closed down more than -2%.

Cryptocurrency-exposed stocks traded higher after bitcoin (^BTCUSD) rallied +2.3% on the improved prospects for House passage of a crypto bill supported by the industry and the White House.  Riot Platforms (RIOT), Mara Holdings (MARA), and Strategy (MSTR) closed up more than +3%.

Johnson & Johnson (JNJ) rallied more than +6% after raising its full-year sales guidance for the year and reporting better-than-expected Q2 earnings and revenue.

Earnings Reports (7/17/2025)

PepsiCo Inc (PEP), Travelers Cos Inc/The (TRV), Abbott Laboratories (ABT), Elevance Health Inc (ELV), Cintas Corp (CTAS), Marsh & McLennan Cos Inc (MMC), US Bancorp (USB), Snap-on Inc (SNA), General Electric Co (GE), Citizens Financial Group Inc (CFG), Fifth Third Bancorp (FITB), Netflix Inc (NFLX).