The S&P 500 Index ($SPX) (SPY) Friday closed down -0.01%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.32%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.05%.  September E-mini S&P futures (ESU25) fell -0.08%, and September E-mini Nasdaq futures (NQU25) fell -0.10%.

Stocks gave up an early advance on Friday and settled slightly lower on mixed earnings results and weakness in health insurance providers.  Netflix fell by more than 5% and weighed on technology stocks after the company forecasted full-year operating margins below consensus.

Also, health insurance stocks retreated after Humana lost a lawsuit to reverse cuts to its Medicare bonus payments and after Elevance Health was downgraded. 

Stocks maintained slight losses Friday afternoon after the Financial Times reported that President Trump is pushing for a minimum tariff of 15%-20% in any trade deal with the European Union (EU), as Mr. Trump has remained unmoved by the latest EU offer to reduce car tariffs.  Also, the Financial Times said that EU trade commissioner Sefcovic gave a downbeat assessment of recent trade talks in Washington on Friday to EU ambassadors.

Stock indexes initially moved higher on Friday, with the S&P 500 and Nasdaq 100 posting new record highs.  Bullish factors included the stronger-than-expected housing starts report and generally upbeat earnings reports.  Also, the University of Michigan's US July consumer sentiment index rose more than expected to a 5-month high.

Falling bond yields are supportive of stocks following dovish comments from Fed Governor Christopher Waller on Thursday evening, who stated that he supports a Fed interest rate cut at the July 29-30 FOMC meeting.  Also, an easing of inflation expectations in Friday's University of Michigan's July inflation expectations report was bullish for T-notes and stocks. The 10-year T-note yield fell -2 bp to 4.43%.

US June housing starts rose +4.6% m/m to 1.321 million, stronger than expectations of 1.300 million.  Also, June building permits, a proxy for future construction, unexpectedly rose +0.2% m/m to 1.397 million versus expectations of a -0.5% m/m decline to 1.387 million.

The University of Michigan's July US consumer sentiment index rose +1.1 to a 5-month high of 61.8, stronger than expectations of 61.5.

The University of Michigan's US July 1-year inflation expectations indicator fell to a 5-month low of +4.4%, better than expectations of no change at +5.0%. Also, the July 5-10 year inflation expectations indicator eased to a 5-month low of +3.6%, weaker than expectations of +3.9%.

Thursday evening, Fed Governor Christopher Waller said, "With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate.  I believe it makes sense to cut the FOMC's policy rate by 25 basis points two weeks from now."

Recent trade news has put some downward pressure on stocks.  President Trump said late Wednesday that he intends to send a tariff letter to more than 150 countries notifying them their tariff rates could be 10% or 15%, effective August 1, and that the group was "not big countries who don't do that much business with the US."

Also, President Trump last weekend 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.

Federal funds futures prices are discounting the chances for a -25 bp rate cut at 5% at the July 29-30 FOMC meeting and 58% at the following meeting on September 16-17.

Earnings season began in earnest this week as big bank earnings results came in stronger than expected.  Early results now show S&P 500 earnings are on track to rise +3.2% for the second quarter, better than the pre-season expectations of +2.8% y/y, 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 on Friday settled mixed.  The Euro Stoxx 50 closed down -0.33%.  China's Shanghai Composite closed up +0.50%.  Japan's Nikkei Stock 225 fell from a 2.5-week high and closed down -0.21%.

Interest Rates

September 10-year T-notes (ZNU25) on Friday closed up +8.5 ticks.  The 10-year T-note yield fell -2.3 bp to 4.428%.  T-notes rose Friday on dovish comments from Fed Governor Christopher Waller, who said he backs a Fed rate cut at the July 29-30 FOMC meeting. Also, falling inflation expectations in Friday's University of Michigan report were bullish for T-notes.

On the bearish side, Friday's US housing starts report was stronger than expected.  Also, Friday's increase in the University of Michigan US July consumer sentiment to a 5-month high was negative for T-notes.

European government bond yields on Friday moved higher.  The 10-year German bund yield rose +2.0 bp to 2.695%.  The 10-year UK gilt yield climbed to a 1.5-month high of 4.684% and finished up +1.9 bp to 4.674%.

Eurozone May construction output fell -1.7% m/m, the biggest decline in nearly 2.5-years.

The German June PPI fell -1.3% y/y, right on expectations and the steepest pace of decline in 9 months.

Swaps are discounting the chances at 1% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

Weakness in managed health care stocks weighed on the broader market Friday.  Molina Healthcare (MOH) closed down more than -10% to lead losers in the S&P 500, and Elevance Health (ELV) closed down more than -8% after Leerink Partners downgraded the stock to market perform from outperform.  Also, Centene (CNC) closed down more than -3%, and CVS Health Corp (CVS) and UnitedHealth Group (UNH) closed down more than -2%.  In addition, Humana (HUM) closed down more than -1% after it lost a lawsuit seeking to reverse cuts to its Medicare bonus payments.

Netflix (NFLX) closed down more than -5% after forecasting a full-year operating margin of 29.5%, below the consensus of 29.7%.

3M Co (MMM) closed down more than -3% to lead losers in the Dow Jones Industrials after cutting its full-year organic sales estimate to +2% from a previous forecast of +2% to +3%.

Sarepta Therapeutics (SRPT) closed down more than -36% after it said another patient died from acute liver failure after receiving one of its experimental gene therapies for a muscle disease. 

Autoliv (ALV) closed down more than -4% after reporting Q2 adjusted operating margin of 9.30%, below the consensus of 9.35%. 

Builders FirstSource (BLDR) closed down more than -3% after Zelman & Associates downgraded the stock to underperform. 

American Express (AXP) closed down more than -2% after reporting Q2 total expenses of $12.90 billion, above the consensus of $12.73 billion. 

Talen Energy (TLN) closed up more than +24% after acquiring gas-fired power plants in Pennsylvania and Ohio for $3.5 billion. 

Invesco Ltd (IVZ) closed up more than +15% to lead gainers in the S&P 500 after it filed a proxy statement with the SEC seeking to convert the Invesco QQQ Trust Series 1 into an open-ended fund from a unit investment trust.

Interactive Brokers Group (IBKR) closed up more than +7% after reporting Q2 total net interest income of $860 million, well above the consensus of $794.7 million. 

Regions Financial (RF) closed up more than +6% after reporting Q2 net interest income of $1.27 billion, better than the consensus of $1.24 billion, and raising its full-year net interest income growth estimate to +3% to +5% from a previous estimate of +1% to +4%.

Abbott Laboratories (ABT) closed up more than +2% after Jefferies upgraded the stock to buy from hold with a price target of $145.

Norfolk Southern (NSC) closed up more than +2% on reports that Union Pacific is said to be exploring an acquisition of the company. 

Charles Schwab (SCHW) closed up more than +2% after reporting Q2 net revenue of $5.85 billion, stronger than the consensus of $5.72 billion.

Earnings Reports (7/21/2025)

AGNC Investment Corp (AGNC), Alexandria Real Estate Equities (ARE), BOK Financial Corp (BOKF), Cleveland-Cliffs Inc (CLF), Crown Holdings Inc (CCK), Domino's Pizza Inc (DPZ), Equity LifeStyle Properties In (ELS), Medpace Holdings Inc (MEDP), NXP Semiconductors NV (NXPI), RLI Corp (RLI), Roper Technologies Inc (ROP), Steel Dynamics Inc (STLD), Verizon Communications Inc (VZ), W R Berkley Corp (WRB), Wintrust Financial Corp (WTFC), Zions Bancorp NA (ZION).