The S&P 500 Index ($SPX) (SPY) Thursday closed down -0.53%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.25%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.80%.  June E-mini S&P futures (ESM25) are down -0.52%, and June E-mini Nasdaq futures (NQM25) are down -0.84%. 

Stock indexes on Thursday gave up early gains and retreated after Tesla plunged more than -14% to lead technology stocks lower when President Trump proposed ending government contracts and subsidies for Elon Musk's companies. 

Concerns about the US labor market also weighed on stocks after weekly jobless claims unexpectedly rose to a 7-3/4 month high.  Also, Thursday's downward revision to US Q1 nonfarm productivity and upward revision to Q1 unit labor costs were bearish for stocks.  In addition, higher bond yields are negative for stocks after the 10-year T-note yield rose +4 bp to 4.40% as it rebounded from a 4-week low of 4.31% on negative carryover from a slide in 10-year German bunds after ECB President Lagarde said the ECB was nearing the end to its rate cutting cycle.

Stocks on Thursday initially moved higher, with the S&P 500 posting a 3-1/4 month high and the Nasdaq 100 posting a 3 1/2-month high on hopes that trade tensions will ease between the US and China.  US President Trump and Chinese President Xi Jinping spoke by telephone Thursday and agreed to further trade talks.  President Xi urged the US to remove "negative" measures that have roiled trade tensions between the two countries.   The Chinese president also said the countries should work to reduce misunderstandings and that Trump was welcome to visit China.

Stocks also garnered support from Thursday's economic news that showed the US trade deficit in April shrank to a 20-month low, a positive factor for Q2 GDP.

US weekly initial unemployment claims unexpectedly rose +8,000 to a 7-3/4 month high of 247,000, showing a weaker labor market than expectations of a decline to 235,000.

The US Apr trade deficit shrank to a 20-month low of -$61.6 billion, narrower than expectations of -$66.0 billion.

US Q1 nonfarm productivity was revised lower to -1.5% from -0.8%.  Q1 unit labor costs were revised upward to 6.6% from the previously reported 5.7%.

Hawkish Fed comments on Thursday were negative for stocks and bonds. Fed Governor Kugler said, "Disinflation has slowed, and we are already seeing the effects of higher tariffs, which I expect will continue to raise inflation over 2025," so I support holding interest rates steady if these risks linger.  Also, Philadelphia Fed President Harker said he's supportive of recent decisions to "keep the Fed's policy interest rate steady" until we see how the US economy will react to President Trump's policies for immigration, trade, taxes, and regulation.

The markets are discounting the chances at 3% for a -25 bp rate cut at the next FOMC meeting on June 17-18.

The markets this week will focus on any fresh trade or tariff news. 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 Thursday settled mixed.  The Euro Stoxx 50 closed up +0.10%.  China's Shanghai Composite climbed to a 1-1/2 week high and closed up +0.23%.  Japan's Nikkei Stock 225 closed down -0.51%.

Interest Rates

September 10-year T-notes (ZNU25) Thursday closed down -10 ticks.  The 10-year T-note yield rose +4.2 bp to 4.397%.  Sep T-notes Thursday fell from a 4-week high and moved lower, and the 10-year T-note yield rose from a 4-week low of 4.310% and moved higher. T-notes gave up early gains Thursday and turned lower as an easing of US-China trade tensions curbed safe-haven demand for T-notes after President Trump and President Xi Jinping spoke by telephone and agreed to additional talks.  T-notes also fell on negative carryover from a slide in 10-year German bunds on hawkish comments from ECB President Lagarde, who said the ECB is nearing the end of its rate-cutting cycle.  In addition, T-notes fell after Thursday's news showed US Q1 nonfarm productivity was revised downward and Q1 unit labor costs were revised higher.

T-notes on Thursday initially moved higher when weekly US jobless claims unexpectedly rose to a 7-3/4 month high, a sign of labor market weakness and a dovish factor for Fed policy.  Also, an easing in inflation expectations is bullish for T-notes after the US 10-year breakeven inflation rate fell to a 3-week low Thursday at 2.296%. 

European government bond yields on Thursday moved higher.  The 10-year German bund yield rebounded from a 4-week low of 2.476% and finished up +5.5 bp to 2.582%.  The 10-year UK gilt yield rebounded from a 3-1/2 week low of 4.554% and finished up +1.0 bp to 4.616%.

Eurozone Apr PPI fell -2.2% m/m and rose +0.7% y/y, weaker than expectations of -2.1% m/m and +1.1% y/y.

German Apr factory orders unexpectedly rose +0.6% m/m, stronger than expectations of -1.5% m/m.

The ECB, as expected, cut the deposit facility rate by -25 bp to 2.00% from 2.25% and said, "Inflation is currently at around the Governing Council's 2% medium-term target."

ECB President Lagarde said risks to growth "tilted to the downside" as recent survey data points to weaker near-term prospects for the Eurozone economy.  However, a stronger labor market and rising incomes will help the economy, and she wouldn't exclude further upward revisions to growth.  She added that the ECB is getting toward the end of its rate cut cycle with today's rate cut.

Swaps are discounting the chances at 42% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

Chip makers gave up early gains on Thursday and turned lower, weighing on the broader market.  Advanced Micro Devices (AMD) closed down more than -2%.  Also, Marvell Technology (MRVL), ON Semiconductor (ON), Nvidia (NVDA), Intel (INTC), NXP Semiconductors NV (NXPI), and Qualcomm (QCOM), closed down more than -1%.   

Brown-Forman (BF.B) closed down more than -17% to lead losers in the S&P 500 after reporting Q4 net sales of $894 million, well below the consensus of $968.4 million.

Tesla (TSLA) closed down more than -14% to lead losers in the Nasdaq 100 after President Trump proposed ending government contracts and subsidies for Elon Musk's companies. 

PVH Corp (PVH) closed down more than -17% after cutting its 2026 adjusted EPS forecast to $10.75-$1.00 from a previous forecast of $12.40-$12.75, well below the consensus of $12.46. 

Ciena Corp (CIEN) closed down more than -12% after reporting Q2 adjusted EPS of 42 cents, weaker than the consensus of 52 cents. 

Costco Wholesale (COST) closed down more than -3% after reporting May total comparable sales rose +4.3%, weaker than the consensus of +4.7% 

Procter & Gamble (PG) closed down more than -1% to lead losers in the Dow Jones Industrials after announcing it expects to take a $1.6 billion charge over the next two years as it cuts its workforce by 7,000 or 15%. 

Mining stocks rose Thursday after the price of silver soared to a 13-year high.  As a result, Freeport-McMoRan (FCX) and Anglogold Ashanti Plc (AU) closed up more than +2%. 

MongoDB (MDB) closed up more than +12% after reporting Q1 adjusted EPS of $1.06, well above the consensus of 67 cents, and raising its 2026 adjusted EPS forecast to $2.94-$3.12 from a previous estimate of $2.44-$2.62, stronger than the consensus of $2.60. 

Five Below (FIVE) closed up more than +5% after reporting Q1 comparable sales rose +7.1%, better than the consensus of +6.37%, and forecast 2026 comparable sales will climb +3% to +5%, the midpoint above the consensus of +3.78%. 

Dollar Tree (DLTR) closed up more than +9% to lead gainers in the S&P 500 after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $111. 

MarketAxess Holdings (MKTX) closed up more than +3% after reporting a May total average daily volume of $46.23 billion, up +44% y/y. 

Tractor Supply (TSCO) closed up more than +3% after company executives delivered positive demand commentary during an industry conference hosted by Baird.

Earnings Reports (6/6/2025)

ABM Industries Inc (ABM), FuelCell Energy Inc (FCEL), G-III Apparel Group Ltd (GIII), Virco Mfg. Corp (VIRC).