The S&P 500 Index ($SPX) (SPY) Wednesday closed down -0.27%, the Dow Jones Industrials Index ($DOWI) (DIA) closed unchanged, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.37%.  June E-mini S&P futures (ESM25) are down -0.25%, and June E-mini Nasdaq futures (NQM25) are down -0.31%. 

Stock indexes on Wednesday gave up an early advance and settled lower.  Chip stocks relinquished early gains on Wednesday and retreated, which weighed on the overall market. 

Also, rising geopolitical risks sparked long liquidation in stocks after Reuters reported that the US embassy in Iraq is preparing to be evacuated because of rising security risks.  Tensions in the region have increased this week as talks between the US and Iran over its advancing nuclear program appear to have hit an impasse. President Trump said Wednesday that he's "less confident" about convincing Iran to shut down its nuclear program.  If the US and Iran are at an impasse, it is possible that Israel might decide to proceed with a military attack on Iran’s nuclear facilities.

Stocks initially moved higher on Wednesday, with the S&P 500 and Nasdaq 100 climbing to 3 1/2-month highs and the Dow Jones Industrial Average posting a 3-month high.  Stocks were supported Wednesday by falling bond yields and a weaker-than-expected US May core CPI report, which eased inflation concerns.  The 10-year T-note yield fell -5 bp to 4.41%.

Stocks also saw early support on Wednesday after President Trump announced that a trade framework between the US and China had been completed, with China agreeing to supply rare earths and magnets "up front" in exchange for the US allowing Chinese students into US colleges and universities. After nearly 20 hours of negotiations in London, US officials said both sides had established a framework to revive the flow of sensitive goods between the two countries. 

US MBA mortgage applications rose +12.5% in the week ended June 6, with the purchase mortgage sub-index up +10.3% and the refinancing sub-index up +15.6%.  The average 30-year fixed rate mortgage rose +1 bp to 6.93% from 6.92% in the prior week. 

US May CPI rose +2.4% y/y, right on expectations.  May CPI ex-food and energy rose +2.8% y/y, unchanged from April and a smaller increase than expectations of +2.9% y/y.

The US May federal budget deficit widened to a 6-month high of -$316.0 billion, a larger deficit than expectations of -$314.0 billion.

The markets this week will focus on any fresh tariff news and the US-China trade negotiations.  On Thursday, weekly initial unemployment claims are expected to fall -6,000 to 241,000. Also, the May final-demand PPI is expected to increase to +2.6% y/y from +2.4% y/y in April, while May PPI ex-food and energy is expected to remain unchanged from April at +3.1% y/y.  On Friday, the preliminary June University of Michigan US consumer sentiment index is expected to climb +1.3 to 53.5. 

The markets are discounting the chances at 0% for a -25 bp rate cut at the next FOMC meeting on June 17-18.

Overseas stock markets on Wednesday were mixed.  The Euro Stoxx 50 closed down -0.41%.  China's Shanghai Composite rose to a 4-week high and closed up +0.52%.  Japan's Nikkei Stock 225 climbed to a 3-1/2 month high and closed up +0.55%.

Interest Rates

September 10-year T-notes (ZNU25) Wednesday closed up +15.5 ticks.  The 10-year T-note yield fell -5.8 bp to 4.412%.  Sep T-notes on Wednesday recovered from overnight losses and rallied higher after the US May core CPI rose less than expected, a dovish factor for Fed policy.  T-notes also rose after the 10-year breakeven inflation expectations rate dropped to a 1-month low today of 2.275%.  T-notes maintained their gains despite mediocre demand for the Treasury's $39 billion auction of 10-year T-notes that had a bid-to-cover ratio of 2.53, below the 10-auction average of 2.56.

T-notes on Wednesday initially moved lower on negative carryover from weakness in European government bonds.  Also, supply pressures weighed on T-notes as the Treasury auctioned $39 billion of 10-year T-notes on Wednesday as part of this week's $119 billion auction package of T-notes and T-bonds. 

European government bond yields on Wednesday moved higher.  The 10-year German bund yield rose +1.1 bp to 2.535%. The 10-year UK gilt yield rose +1.0 bp to 4.552%.

The ECB's wage tracker predicts Q4 2025 wage growth in the Eurozone rising +1.7% y/y, above expectations of +1.6% y/y but well below the +5.4% y/y in Q4 2024.

Swaps are discounting the chances at 13% for a -25 bp rate cut by the ECB at the July 24 policy meeting.

US Stock Movers

The weakness of chip stocks weighed on the broader market.  Intel (INTC) closed down more than -6% to lead losers in the S&P 500 and Nasdaq 100.  Also, ON Semiconductor Corp (ON) closed down more than -3%, and GlobalFoundries (GFS) closed down more than -2%.  In addition, Advanced Micro Devices (AMD), Texas Instruments (TXN), and Marvell Technology (MRVL) closed down more than -1%. 

US steelmakers retreated on Wednesday after the US and Mexico closed in on a deal to remove tariffs on some steel imports, boosting speculation that other countries could also receive concessions.  As a result, Cleveland-Cliffs (CLF) closed down more than -8%, Nucor (NUE) closed down more than -6%, and Steel Dynamics (STLD) and Commercial Metals (CMC) closed down more than -2%. 

Airline stocks were under pressure Wednesday after WTI crude oil surged to a 2-1/4-month high, which is expected to boost jet fuel prices and undercut airlines' earnings.  United Airlines Holdings (UAL) and American Airlines Group (AAL) closed down more than -5%.  Also, Delta Air Lines (DAL) and Alaska Air Group (ALK) closed down more than -4%, and Southwest Airlines (LUV) closed down more than -2%. 

American Superconductor Corp (AMSC) closed down more than -14% after selling an underwritten public offering of common stock overnight between $28 and $29 a share, well below Tuesday's closing price of $34.35. 

Chewy (CHWY) closed down more than -11% after reporting a Q1 gross margin of 29.6%, below the consensus of 29.9%. 

Gitlab (GTLB) closed down more than -10% after forecasting Q2 revenue of $226 million-$227 million, below the consensus of $227.1 million.

Lockheed Martin (LMT) closed down more than -4% after the US Air Force cut in half its request to Congress for F-35 aircraft. 

Warner Bros Discovery (WBD) closed up +5% to lead gainers in the S&P 500 and Nasdaq 100 after it said it may buy back more of its bonds than the $14.6 billion announced it will buy back on Monday.

Talen Energy (TLN) closed up more than +7% after expanding its existing nuclear pact with Amazon.com to provide 1,920 MW of power to Amazon's data centers through 2042. 

Starbucks (SBUX) closed up more than +4% after CEO Niccol told the Financial Times that a possible sale of a stake in its China business has drawn "a lot of interest."

GE Vernova (GEV) closed up more than +3% after Guggenheim Securities raised its price target on the stock to $600 from $380.

Energy producers and service providers rallied Wednesday after crude prices surged more than +4% to a 2-1/4 month high.  Devon Energy (DVN), ConocoPhillips (COP), Occidental Petroleum (OXY), and Haliburton (HAL) closed up more than +2%.  Also, Exxon Mobil (XOM), Phillips 66 (PSX), APA Corp (APA), Marathon Petroleum (MPC), and Valero Energy (VLO) closed up more than +1%. 

Palantir Technologies (PLTR) closed up more than +2% after Mizuho Securities raised its price target on the stock to $116 from $94.

Earnings Reports (6/12/2025)

Adobe Inc (ADBE), America's Car-Mart Inc/TX (CRMT), Immersion Corp (IMMR), Lovesac Co/The (LOVE), RH (RH).