U.S. stock indexes experienced notable gains on Tuesday, propelled by optimistic developments in U.S.-China trade discussions. The S&P 500 Index surged by 0.55%, closing at levels not seen in over three months. The Dow Jones Industrial Average rose by 0.25%, while the Nasdaq 100 Index saw an increase of 0.66%. This upward momentum was mirrored in the futures market, with June E-mini S&P futures climbing 0.54% and June E-mini Nasdaq futures rising by 0.64%.
Market optimism was particularly driven by recent comments from U.S. Commerce Secretary Lutnick, who indicated that trade negotiations with China were progressing well. He stated that discussions would continue if necessary, catalyzing a midday surge in stocks. However, gains were somewhat tempered by a global economic outlook adjustment from the World Bank, which lowered its 2025 global GDP forecast from 2.7% to 2.3%.
As the week unfolds, market watchers are keenly focused on developments related to tariffs and ongoing trade dialogue between the U.S. and China. Investors will also be attuned to incoming economic data. Reports due for release include May’s Consumer Price Index (CPI), which is projected to rise to 2.5% year-over-year from April’s reading of 2.3%. The core CPI, excluding food and energy, is expected to increase to 2.9% year-over-year, up from 2.8% in April. Additionally, Thursday’s release of initial unemployment claims is anticipated to drop by 6,000 to a total of 241,000, while the final-demand Producer Price Index (PPI) for May is forecasted to rise to 2.6% year-over-year from April’s 2.4%.
While the U.S. markets showed strength, overseas markets displayed a mixed performance. The Euro Stoxx 50 index fell marginally by 0.11%, while equities in Japan and China displayed contrasting trajectories. Japan’s Nikkei Stock 225 index increased by 0.32%, reaching a three-and-a-half-month high, whereas China’s Shanghai Composite index declined by 0.44% after hitting a similar peak earlier this month.
In the bond market, September 10-year Treasury notes showed modest gains, closing up by 1.5 ticks. The yield on 10-year Treasury notes fell slightly to 4.472%, supported by rising optimism stemming from U.S.-China trade negotiations, which might ease inflationary pressures. Nonetheless, demand for Treasury securities remained tepid, particularly after a $58 billion auction of three-year notes, which witnessed a bid-to-cover ratio below the 10-auction average.
European government bond yields experienced a downward trend, particularly the 10-year German Bund, which fell by 4.4 basis points to 2.523%. Meanwhile, the 10-year UK gilt yield decreased to a one-month low, closing down by 9 basis points. Investor sentiment in the Eurozone improved, with the June Sentix investor confidence index rising to 0.2, marking a one-year high and surpassing expectations of -5.5.
On the domestic front, economic indicators released from the U.K. revealed a more significant than expected drop in employed payrolls for May, with a decline of 109,000 jobs, the largest reduction in five years. This report may have implications for British monetary policy, as market expectations currently assign a 13% probability to a potential 25 basis point rate cut by the European Central Bank in light of these labor market conditions.
In the equity markets, semiconductor stocks were the standout performers, reflecting strong demand and optimism within the technology sector. Intel Corporation, for instance, saw its stock price rise over 7%, leading the gains within both the S&P 500 and Nasdaq. Other notable performers included KLA Corporation and Lam Research, whose shares rose more than 3%. The broader market was also supported by a rally in oil prices, with West Texas Intermediate crude reaching levels not seen in over two months. Companies in the energy sector, such as Schlumberger and Haliburton, benefitted significantly, with both stocks up over 4%.
Several firms released positive earnings reports that further fueled market enthusiasm. Insmed Inc. surged more than 28% following promising results from a Phase 2b clinical trial investigating a new therapy for pulmonary arterial hypertension. Casey’s General Stores also saw a gain of over 11%, reporting earnings per share that exceeded analyst expectations.
Conversely, some stocks faced downward pressure. JM Smucker’s shares plunged more than 15% after reporting disappointing net sales and issuing a lower-than-expected earnings forecast. Additionally, Rubrik Inc. announced a $1 billion convertible senior notes offering, which resulted in a more than 5% decline in its stock price.
As investors sift through the latest economic and market data, the focus remains on the ongoing developments in U.S.-China trade talks and their potential implications for the global economy. Market analysts anticipate that clarity on tariff policies and trade agreements alongside the upcoming economic reports could steer market sentiment in the days ahead.
The nuanced interplay between economic indicators, corporate earnings, and geopolitical factors continues to shape the landscape for investors, prompting ongoing vigilance as developments unfold.