July 31st, 2025
Tech Stocks Power Market Rebound
Equity markets are rallying this morning, led by strength in technology shares, as investors shift focus from Fed Chair Powell’s cautious stance on rate cuts to upbeat Q2 earnings from major tech firms. The NASDAQ is setting the pace in early trading, with tech gains also driving a sharp rise in the S&P 500. The Dow is up modestly as well. However, momentum is more muted outside U.S. large caps: the Russell 2000 is in the red, Canadian stocks are flat, and international markets struggled overnight.
Economic Takeaways:
- In fixed income, longer-dated government bonds are seeing modest gains, with the U.S. 10-year Treasury yield slipping 2 basis points.
- The U.S. dollar continues to strengthen, climbing to a two-month high against a basket of trade-weighted currencies.
- President Trump reaffirmed a 15% tariff on South Korean goods and introduced a higher 25% rate on imports from India. Trade deals are reportedly in progress with Taiwan, Thailand, and Cambodia.
- In a partial reprieve, refined copper—the largest subcategory of the metal—was exempted from a planned 50% tariff, triggering a sharp decline in U.S. copper futures.
- Additional trade announcements are expected ahead of the August 1st policy deadline.
- On the economic front, personal consumption rose just 0.1% in June, a tepid rebound from May’s 0.2% drop, reflecting household caution amid slower income growth and tariff uncertainty. Core PCE inflation rose 0.3% month-over-month, in line with expectations, with core goods prices up 2.3% annualized over the past three months as tariff effects begin to filter through to consumers.
- Initial jobless claims remain low, but the July Challenger report showed a notable increase in planned layoffs—raising the risk of future labor market softening.
- The Fed kept rates unchanged yesterday where they’ve been since last December.
- Crude oil pulled back after briefly topping $70/barrel and reclaiming its 200-day moving average, driven earlier in the week by U.S.-Russia tensions.
- Treasury yields declined after China’s official manufacturing PMI slipped to 49.3, signaling contraction. U.S. tariffs on South Korean imports also contributed to easing yields, though sticky U.S. inflation reflected in PCE data later tempered the move.
- Bitcoin rebounded 1.3%, with crypto-linked stocks like MicroStrategy (MSTR) and Coinbase (COIN) ticking higher. The sector had dipped late yesterday after a hawkish Fed tone raised caution around risk assets.
Trump Grants Mexico 90-Day Tariff Reprieve as Trade Negotiations Intensify
President Trump announced Thursday that Mexico will receive a 90-day extension on current U.S. tariff rates, providing additional time for the two countries to reach a trade agreement.
“We will be talking to Mexico over the next 90 Days with the goal of signing a Trade Deal somewhere within the 90 Day period of time, or longer,” Trump wrote on social media following a conversation with Mexican President Claudia Sheinbaum.
The move delays a potential escalation with America’s largest trading partner as Trump’s sweeping new tariffs are set to take effect Friday. In recent days, the administration has accelerated trade activity, striking new deals and issuing multiple tariff-related orders.
Global Trade Shifts Accelerate
In addition to the Mexico reprieve, Trump confirmed a new agreement with South Korea that imposes a 15% tariff on Korean imports while exempting U.S. exports. Deals with Thailand and Cambodia are expected to follow, and an agreement with Taiwan is reportedly nearing completion.
On Wednesday, Trump took a harder stance with India and Brazil. He threatened a 25% tariff on Indian goods and imposed a 50% tariff on many Brazilian imports—though key categories such as orange juice and aircraft parts, which benefit Brazilian aerospace firm Embraer (ERJ), were exempted.
New Tariff Orders Signed
Three executive orders were signed Wednesday:
A 50% tariff on semi-finished copper products, effective Aug. 1, excluding copper scrap and raw input materials.
An end to the de minimis exemption for imports under $800, with tariffs taking effect Aug. 29.
Targeted tariffs on Brazilian goods, with key U.S. imports receiving carve-outs.
Copper futures plunged nearly 22% following the announcements.
More Deals in the Works
Treasury Secretary Scott Bessent stated Thursday that the U.S. and China are making progress, noting “the makings of a trade deal” after a third round of negotiations. Meanwhile, the U.S. and EU are working rapidly to finalize their own agreement ahead of Friday’s deadline.
On the Move
- Microsoft shares surged 8% pre-market after cloud revenue jumped 27%, beating expectations. Azure and related services led the way with a 39% gain, while other business segments also topped company guidance.
- Meta Platforms soared nearly 12% after issuing stronger-than-expected Q3 revenue guidance and maintaining capital spending plans. While steady capex may underwhelm chip investors following Alphabet’s recent hike, Meta signaled an increase in 2025. A 9% rise in average ad pricing helped drive revenue, and the company credited AI initiatives for enhancing its ad business.
- Nvidia (NVDA) and AMD (AMD) each gained 2.5% in early trading, benefiting from bullish sentiment around AI demand fueled by Microsoft and Meta’s strong results.
- CVS Health (CVS) climbed nearly 8% after posting a strong earnings beat and issuing an upbeat outlook.
- Qualcomm (QCOM) dropped 5% despite topping quarterly earnings estimates. The company’s forecast met expectations, but revenue from handset and auto segments missed.
- Ford (F) edged lower after beating Q2 revenue estimates and reinstating guidance. The automaker said tariffs would cost $3 billion, though $1 billion could be offset, per CNBC.
- Arm Holdings (ARM) fell 7% despite reporting results and an outlook in line with expectations.
- Lam Research (LRCX) slid 8% pre-market, even after beating revenue and earnings estimates and issuing guidance above consensus.
- Comcast (CMCSA) gained 6% on better-than-expected earnings.
- Norwegian Cruise Line (NCLH) jumped 13% despite missing EPS expectations, as it posted record Q2 revenue.
What’s Ahead
All eyes also now turn to Friday’s payrolls report.
Friday’s non-farm payrolls report is expected to show job growth slowing to 102,000, down from 147,000 in June. Much of June’s strength came from a spike in public-sector hiring in education—an unlikely repeat in July. Forecasts for this month’s report vary widely, ranging from zero to 170,000, reflecting uncertainty among analysts and businesses as they navigate a murky landscape shaped by geopolitical tensions and tariff shifts. The unemployment rate, which stood at 4.1% in June, is expected to edge up to 4.2%. However, recent declines in labor force participation have helped keep the rate relatively contained. While recent payrolls data have tended to surprise to the upside—including in June—the outperformance was largely driven by temporary factors that may not carry over into July.
With Chair Powell emphasizing labor market health as a key factor in monetary policy, a weak reading could increase market expectations for a September rate cut. Markets are currently pricing in a 40% chance of a 25bps move at that meeting.
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