Nasdaq Secures Record Close as Investors Shake off Tariff Threats, Eye Key Inflation Data

Stocks

China–U.S. Trade War

Summary:

Officials from the EU and Mexico are pushing to continue negotiations with the US in hopes of securing a lower rate via a new deal.

US stocks rose on Monday with the Nasdaq (^IXIC) closing at a fresh record as Wall Street ultimately shrugged off renewed trade tensions and looked ahead to a key inflation report and the first wave of second quarter earnings.

The S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) finished the mostly muted trading day up around 0.1% and 0.2%, respectively. The tech-heavy Nasdaq Composite (^IXIC) added around 0.3% to secure yet another all-time closing high.

Meanwhile, bitcoin (BTC-USD) spiked above $123,000 for the first time as investors greeted the open of Congress's "Crypto Week," but the asset dropped back below $120,000 later in the day. Stocks with crypto ties also rallied as the House of Representatives weighs three key pieces of crypto-related legislation.

Earlier in the day, investors showed a diminished appetite for risk after President Trump said Saturday that the US will impose 30% tariffs on goods from the EU and Mexico from Aug. 1. The increased pressure on key US trading partners is testing the market's previous resilience in the face of escalating tariff tensions. Faith in the idea that Trump will back off from threatened hikes helped lift stocks to all-time highs last week.

Officials from the EU and Mexico are pushing to continue negotiations with the US in hopes of securing a lower rate via a new deal. The hiked tariffs as they stand are seen as likely to remake global trade relations and add to existing inflationary pressures.

That adds uncertainty ahead of consumer inflation data scheduled for release this week. Investors are looking to the June CPI report on Tuesday for signs of how earlier rounds of tariffs are impacting prices across the US economy. The reading will feed into expectations for the Fed's decision on interest rates due in just over two weeks.

Meanwhile, Trump ratcheted up tensions with Russia over the war in Ukraine on Monday, threatening to impose "secondary" tariffs of up to 100% on the country. He also said the US would provide weapons to Ukraine.

Earnings season kicks into swing this week, with all the major US banks due to report results starting on Tuesday. Investors are showing interest in IPO and M&A markets, while Wells Fargo (WFC) reports after being freed from a decade of stringent regulatory restrictions.

Source: Yahoo Finance

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Adam

Economic

Global stocks have had a muted start to the week, with stocks in Europe and the US both lower on Monday. The FTSE 100 is an outlier and is edging closer to last week’s record highs.

Large gains for Astra Zeneca and the LSE are helping to boost the main UK blue chip index. Astra Zeneca is gaining after the company said that its experimental hypertension drug met all requirements in a late-stage trial. These results are sending investors into a frenzy because it boosts the company’s competitive profile, and it could be a multi-billion-dollar sales opportunity. AZ believe that sales of the drug Baxdrostat could generate $5bn per year, and it also boosts the company’s M&A division, who acquired the drug after buying CinCor Pharma in 2023.

In the US, the stock market malaise may prove to be temporary, as companies linked to crypto surge on Monday, after Bitcoin reached a record high above $121,000 and is currently higher by $2000 on Monday. Coinbase, the listed crypto exchange, is higher by nearly 2% on Monday. The surge in crypto is linked to the House of Representatives in the US, which is preparing to consider key industry legislation this week and is adding more fuel to this rally. The House could vote on the Clarity Act, Anti CBDC Surveillance State Act and the Senate’s Genius stablecoin package. These acts could expand the use of bitcoin and usher in a new era for digital currencies and their usage in the broader economy.

When analysts are more pessimistic than the companies themselves

This is a key week for US equities as earnings season gets into full swing, with high profile bank earnings including JP Morgan and Goldman Sachs reporting Q2 results. Netflix is also the first of the large tech firms to report on Thursday evening.

As we lead up to earnings season, analysts have been getting bearish about the outlook due to fears of a weakening economy and tariffs, and earnings expectations have been cut by more than average, according to FactSet. All but one sector on the S&P 500 have seen their earnings estimates cut by analysts in recent weeks. The energy sector has come in for the biggest cuts, followed by consumer discretionary and materials. Communications has seen their earnings forecasts remain stable.

Interestingly, companies themselves are more optimistic than usual about Q2, earnings season. 110 S&P 500 companies have reported Q2 earnings guidance, and 59 have issued positive EPS guidance, which is above the 5-year average of 57. The positive outlook has been led by the tech sector, with industrials and healthcare in second and third place. Interestingly, the tech sector also has the largest number of companies issuing negative guidance for Q2. This could be a sign that there will be a big divergence within the tech sector, and some companies will perform better than others.

Earnings focus: US Banks and why BOA may be a weak spot

The banking sector is in focus on Tuesday and Wednesday when the bulk of the S&P 500’s top tier banks will report Q2 earnings. The financial sector does not usually issue guidance, so their reports will be parsed for details on profits and revenues. However, there were several decent tailwinds that could have boosted the sector, including market volatility, which may boost the trading revenues for the biggest US banks, and steady borrowing costs, which may have preserved net interest income.

While trading revenues could be a bright spot, all eyes will also be on loan loss provisions, which are hard to predict ahead of time. The loan loss provisions should give us a clearer idea on the outlook for the US economy, and an update on the health of the consumer.

JP Morgan is the bellwether as the US’s largest bank. It is expected to boost its net interest income target for this year, as it benefits from elevated interest rates in the US, and profit growth from loans could top 3% in Q2. This may be dwarfed by trading revenue, which some analysts expect to have surged by 8%.

Citi is expected to see an increase in revenue for its services unit, with Bank of America struggling due to high deposit rates, and overall revenue could fall 1% QoQ. Trading revenue could also be hard to beat for BOA, after it reported record high trading revenue at the start of the year.

The KBW banking index in the US has backed away from recent highs but remains close to the record high from 2022. It has had a stunning 44% rally since the low in April, and this earnings season may be crucial for where banking stocks go next. Although the banking sector has pulled back from 2025 highs, the uptrend remains intact, so a strong earnings season could help propel the KBW banking stock index back to the 2022 highs.

Chart 1: KBW banking index, 12-month chart

Netflix preview

There are over 40 companies from the S&P 500 reporting earnings this week, including Pepsi Co, Johnson & Johnson and United Airlines. The other major earnings report that will likely garner media attention includes Netflix.

Since reaching a high on 30th June, the stock has backed up to the 50-day sma, where it is finding good support. Analysts are expecting the company to report $11.04bn in revenue, which is up from the $10.54bn reported in Q1. We will be watching to see if this came from advertising revenue, or from subscriber growth, although Netflix no longer provides subscriber numbers with its earnings reports. Net income is expected to rise to $3.17bn. At 46.6 times 12-month forward earnings, Netflix stocks are not cheap. However, over the last 8 quarters, the stock has risen by an average of 8.15% in the 24 hours after an earnings report. As you can see in the chart below, analysts are optimistic about revenues for Netflix for Q2 and Q3 this year. Thus, it will take a positive outlook from the company to justify this.

The fact that Netflix is the first of the major tech names to report earnings also means that this report will generate a lot of attention in the coming days.

Chart 2: Netflix quarterly revenues, including Q2 and Q3 expectations for 2025.

Source: xtb

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Adam

Economic

Economists have long been warning of a tariff-driven boost to US inflation. The next report on consumer prices will put their conviction to the test.

After four months of overestimating readings on the consumer price index, forecasters are predicting an acceleration in June data due from the Bureau of Labor Statistics on Tuesday. Advances in tariff-exposed categories including furniture, toys and recreational goods, as well as cars, are seen putting an end to the streak of benign figures.

It’s a tough position to be in for the Federal Reserve, which has defended holding interest rates steady this year in anticipation of tariff-driven inflation that hasn’t shown up yet. Another tame number would all but certainly draw more ire from President Donald Trump — who’s repeatedly called for the central bank to lower rates and criticized Chair Jerome Powell personally.

There’s widespread consensus among Fed officials and private-sector forecasters that inflation will turn higher over the summer as businesses start passing on Trump’s tariffs to consumers. While many firms chose to initially shield customers by stocking up on inventories in advance or even absorbing part of the higher costs at the expense of lower margins, some are now running out of options.

“You’re still in an environment where businesses used a broad array of strategies to mitigate the effect of duties,” said EY-Parthenon Chief Economist Gregory Daco, who expects tariffs will drive a third of the overall monthly advance, with a bigger hit to come later in the summer. “But over time that effect is going to increase.”

That threat was amplified last week as Trump ramped up his tough talk on trade, unveiling higher tariffs on copper as well as goods from Canada, Brazil and other countries. Some of the more punitive levies are now expected to take effect in August after being pushed back from July, and Trump said he won’t extend the deadline.

“Certainly now that the president seems to be throwing a volley of new higher tariff rates at a number of countries, we’re certainly not out of the woods yet on a tariff inflation threat,” said Scott Anderson, chief US economist at BMO Capital Markets.

As of May, roughly three in four companies surveyed by the New York Fed were raising prices to make up for higher costs from tariffs. Other surveys have also indicated firms are inclined to hike prices, and companies say as much as well: Toyota Motor Corp. is planning to raise prices this month, and retailers like Nike Inc. are aiming for the fall.

Beyond goods, economists and policymakers will also play close attention to services inflation. Some forecasters argue that categories that have been tame in recent months, including airfares and hotel stays, could show some strength in June, contributing to the expected acceleration in overall CPI.

Fed Impact

The minutes of the Fed’s June policy meeting, released last week, showed officials are divided as to how tariffs will impact inflation and therefore the course of monetary policy. Powell is wary of prices rearing back up again.

“We expect to see over the summer some higher readings,” Powell said at a conference in Portugal on July 1. He added that policymakers are prepared to learn the impact could be “higher or lower, or later or sooner than we expected.”

Investors are pricing in almost no chance of a rate cut at the Fed’s meeting at the end of this month. Some officials, such as Governors Christopher Waller and Michelle Bowman — both Trump appointees — have signaled openness to a cut in July if inflation remains muted. Others have suggested a move later in the year is more likely.

“I think we’re just too tight, and we could consider cutting the policy rate in July. That’s my view,” Waller said Thursday at an event in Dallas. “I’m kind of in the minority on this, but I’ve tried to lay out very clearly in economic terms why we could do this. It’s not political.”

Even with Trump’s latest tariff threats, Samuel Tombs, chief US economist at Pantheon Macroeconomics, notes Trump has backed down before and could do so again.

“That’s not to say that there couldn’t again be a temporary flare up — a few weeks where tariffs are at extremely high levels,” Tombs said. “But businesses and supply chains are evolving, they’re getting used to factoring in this volatility.”

Source: Bloomberg

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Adam

Economic

Chinese exports exceeded expectations in June. Data released on Monday showed that Chinese exports rose 5.8% year-on-year, above the 5.0% expected and up from 4.8% in May.

Chinese imports also rebounded, rising 1.1% after contracting 3.4% in May. Economists had expected a 1.3% increase.

Nevertheless, imports remain at fairly low levels since the beginning of the year. This is due to weak demand for raw materials (agricultural and energy).

On the other hand, exports have been very strong. First, shipments were very robust in anticipation of tariffs. Then, the decline in shipments to the United States was more than offset by an increase in exports to other regions.

As a result, China's trade surplus continues to grow. In the first half of 2025, it amounted to $586 billion.

An uncertain future

While China got through the first half of the year without too much damage, the future is very uncertain. In May, the US and China agreed to a 90-day truce in Geneva. Since then, an agreement, the details of which have not been disclosed, has been reached in London. But we do not really know whether the previous deadline of August 12 still stands or whether the June agreement will prevail indefinitely.

What we can say is that this provisional tariff agreement remains fragile. The previous compromise in May was quickly undermined by a series of export controls that disrupted supply chains in several key sectors.

Beijing must now maneuver skillfully to convince Washington to ease tariffs. Analysts estimate that taxes above 35% would undermine the profitability of Chinese manufacturers. "Tariffs are likely to remain high, and Chinese manufacturers are increasingly constrained in their ability to rapidly increase their global market share by lowering prices," warns Zichun Huang, China economist at Capital Economics. She anticipates a slowdown in exports in the coming quarters, weighing on the country's growth.

Beyond direct tariffs on Chinese products, the US is trying to prevent these measures from being circumvented. Since the introduction of tariffs during Donald Trump's first term, China has been using third countries, particularly in Southeast Asia, to ultimately export its products to the US without paying tariffs.

The Trump administration now seems determined to close this loophole. The agreement reached with Vietnam in early July provides for a 20% tariff on Vietnamese products but 40% on "illegal transshipments" (goods transiting through Vietnam). However, it is still unclear how Washington will define illegal transshipment and what added value Vietnam will have to bring to imported products to avoid the 40% tax.

The fact remains that China is in Washington's sights and that US trade policy is a threat to its economy. For China, the equation is still the same: tariffs are holding back exports. Exports are the main driver of growth. The trade war therefore highlights, once again, the need to further stimulate domestic demand.

Source: marketscreener

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Manuel

Cryptocurrency

Stocks

Vanguard, one of the world’s top asset managers, has become the largest institutional shareholder of Strategy, which is widely seen as a proxy for Bitcoin, despite previously labeling the crypto as speculative and lacking inherent value.

According to Bloomberg News, Vanguard now owns more than 20 million shares of Strategy, representing nearly 8% of the company’s Class A common stock.

The investment positions Vanguard above Capital Group Cos. as the Bitcoin firm’s largest shareholder, potentially cementing that lead in the fourth quarter.

The development comes as a striking contradiction to Vanguard’s long-standing stance on digital assets. Executives at the $10 trillion fund have repeatedly stated that Bitcoin is not “appropriate” for long-term investors, calling it an “immature asset class” with “no inherent economic value.”

They have also described crypto as more akin to speculation than investment, cautioning against its volatility and the risk it poses to portfolio stability.

However, Vanguard has accumulated a significant stake in Strategy through its passive index investment strategies. Strategy has transformed itself from a business intelligence firm into one of the most prominent corporate holders of Bitcoin, now owning over 601,550 BTC as of July 15.

Industry analysts point to the unintended consequences of passive index investing, which may force firms like Vanguard to gain exposure to assets they openly criticize.

Bloomberg noted that this irony highlights the broader tension between index-based strategies and the active ideological positions of asset managers.

With nearly $9 billion in Strategy stock linked to index fund flows, some critics argued that the situation exposes a contradiction in traditional finance.

Matthew Sigel, head of digital assets research at VanEck, called it “institutional dementia” in a social media post and criticized the firm for mocking Bitcoin publicly while simultaneously fueling exposure to it through indexing.

The contradiction raises questions about whether institutional finance can continue to resist crypto on philosophical grounds while remaining beholden to automated investment mandates that tell a different story with capital allocation.

Source: CryptoSlate

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Manuel

Economic

China–U.S. Trade War

President Trump is pushing through with his tariff agenda, unveiling a new batch of letters to country leaders outlining tariffs on goods imported from their countries beginning in August.

Trump on Thursday announced a 35% tariff on Canadian goods. He followed that up this weekend with promises of 30% duties on Mexico and the European Union. In an interview with NBC News published late Thursday, Trump also floated 15% to 20% blanket tariffs on most trading partners, higher than the 10% level currently in effect.

The fresh tariff salvos capped a week in which Trump sent a barrage of tariff letters to over 20 trade partners, setting levels of 20% to 40% — except for a 50% levy on goods from Brazil in a move that waded into the country's domestic politics.

The EU is now scrambling to avoid the tariffs in just over two weeks, with leaders both pledging to negotiate but also warning of a "big gap" and the need to prepare countermeasures in case talks fail.

"There will be a huge impact on trade,” the EU's chief negotiator said Monday. "It will be almost impossible to continue trading as we are used to in a transatlantic relationship."

As markets focus on US talks, here is where things stand with other key partners:

Vietnam: Trump said a deal with Vietnam will see the country's imports face a 20% tariff — lower than the 46% Trump had threatened in April. He also said Vietnamese goods would face a higher 40% tariff "on any transshipping" — when goods shipped from Vietnam originate from another country, like China. According to reports, Vietnam's leadership was caught off guard by Trump's announcement last week that it agreed to a 20% tariff and is now seeking to lower the rate.

India: Trump's tariffs on Brazil have raised the stakes for India, another member of the BRICS coalition. Bloomberg reported that the countries are working toward a framework deal that could see US tariffs on goods from India drop below 20%.

Russia: Trump threatened "secondary" tariffs on Russia of up to 100% as he attempts to pressure the country into negotiating an end to the war in Ukraine.

Source: Yahoo Finance

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Adam

Stocks

A number of Wall Street firms are raising their S&P 500 (^GSPC) targets as initial investor panic from President Trump's "Liberation Day" tariffs continues to subside — but that doesn't mean strategists are expecting a solid run higher for stocks in the second half of the year.

In a note to clients on Sunday, RBC Capital Markets boosted its year-end S&P 500 target to 6,250 from a prior target of 5,730. But the firm's head of US equity strategy, Lori Calvasina, explained that the adjustment comes amid the market's more than 25% bounce back from April lows, reached when Trump announced a wide array of higher-than-expected tariffs on goods from various countries. Those tariffs were delayed, and the US is now in the process of negotiating them.

RBC is now essentially moving its target back to where it sat in mid-March before the bulk of the tariff turmoil began. In fact, a target of 6,250 means the benchmark index would end the year mostly flat from its closing price last week, when it notched a fresh record.

"We feel neutral on the outlook for stocks in the 2nd half of 2025, and are mindful that our new price target is essentially in line with recent levels," Calvasina wrote. "We expect choppy conditions in the back half of the year, and swings in both directions."

Calvasina noted that, among other risks, it's likely still "too early to stop worrying about tariff impacts" on corporate earnings.

Overall, eight strategists among the 14 tracked by Yahoo Finance currently project the S&P 500 to close either nearly flat from current levels or lower. Even those who predict an increase aren't pounding the table for the rally to continue in the short term.

Yardeni Research president Ed Yardeni, who maintains a 6,500 year-end target for the S&P 500, wrote in a note to clients on Sunday that the recent V-shaped recovery for stocks could soon look more like a "square root shaped pattern," where the path higher stalls.

Yardeni pointed out that his team had expected Trump to relent on his tariff back-and-forth by now. But that is not happening. New letters from Trump over the weekend threatened 30% duties on goods from Mexico and the European Union. The latest tariff actions follow a 35% tariff on Canadian goods announced last week.

Yardeni believes his 6,500 target could still be reached by year end, but added, "Trump must get the tariff issue resolved in coming weeks."

Last week, Bank of America's equity strategy team led by Savita Subramanian also recently moved its year-end target, boosting its call to 6,300 from a prior forecast of 5,600.

"It's hard to identify a positive catalyst for the S&P 500 to continue its meteoric run into Q3," Subramanian wrote. "Among our five target models, our earnings per share surprise framework represents our near-term read and is mixed, at best. Negative guidance and revisions in April/May have improved to average levels but economic surprises have broken down. And the meat of corporate profits, tech company earnings, are slated to decelerate."