Falling Rates, Earnings Enthusiasm Spark New Records for Stocks: July 21, 2025

Stocks are achieving new records today as Wall Street gears up for a heavy week of corporate earnings featuring two of the magnificent 7 members. Treasurys are joining the rally too as Japanese election results met expectations, which quelled global nervousness concerning sovereign debt loads and fiscal deficits. The international relaxation at the long-end is sending the domestic yield curve south in bull flattening fashion, with fixed-income players scooping up maturities across the complex amidst a heavier appetite for duration. Turning to Washington, the upcoming August 1 trade agreement deadline isn’t causing much anxiety, with market participants generally sanguine about the path and progress of deals going forward. The stateside economic calendar is quiet on the other hand and investors are taking their cue from softer interest rates and anticipation of robust profitability reports. Shares in all equity sectors are advancing minus energy, which is losing ground on descending crude oil and natural gas prices influenced by lessening worries of sanctions restraining supplies. All other commodity majors are climbing, however, and bitcoin as well as its associated forecast contracts are also seeing strong participation. Lower borrowing costs are weighing on the greenback, meanwhile, and traders are trimming holdings of volatility protection instruments.

Profits Likely Drive Equities Even Higher

Outside of any unexpected surprises, earnings reports are key to upside for equities in the coming days. I’m viewing profitability hurdles as subdued at this juncture, however, as second quarter trade turbulence was much lower than feared and the signature GOP taxation bill became law. The dynamic of decent cross-border commerce negotiations, lighter governmental expenses and the associated fiscal stimulus signal controlled costs alongside growing revenues. Meanwhile, economic data from April to June have been cooperative, as they relate to consumption trends, labor market health and price pressures, pointing to an environment that is conducive to further bottom line expansions from here across corporate America. Furthermore, the momentum is likely to boost company outlooks amidst an uptick of relative certainty and a lack of headwinds on the horizon. I’m expecting the season to go well and be cheered by Wall Street, driving stocks to more records into year-end.

International Roundup

China Maintains Key Rates

After having announced that growth of both GDP and retail sales had decelerated, the People’s Bank of China today decided to keep its 1-year and 5-year loan prime rates at 3.0% and 3.5%, respectively.

Hong Kong Three-Month CPI is Flat

Hong Kong’s composite Consumer Price Index recorded an average monthly result of zero from April to the end of June, according to the Census and Statistics Department. For the three-month period ended in May, the average monthly result was -0.1%.

The recent print, however, would have been 0.1% if government electricity relief efforts weren’t included. The gauge was also up 1.4% year over year (y/y) in June, down sharply from the 1.9% in the preceding month.

Canada Gate and Input Prices Climb

Wholesale costs in Canada increased 0.4% month over month (m/m) and 1.7% y/y in June while raw materials costs for goods producers climbed 2.7% m/m, according to the Industrial Product Price Index (IPPI) and the Raw Materials Price Index (RMPI). The economist consensus estimate called for the IPPI to climb 0.1% m/m following May’s 0.5% drop. The RMPI was also hotter than expected, with economists forecasting a decline of 0.1% m/m compared to May’s 0.7% drop.

Regarding the IPPI, non-ferrous metal products climbed 2.8% m/m. Within that category, the unwrought gold, silver and platinum group was up 5.9%. The meat, fish and dairy products category ascended 2.2%, the seventh-consecutive monthly increase. In other categories, fruit, vegetables, fees and other food products were 1.2% more costly and energy and petroleum products were 1.1% higher. Declining groups included primary ferrous metal products, electrical, electronic, audiovisual and telecommunication products, and motorized and recreational vehicles which were 2.4%, 1.7% and 0.3% less expensive relative to May.

Within the RMPI, crude energy products advanced 6.8% and metal ores, concentrates and scrap were up 1.4%.  The animal and animal products group, additionally, was loftier by 2%.

Home Sellers’ Asking Prices Drop in the UK

The average price of newly listed homes for sale in the UK sank 1.2% in July, according to the Rightmove House Price Index. Homes in London led the softness with pricing lower by 1.5%. Relative to July of 2024, prices are up 0.1%. In June, the y/y metric was 0.8%. Rightmove notes that the number of homes on the market are at a decade high, causing sellers to price their properties more competitively.

Japan’s Ruling Coalition Faces Set Back

As Japan continues to engage in delicate trade negotiations with the US, the country’s ruling coalition has lost its majority in the country’s upper chamber of parliament. The defeat follows the loss of the majority in the lower chamber last October. Prime Minister Shigeru of the Liberal Democratic Party attempted to win public support for the organization by taking a hard stance against US tariffs; however, he faces a growing tide of populism. Shigeru is likely to face calls to resign, but he said he will continue in the position. He has the option of leaning on smaller parties for passing legislation.