The trade deal with Japan and chatter that a trade deal with the EU could be close drove the S&P 500 and Nasdaq Composite to new record highs yesterday and fueled a broad-based advance.
In some respects, the Japan trade deal was like a cherry on top of the sundae, only it may not be the top. There is underlying enthusiasm for more trade deals being struck before the August 1 deadline, and, once again, some relief grounded in the understanding that the reciprocal tariff rates for key trading partners may not be as onerous as advertised.
Mexico, Canada, the EU, and China are all still out there with tariff rates that leave plenty of room for downward negotiation. The market knows that and is expecting just such an outcome, comforted in the meantime by economic and earnings data that suggest the tariffs, so far, have not derailed the global economy, even if they have slowed it somewhat.
Today’s tape is painted with a lot of earnings action. Alphabet (GOOG), ServiceNow (NOW), Las Vegas Sands (LVS), and T-Mobile (TMUS) are among the upside leaders, whereas Tesla (TSLA), IBM (IBM), Chipotle Mexican Grill (CMG), Dow, Inc. (DOW), American Airlines (AAL), and Honeywell (HON) are among the downside leaders.
There are many other companies moving on earnings news. This is just a sample, and it reflects a mixed market response; however, the futures for the S&P 500 and Nasdaq 100 are signaling an okay start.
The catalyst in that regard is AI growth enthusiasm, which was stoked again by the news from Alphabet that it is raising its 2025 capital expenditure plan to a whopping $85 billion.
Aside from that, there is also an underlying bid in the market that has been stoked by its continued momentum to the upside, and participants are going to ride that momentum for all it is worth until the price action tells them to get off the train.
The S&P 500 futures are up one point and are trading in line with fair value, the Nasdaq 100 futures are up 41 points and are trading 0.2% above fair value, and the Dow Jones Industrial Average futures, hurt by the weakness in IBM and Honeywell, are down 300 points and are trading 0.7% below fair value.
Separately, the initial jobless claims report today is showing that there is continued momentum in the labor market.
Initial jobless claims for the week ending July 19 decreased by 4,000 to a lowly 217,000 (Briefing.com consensus: 225,000). Continuing jobless claims for the week ending July 12 increased by 4,000 to 1.955 million.
The key takeaway from the report is still the same. The low level of initial jobless claims connotes a relatively solid labor market; however, the elevated level of continuing jobless claims connotes some added difficulty in finding a new job in the event one gets laid off by their employer.
Treasury yields jumped in the wake of this report, keying on the leading indicator of initial jobless claims, which is also a coincident indicator suggesting the Fed, which will get a visit today by President Trump, is apt to stick with its wait-and-see approach before cutting rates. The 2-yr note yield is up four basis points to 3.92%, and the 10-yr note yield is up four basis points to 4.43%.
The ECB, for its part, stood pat today with its key policy rates, as expected.
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Originally Posted on July 24, 2025 – Alphabet and AI growth enthusiasm set tone for an okay start
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