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Briefing.com Summary:
*Markets shrug off tariffs, focus on exemptions and negotiation hopes.
*Mixed earnings reactions despite strong Q2 results across most sectors.
*Jobless claims rise, signaling continued labor market softening.
The higher reciprocal tariff rates go into effect today for countries without a trade deal with the U.S., and President Trump announced a 100% tariff on all semiconductor imports. On the surface, that sounds pretty bad, yet you wouldn't know it on the surface of the equity futures trade.
Currently, the S&P 500 futures are up 40 points and are trading 0.6% above fair value, the Nasdaq 100 futures are up 191 points and are trading 0.8% above fair value, and the Dow Jones Industrial Average futures are up 231 points and are trading 0.5% above fair value.
Market participants, however, aren't concerned about what they are seeing on the surface of the tariff headlines. Instead, they are focused on other things, namely that further negotiations should ultimately produce less onerous tariff rates and the exemption on the semiconductor tariffs for companies that are building in the U.S. or have committed to build in the U.S.
The latter include many companies, such as Apple (AAPL), NVIDIA (NVDA), and Taiwan Semiconductor Manufacturing Co. (TSM), which has generated some spark (and relief) in the equity futures trade.
Intel (INTC) also has manufacturing operations in the U.S., but it is down 2.1% on President Trump's declaration that the company's CEO is "highly conflicted and must resign, immediately."
That is a stock-specific issue. There are others like that.
Enter Eli Lilly (LLY), which topped Q2 earnings expectations and raised its FY25 outlook but is trading 7% lower in response to results from its weight-loss drug pill trial. Those results, on the surface, were positive, yet they reportedly didn't measure up to the competition, showing a 12.4% weight loss versus 15% for Novo-Nordisk's (NVO) weight-loss drug pill and an overall dropout rate of 24.4% at the highest dose.
Cybersecurity company Fortinet (FTNT) is down 21% after reporting what at least one analyst called a "lackluster quarter."
On the flip side, Duolingo (DUOL), Dutch Bros. (BROS), Peloton (PTON), DoorDash (DASH), and DraftKings (DKNG) are showing some robust gains after their earnings results. Be sure to consult our Earnings Results Calendar for the full rundown of reporters in what was the heaviest slate of reports so far this period between yesterday's close and today's open.
The brief synopsis is that the vast majority of companies topped expectations, keeping with the Q2 reporting cadence.
Turning to today's economic data, the Q2 Productivity Report was better than expected, while the initial and continuing jobless claims report was mixed.
Q2 productivity increased 2.4% (Briefing.com consensus: 2.2%) following a downwardly revised 1.8% decline (from -1.5%) in Q1. Unit labor costs rose 1.6% (Briefing.com consensus: 1.5%) following an upwardly revised 6.9% (from 6.6%) in Q1. From the same quarter a year ago, nonfarm business sector labor productivity was up 1.3%.
The key takeaway from the report is that productivity improved noticeably from the first quarter, helping to tamp down unit labor costs. The 1.8% annualized rate of productivity growth in the current business cycle (starting Q4 2019), though, is still below the long-term rate of 2.1% since the first quarter of 1947.
Separately, initial jobless claims for the week ending August 2 increased by 7,000 to 226,000 (Briefing.com consensus: 220,000). Continuing jobless claims for the week ending July 26 increased by 38,000 to 1.974 million, which is the highest level since November 6, 2021.
The key takeaway from the report, in light of the soft nonfarm payrolls data seen last week, is the jump in continuing jobless claims, which will be seen as a sign/symptom of a softening labor market.
Treasury yields turned lower after the reports but are still little changed from yesterday's settlement. The 2-yr note yield is up two basis points to 3.72%, and the 10-yr note yield is up two basis points to 4.24% ahea do the $25 billion 30-yr bond auction at 1:00 p.m. ET.
In other developments, the Bank of England voted 5-to-4 to cut its key policy rate by 25 basis points to 4.00%, and Russia confirmed that a meeting between President Trump and President Putin in the coming days has been agreed to in principle.
