Wednesday was a strong day for the U.S. stock market. The S&P 500 hit a new all-time high, while the Dow Jones climbed to its highest level in five and a half months. Investors welcomed positive developments on the international trade front, pushing equities higher.
U.S.-Japan Trade Agreement — A Step Toward Resolution
On Tuesday evening, President Trump announced a new trade deal with Japan. The agreement introduces a 15% tariff on Japanese imports — a more moderate rate than the previously threatened 25%. Japan also committed to investing $550 billion in the U.S. economy, buying 100 Boeing airplanes, increasing rice imports by 75%, and purchasing $8 billion worth of other agricultural goods. Additionally, Japan will raise its defense-related spending in the U.S. from $14 billion to $17 billion annually.
Meanwhile, Bloomberg reported on Wednesday that the U.S. and the European Union are also nearing a trade deal. The tentative agreement would set a 15% tariff on most EU imports — significantly below the 30% rate previously threatened.
Tech and Housing Data Weigh on Nasdaq
Despite the overall market optimism, the Nasdaq 100 lagged. Shares of Texas Instruments dropped 13% after the company stated there is still no "genuine broad recovery" in the automotive sector. Other chipmakers followed suit, with Microchip, ON Semiconductor, Analog Devices, and NXP Semiconductors all finishing lower.
In real estate, things weren't much better. Existing home sales fell 2.7% in June, hitting a 9-month low — worse than the expected 0.7% drop. Mortgage applications rose slightly by 0.8%, but the average 30-year fixed rate climbed to 6.84%.
August 1 Looms as Key Date for Trade Talks
President Trump set August 1 as a soft deadline for trade negotiations. If no deals are struck, new tariffs of 10–15% could hit over 150 countries. Canadian goods could face even steeper duties — up to 35%. The clock is ticking, and markets are watching closely.
This week, investors are also anticipating data on jobless claims, manufacturing activity, and new home sales. Friday will bring figures on capital goods orders — a key indicator of business investment.
Rates, Bonds, and Investor Sentiment
Futures markets now see almost no chance of a rate cut at the July FOMC meeting. Odds for a September cut stand at around 58%.
In the bond market, the yield on 10-year Treasuries rose to 4.384%, while prices fell — a reflection of easing demand for safe-haven assets. Still, weak housing data and strong demand in a $13B Treasury auction helped cushion the blow. Inflation expectations also declined, supporting bond prices.
European bond yields climbed as well, with Germany’s 10-year yield rising to 2.639% and the UK’s to 4.635%. Traders now price in just a 2% chance of an ECB rate cut at this week’s policy meeting.
Power Sector Gets a Boost from AI Hype
Utility stocks were among the day’s top performers. PJM Interconnection said the AI boom could push U.S. businesses and households to invest a record $16.1 billion in power infrastructure. Talen Energy gained over 8%, Vistra rose 5%, while NRG Energy and Constellation Group also saw gains.
Earnings Season — Winners and Losers
Several companies crushed expectations this week:
Lamb Weston (LW) jumped 16% after beating revenue forecasts ($1.68B vs. $1.59B).
GE Vernova (GEV) gained 14% on strong Q2 revenue of $9.11B.
Baker Hughes (BKR) rose 11% after posting $6.91B in revenue.
TE Connectivity (TEL) climbed 11% with strong quarterly results and an upbeat Q4 forecast.
Thermo Fisher (TMO) gained 9% with better-than-expected Q2 revenue and full-year guidance.
Lennox International (LII) and CoStar Group (CSGP) both rose over 6%.
But not everyone had a good day:
Fiserv (FI) fell 13% after reporting weaker-than-expected organic revenue growth.
Otis Worldwide (OTIS) dropped 12% after slashing its full-year guidance.
Unity Software (U) declined 2% after BTIG downgraded the stock to “Sell.”
Teledyne Technologies (TDY) slid 1% on disappointing earnings guidance.
Global Markets Join the Rally
International stocks also gained ground:
Euro Stoxx 50 rose 1.02%.
Shanghai Composite hit a 9.5-month high, up 0.01%.
Nikkei 225 surged 3.51%, reaching a new 12-month peak.
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