US Stocks Rise as Chipmakers Rally and Bond Yields Fall

US stock indexes finished higher on Tuesday. The S&P 500 gained +0.41%, the Dow Jones rose +0.30%, and the Nasdaq 100 advanced +0.43%. The rally was fueled by stronger-than-expected reports on capital spending and consumer confidence, along with broad strength in semiconductor makers. Optimism was also lifted by news that China’s Vice Commerce Minister Li Chenggang will travel to Washington for trade negotiations.

Treasury yields eased after strong demand in the $69 billion 2-year note auction, pushing the 10-year yield down to 4.25%. Stocks extended gains on the back of falling yields. However, uncertainty rose after President Trump moved to dismiss Fed Governor Lisa Cook, raising concerns over the independence of the Federal Reserve. Cook rejected the move, calling it illegal.

July core capital goods orders rose +1.1% m/m, well above expectations. The S&P CoreLogic home price index slowed to +2.14% y/y, its weakest pace in two years. The Conference Board’s consumer confidence index came in stronger than forecast at 97.4, while the Richmond Fed manufacturing survey reached a five-month high.

Trade tensions remain in focus as President Trump threatened new tariffs on high-tech goods in response to digital services taxes abroad. Earlier this month, tariffs on Indian imports were doubled to 50% over oil purchases from Russia. Bloomberg Economics estimates the average US tariff rate could rise to 15.2%, up from just 2.3% in 2024. On the geopolitical front, prospects for peace talks between Russia and Ukraine remain slim, with no summit planned.

S&P 500 Q2 earnings are tracking +9.1% y/y, far above preseason expectations, with 82% of companies beating estimates. Chipmakers led the market higher, with Nvidia, AMD, Qualcomm, Broadcom, and Applied Materials among notable gainers.

Eli Lilly (+5%) rallied after positive obesity drug trial results, while Boeing (+3%) rose on reports of a major Korean Air order. EchoStar (+70%) surged after AT&T agreed to buy spectrum licenses.

Losers included Keurig Dr Pepper (-6%) on a downgrade by HSBC and Salesforce (-1%) after Oppenheimer cut its price target.

Investors are awaiting Nvidia’s earnings after Wednesday’s close, along with revised Q2 GDP, inflation data, and consumer sentiment later this week. Futures markets now price in an 87% chance of a 25 bp Fed rate cut in September.