(Bloomberg) — Wall Street traders sent stocks lower in the run-up to the Federal Reserve decision, with concerns about high valuations overshadowing hopes for an extension of a tariff truce between the world’s two largest economies. Bond yields fell. The dollar edged up.
Following a record-setting run, the S&P 500 lost steam. Treasuries remained higher after a solid $44 billion sale of seven-year notes. Longer-dated bonds led gains ahead of the release of debt-issuance plans that are likely to provide signs for how the US plans to keep a lid on yields for those maturities. The greenback outpaced most of its developed-world peers.
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Treasury Secretary Scott Bessent said the US and China will continue discussing the terms of a truce extension, and President Donald Trump will make the final call. The talks wrapped up before a deadline to resolve differences during a suspension of sky-high tariffs. Adding an extra 90 days is one option, Bessent said.
Just as it happened after the US tariff deal with the European Union, the underwhelming market reaction to China talks illustrates the steady decline in the ability of those initiatives to spur big moves on Wall Street.
There are other market-moving factors on the horizon. Those include Wednesday’s Fed decision and key data like the jobs report on Friday. The market also faces a crucial test, with four tech giants reporting earnings over a two-day stretch.
“Investors are now more focused on hard data to validate the economic and policy outlook, rather than over-interpreting trade agreements,” said Dilin Wu, a research strategist at Pepperstone Group Ltd.
On the economic front, US consumer confidence increased in July as concerns eased about the outlook for the broader economy and the labor market. While job openings fell, they hovered at a level that indicates generally stable demand for workers.
“Overall, it was a mixed round of data that has done little to materially challenge the price action or macro narrative,” said Ian Lyngen at BMO Capital Markets.
Wall Street strategists have a message for investors worrying about signs of excessive optimism emerging as US stocks extend their record run: Any near-term pullback will likely create a buying opportunit
Strategists from HSBC Holdings Plc, Morgan Stanley and UBS Group AG are maintaining their long-term bullish views even as concerns build that valuations have become stretched at the moment. They see strong corporate earnings and economic data, growing clarity around tariffs and the tailwind of artificial intelligence propelling stocks higher into next year.
“While we expect equities to advance over the next 12 months, investors should be mindful of potential market swings in the coming weeks,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management. “We think capital preservation or phasing-in strategies can be effective in navigating near-term volatility.”
Long positioning on US equity futures keeps increasing, led by rising exposure to the S&P 500 in the past week, according to Citigroup Inc. strategists led by Chris Montagu.
Investors are pricing the US stock market as if there’s no longer any risk of a tariff-driven recession. Peter Oppenheimer isn’t so sure.
The chief global equity strategist at Goldman Sachs Group Inc. says it’s possible that tariffs bite hard enough to hurt equity prices even as Washington agrees on deals with key trading partners. And while the US might dodge a recession, valuations are high enough that it’s prudent to keep diversifying into other markets.
Corporate Highlights:
Union Pacific Corp. agreed to acquire Norfolk Southern Corp. in a cash-and-stock transaction valued at $85 billion, forming a transcontinental rail behemoth in what stands to be the industry’s largest deal ever. Baker Hughes Co. agreed to buy Chart Industries Inc. for about $9.6 billion in cash, seeing off a rival takeover attempt for the US industrial gas equipment maker. United Parcel Service Inc. declined to provide earnings guidance as it struggles to get a handle on volatility in the market, underscoring the challenges for the courier’s effort to reconfigure its network and revitalize its business. JetBlue Airways Corp. posted a smaller-than-expected loss in the second quarter as demand rebounded and efforts to turn around the struggling carrier gained traction. Procter & Gamble Co. issued a wider range than usual for its annual sales outlook, underscoring the volatility US companies continue to navigate even as the Trump administration begins to strike trade deals. UnitedHealth Group Inc. warned its annual profit is likely to be hit harder than Wall Street was expecting, the latest in a series of disappointments from an insurer once known for its reliable growth and predictability. Merck & Co. is slashing $3 billion from its annual spending as it braces for off-brand competition to its cancer drug Keytruda, the best-selling medicine in the world. Whirlpool Corp. slashed its 2025 profit outlook, saying that the boost it expects from making the majority of its appliances in the US has yet to materialize as foreign rivals rushed imports into the country during the second quarter to avoid higher tariffs. Royal Caribbean Cruises Ltd.’s quarterly profit outlook trailed expectations because of costs related to its newest ship. Boeing Co. managed to almost halt its cash outflow in the second quarter, indicating that a turnaround initiated by Chief Executive Officer Kelly Ortberg a year ago is paying off as the company delivers more aircraft. PayPal Holdings Inc. raised its 2025 earnings forecast for this year based on momentum in several of its business lines, including the Venmo payments platform, as attempts to make the brand more prominent start to bear fruit. Spotify Technology SA swung to a loss in the second quarter, missing analysts’ estimates after the music-streaming service recorded higher-than-expected expenses related to employee compensation. Novo Nordisk A/S named its head of international operations as chief executive officer after slumping weight-loss drug sales led to a profit warning that wiped $93 billion off its market value. In a major win for Sarepta Therapeutics Inc., US regulators are recommending that patients who can walk be allowed to take its gene therapy Elevidys again. Stocks
The S&P 500 fell 0.1% as of 1:23 p.m. New York time The Nasdaq 100 was little changed The Dow Jones Industrial Average fell 0.3% The MSCI World Index fell 0.2% Currencies
The Bloomberg Dollar Spot Index rose 0.1% The euro fell 0.3% to $1.1557 The British pound was little changed at $1.3351 The Japanese yen rose 0.1% to 148.36 per dollar Cryptocurrencies
Bitcoin fell 0.1% to $117,894.42 Ether fell 0.4% to $3,775.37 Bonds
The yield on 10-year Treasuries declined eight basis points to 4.33% Germany’s 10-year yield advanced two basis points to 2.71% Britain’s 10-year yield declined one basis point to 4.63% Commodities
West Texas Intermediate crude rose 1.5% to $67.72 a barrel Spot gold rose 0.4% to $3,326.98 an ounce ©2025 Bloomberg L.P.