Little conviction, but plenty of buying interest

There isn’t much conviction in the equity futures trade. Currently, the S&P 500 futures are down four points and are trading fractionally below fair value, the Nasdaq 100 futures are down three points and are trading roughly in line with fair value, and the Dow Jones Industrial Average futures are down 69 points and are trading 0.1% below fair value.

The lack of conviction in the equity futures trade belies the fact that there has been plenty of buying conviction in the market for the past three months. The rally off the April 7 low has led to record highs for the S&P 500 and Nasdaq Composite, the latter of which registered yet another record high in yesterday’s trade.

NVIDIA (NVDA), which saw its market cap surpass $4 trillion, was instrumental in that move, and it continues to provide support this morning. The stock is trading 0.9% higher in pre-market action.

That relative strength has not been mirrored by other mega-cap issues, most of which are showing modest declines in pre-market trading. That is acting as a restraint on the market, which is also digesting more tariff headlines.

Specifically, President Trump confirmed that the 50% tariff on copper imports will be effective August 1. He also sent a letter to Brazil announcing a 50% tariff rate starting August 1. Brazil said it will reciprocate in accordance with its Economic Reciprocity Law.

True to bullish form, the stock market is not fretting over these latest developments, and neither is the Treasury market. The 2-yr note yield is up one basis point to 3.87%, and the 10-yr note yield, which is more sensitive to inflation pressures, is up one basis point to 4.35% and unchanged for the week.

There is an understanding that the tariffs could invite higher prices and worsening inflation, but the stock market and the Treasury market continue to operate with an attitude of “seeing is believing,” and they haven’t seen enough in the hard data to be convinced that the inflation threat is coming to fruition. The June CPI report gets released on July 15.

They also aren’t seeing enough in the initial jobless claims data to be convinced that the labor market is rapidly deteriorating, such that it would compel the Fed to cut rates.

The latest report showed initial jobless claims decreasing by 5,000 for the week ending July 5 to 227,000 (Briefing.com consensus: 245,000). Continuing jobless claims for the week ending June 28 increased by 10,000 to 1.965 million, which is the highest level since November 13, 2021.

The key takeaway from the report continues to be that businesses have been slow to let employees go, but that it has become more difficult to find a job after losing one. This dynamic reflects a softening labor market, but not a truly weak labor market.

In other developments, Delta Air Lines (DAL) posted some better-than-expected Q2 results and offered a reassuring outlook that has its stock up 12.0%. Other airline stocks are flying alongside it in pre-market action.

Some other stocks that have taken flight are WK Kellogg (KLG), which has reportedly drawn takeover interest, and MP Materials (MP), which announced a public-private partnership with the Department of Defense. KLG and MP are up 30% and 61%, respectively.

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Originally Posted July 10, 2025 – Little conviction, but plenty of buying interest