Daily Commentary
Commentary prepared by Alloya Investment Services, a division of the wholly owned CUSO of Alloya Corporate Federal Credit Union. Alloya Investment Services is a leading broker/dealer consultant to credit unions.
Thursday, August 7, 2025 at 8:00 am CT
Commentary prepared by Tom Slefinger, Market Strategist
Market Indications
Other Market Indicators
| Market Indicators | ||
|---|---|---|
| 2s/5s Tsy Spread | 0.06 | 0.00 |
| 2s/10s Tsy Spread | 0.51 | -0.01 |
| 2s/30s Tsy Spread | 1.10 | -0.01 |
| DJIA-30 | 44,173.64 | +585.06 |
| S&P-500 | 6,329.94 | +91.93 |
| NASDAQ | 21,053.58 | +403.45 |
| Dollar Idx | 98.96 | +0.18 |
| CRB Idx | 293.65 | -1.63 |
| Gold | 3,350.30 | -23.41 |
Daily Commentary
Recap – The beat goes on as another round of corporate earnings and an Apple announcement pushed stocks higher on Wednesday despite the midnight trade deadline. The S&P 500 gained 0.8%, the Nasdaq 1.2% and the Dow 0.2%. And the new day begins with a positive day in equity markets as the news on tariffs, corporate earnings and the economy continues to flow in. Nasdaq and S&P 500 futures are up about +0.5%.
The positive sentiment in the stock market is spilling over to bonds, as yields are moving down slightly across the board. The U.S. 10-year yield is at 4.24% and the 2-year is at 3.72%, both down by about -1 basis point from yesterday. This positive bond market action could signal some positive feedback for stock indexes as the trading day progresses.
Commodities and currencies are quiet with no major moves. Gold and silver prices are climbing with modest gains (up 0.2% and 1.2%, respectively). West Texas Intermediate (WTI) crude prices are steady at around $65 per barrel.
Meanwhile the doves are getting louder and louder. The number of Fed officials calling for a rate cut has reached four, after Minneapolis Federal Reserve Bank (FRB) President Neel Kashkari joined the pack. Kashkari had suggested in June that a rate cut in September might be possible. Also, on Monday, San Francisco FRB President Mary Daly said that the time is nearing for rate cuts and that there may be a need for more than two cuts this year.
I should note that the Federal Reserve can drive the bond market action but a premature easing by the Fed could be “rejected” by the bond market if investors feel it is imprudent, and the longer end of the curve sells off. This can lead the Fed to reverse course or just leave the market with a substantially steepened yield curve. With the term premium driven by serious policy issues, we could be ripe for a re-run if investors worry that tariff inflation could be a problem.
To wit: When the Fed cut rates by 50 basis points in September 2024, the 10-year Treasury yield bottomed that year. Concern over inflation and the probability of President Donald Trump winning the election, the 10-year Treasury note yield rose from 3.6% to 4.4% between September and early November 2024.
Source: Bloomberg
Moving on, while the market chatter was dominated by tariffs and trade, or the blame game regarding the nonfarm payroll data, the next big market impacting story will be who will be appointed as the next Fed Chairman? It is a guarantee that the only qualification is loyalty to the President. That said, whoever takes over the Fed chair, we will witness the first Chairperson coming in as a newbie and make a rate cut as the first move since Arthur Burns buckled under pressure from Richard Nixon back in 1970. All I know is that in the following decade, the gold price soared nearly 20-fold. Got gold?
Where is the consumer? Averaging Q1 and Q2, the net contribution that the consumer made to real gross domestic product (GDP) was the lowest since the first and second quarters of 2020, when the economy was in a shutdown mode. When you strip out inventories and net exports, real final sales cooled off to a stall-speed of +1.1% at an annual rate in Q2 after an almost equally tepid reading of +1.5% in the first quarter.
Regarding geopolitics, there is emerging optimism about a Trump-Putin summit. A positive outcome might bring a new round of positive sentiment to the global growth outlook and to the momentum-driven stock markets.
For one of the best reads of the day have a look at “What BLS Data Means for American Finances” in the Wall Street Journal (WSJ). This article provides a nifty summary on the ways the data influence the financial outcomes of American households such as taxes, retirement benefits, Treasury Inflation-Protected Securities (TIPS), Medicare, etc.
Have a great day and stay tuned.
Economic Calendar
August 4 - 8, 2025: The Week Ahead
Future Fed Expectations
Source: Bloomberg
| Select Probabilities based on the Futures | |
|---|---|
| Probability of Fed Funds rate CUT on September 17, 2025 | -86% |
| Probability of Fed Funds rate CUT on October 29, 2025 | -72% |
**All quoted rates are indications and are subject to change without notice.
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