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.
Wednesday, July 9, 2025 at 8:00 am CT
Commentary prepared by Tom Slefinger, Market Strategist
Market Indications
Other Market Indicators
| Market Indicators | ||
|---|---|---|
| 2s/5s Tsy Spread | 0.08 | +0.00 |
| 2s/10s Tsy Spread | 0.51 | +0.00 |
| 2s/30s Tsy Spread | 1.03 | +0.00 |
| DJIA-30 | 44,240.76 | -165.60 |
| S&P-500 | 6,225.52 | -4.46 |
| NASDAQ | 20,418.46 | +5.94 |
| Dollar Idx | 97.64 | +0.12 |
| CRB Idx | 302.29 | +3.10 |
| Gold | 3,389.18 | -11.97 |
Daily Commentary
Recap – Stock markets treaded water despite a ton of trade war news. (See below). The S&P 500 and the Nasdaq were essentially flat on Tuesday, and the Dow lost 0.4%.
The 10-year Treasury yield stabilized at 4.41%. The recent Treasury market rally has stalled out because of this false belief that the U.S. economy is cooking with gas. Apparently, traders are oblivious to the reality that real gross domestic product (GDP) has contracted modestly on a three- and six-month basis.
In the same vein, have a read of the Bloomberg column titled, “Treasury Bulls Unwind Big Bets as Strong Data Pushes Yields Up”. Supposedly traders have been reducing their long bond positions ever since the “strong non-farm payroll (NFP) print”. Seriously??? As discussed in detail in this week’s Weekly Relative Value (WRV), perception has overtaken reality, because the private-sector payrolls slowed sharply to a scanty +74,000 uptick in June, the weakest reading in five months – but this is what classifies today as being “strong” by the economists.
And what does the bond market dislike about this? The New York Fed’s Survey of Consumer Expectations showed one-year median inflation expectations have gone from +3.63% in April to a five-month low of +3.02% in June. The three-year view stayed at +3.00% on the nose and is exactly where it was before tariffs became the story of the year.
Source: Bloomberg
As for interest rate expectations, the survey was more supportive of President Donald Trump than Federal Reserve Chair Jerome Powell as the assessed probability for higher yields fell to the lowest level in the twelve-year history of the poll.
The latest tape bomb was the announcement out of the White House that the U.S. will impose a 50% tariff on copper imports, precipitating a record +17% spike in U.S. futures. The reality is that almost 40% of U.S. copper demand is met with imports. So, assuming this tariff remains in place (a BIG assumption these days) this is going to cause major ripple effects across American industries (think super-sized margin squeeze) when you consider all the applications: construction, electronics, industrial machinery and transportation equipment. Great news for Freeport-McMoRan perhaps, but not for everyone else.
Source: Bloomberg
Also, headlines suggest that pharmaceutical products are next in line (up to 200% tariffs) as the President targets specific products and not just countries. Also, apparently the European Union (EU) is coming to the table cap in hand. We shall see.
Meanwhile, the fourteen letters sent from the President (mostly aimed at Asia) were in line with the tariff rates announced on “Liberation Day.” The weighted average tariff for goods being imported from Asia, at last count, will be 27% and up from 4.8% at the turn of the year. But the new drop-dead date is August 1, so investors have become trained to take none of this seriously. The focus is on the constantly revised timelines and no longer on these obviously disturbing tariff rate levels. Indeed, global equity markets are taking this latest trade action in stride as investors seem to have built up a form of immunity from all this uncertainty. TACO is alive and well.
The DXY dollar index is consolidating at 97.6 as it enjoys a countertrend rally. Bitcoin is stable around $108,000 and West Texas Intermediate (WTI) crude is essentially unchanged at $68.44 per barrel. Gold continues to see some profit-taking, trading off by -0.4% to $3,290 per ounce. The gold market doesn’t seem to realize just yet that the three people now topping the Trump choice list for next Fed Chairman are Kevin Hassett, Scott Bessent and Kevin Warsh… all “yes men” and that would surely take the U.S. dollar right back down again.
Stay tuned and have a great day!
Economic Calendar
July 7 - July 11, 2025: The Week Ahead
Future Fed Expectations
Source: Bloomberg
| Select Probabilities based on the Futures | |
|---|---|
| Probability of Fed Funds rate CUT on July 30, 2025 | -5% |
| Probability of Fed Funds rate CUT on September 17, 2025 | -68% |
**All quoted rates are indications and are subject to change without notice.
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