I'm Colette Auclair, and here is Schwab's early look at the markets for Tuesday, August 5th.
M&A Monday helped stocks bounce back from Friday's selloff. Blade Air Mobility (BLDE) rallied 17% on a Bloomberg report that Joby Aviation (JOBY) was looking to acquire the helicopter ride-share company. Joby Aviation rose 18.82%. CommScope (COMM) rocketed 86% on news that it had reached a cash deal to sell its broadband connectivity division for $10.5 billion to Amphenol (APH). Amphenol rose 4.14%. Steelcase (SCS) shot nearly 63% higher on news that HNI (HNI) will buy the company. HNI fell 10.4%.
Mega-cap stocks were also big drivers with Nvidia (NVDA) +3.62%, Meta (META) +3.51%, Alphabet (GOOG) +3.05%, Microsoft (MSFT) +2.20%, and Tesla (TSLA) +2.19%.
June factory orders fell 4.8% month over month which is a smaller drop than the consensus estimate of -5.1%. May saw an upward revision of 8.3% from 8.2%. When transportation is excluded, factory orders actually increased 0.4%.
Bloomberg reported that President Trump will announce a New Federal Reserve Governor to replace Adriana Kugler who last week announced plans to retire on August 8. Kugler's term was scheduled to end in January but, she didn't provide a reason for the early departure. The opening provides an opportunity for President Trump to offer a nominee that could potentially replace Jerome Powell as the Fed chair.
Credit spreads rose after Friday's nonfarm payrolls revision. They measure the difference between yields on Treasury and high-yield bonds which is used as an investor sentiment indicator where a widening spread is bearish and falling spread is bullish. The average spread of the Bloomberg US Corporate High-Yield Bond Index rose 23 basis points, the largest one-day spike since April. The one-day rise was large, but the level is still relatively low. "At just 3.01%, the average spread of the index is still well below its long-term average, not representing much risk premium in case the economy slows," observed Collin Martin, director of Fixed Income Strategy at the Schwab Center for Financial Research. "High-yield bonds would likely become more attractive if spreads rose to the 4.5% to 5% area or higher."
The options markets have been sending some interesting signals the last few weeks. In July, S&P 500 index options reached over 90% calls showing heavy bullish bias. While not as high, similar trends are seen in ETF and equity options. Additionally, up until last Friday, hedging was at a minimum with 30-day volatility skews in the 45th percentile. Some contrarian investors saw these developments as signs that the market was in an extreme overbought condition and ripe for a pullback. On Friday, option activity flipped, and hedging ramped up causing the 30-day volatility skews to move to the 71st percentile. These changes suggest that investor sentiment maybe flipping.
Last week, copper futures fell 28% on tariff news which also caused the copper-to-gold ratio to plummet. This ratio is used by investors to measure economic health. A rising ratio is seen as positive for the economy while a falling ratio is negative. The reason is because copper is used in manufacturing and construction particularly in wiring. When copper is high demand, manufacturing and construction is doing well. On the other hand, gold is seen as a hedge or "safe haven" by many investors. If gold is outperforming copper, it suggests that investors are bearish on the economy and looking for safety. Copper tariffs have distorted the copper-to-gold ratio, but the recent selloff in copper suggests economic weakness.
IDEXX Labs (IDXX) rocketed 27.5% higher as the pet health care company reported better-than-expected earnings and raised their 2025 profit and revenue forecasts.
Monolithic Power (MPWR) extended its Friday rally another 5.73% bringing it to a total increase of more than 16.7%.
Spotify (SPOT) rallied 5% after announcing plans to raise its premium subscription prices in September.
Tyson Foods (TSN) rose 2.44% after beating earnings and revenue estimates and raising it's 2025 fiscal year outlook.
William-Sonoma (WSM) climbed 6.85% despite no immediate news.
The Dow Jones Industrial Average® ($DJI) rose 585.06 points Monday (1.34%) to 44,173.64; the S&P 500 index (SPX) rallied 91.93 points (1.47%) to 6,329.94, and the Nasdaq Composite® ($COMP) climbed 403.45 points (1.95%) to 21,053.58.
