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The yield on the 10-year US Treasury note fell to 4.46% to pull back from the five-week high of 4.5% tested earlier in the session as markets assessed the latest economic data and hints on future FOMC members. Retail sales jumped more than expected and initial unemployment claims unexpectedly dropped to a three-month low, adding to the batch of hard economic data that reflects a robust US economy. In the meantime, conflicting reports on whether Trump may attempt to fire Fed Chair Powell sustained the long-end of yields. The US President has repetitively called for lower interest rates to raise expectations that his incoming nominee for Fed Chair is likely to tilt the FOMC to the dovish monetary side, raising inflationary risks on the longer term and sustaining concerns that the Fed may lose control of yields of higher maturities. On the trade front, major partners Japan, Korea, and the EU were still subject to more aggressive tariffs on August 1st as no trade agreements were announced.

US 10-Year Yield Pulls Back

The Philadelphia Fed Manufacturing Index surged to 15.9 in July 2025, its first positive reading after three consecutive months in negative territory and the highest level since February. Rebounding from -4.0 in June and far exceeding market expectations of -1, the index signaled a strong recovery in regional manufacturing and renewed optimism about the sector’s outlook. Key components strengthened across the board, with the new orders index rising 16 points to 18.4 and the shipments index climbing 15.4 points to 23.7. The employment index turned positive, up 20 points to 10.3, indicating overall increases in employment. Price pressures also picked up, as the prices paid index rose 17 points to 58.8 and the prices received index increased 5 points to 34.8, reversing last month’s declines. Forward-looking indicators improved as well, with the future activity index rising 3 points to 21.5, suggesting firms remain optimistic about growth over the next six months.

Philadelphia Factory Activity Rebounds Strongly in July

Futures tied to the S&P 500 and Nasdaq 100 edged up 0.1% and 0.2%, respectively, on Thursday, while Dow Jones futures hovered near the flatline as traders assessed a fresh batch of economic data. US retail sales rose 0.6% last month, well above expectations of a 0.1% increase, offering reassurance about the resilience of consumer spending. Additionally, initial jobless claims fell to 221K, signaling continued labor market strength, while import prices rose just 0.1%, below the 0.3% forecast. Meanwhile, investor anxiety eased after President Trump denied reports that he was planning to dismiss Federal Chair Powell, calming markets following earlier speculation. On the earnings front, PepsiCo shares rose 3.7% in premarket trading after the company posted quarterly earnings and revenue that exceeded expectations. United Airlines edged up 0.5%, with the company releasing a lackluster full-year earnings forecast. Netflix is also scheduled to report its earnings after the closing bell.

S&P and Nasdaq Futures Edge Up

The US dollar index climbed above 98.7 on Thursday, reaching its highest level in over three weeks, after stronger-than-expected retail sales data eased concerns about consumer spending. Retail sales rose 0.6% in June, bouncing back from May’s sharp 0.9% drop and surpassing forecasts of 0.1%. The rebound suggests resilience in household demand and supports the case for the Federal Reserve to keep interest rates unchanged for now. As a result, traders have scaled back expectations for rate cuts in 2025, with markets now pricing in fewer than two reductions this year, down from three anticipated earlier in July. Political uncertainty added to recent market volatility, as speculation swirled about Fed Chair Jerome Powell’s future. However, President Trump later clarified he had no immediate plans to replace Powell, though he continued to criticize the central bank for not cutting rates more quickly.

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