MARKET WRAPS

STOCKS: Stocks rallied after reports of diplomatic breakthroughs on the Strait of Hormuz question and as traders bet the artificial-intelligence boom would continue.

TREASURYS: Treasury yields fell amid signs that the U.S. and Iran were close to a new peace deal.

FOREX: The U.S. dollar ticked down against rivals as inflation fears faded.

COMMODITIES: Oil futures fell to a three-week low after Treasury Secretary Scott Bessent said the U.S. could be close to an agreement with Iran to reopen the Strait of Hormuz, while Qatar reported progress in diplomatic efforts.

HEADLINES

U.S. Trade Deficit Contracted in June

The U.S. trade deficit contracted in June, according to data published

by the Commerce Department Tuesday.

U.S. imports totaled $388 billion in June, down 1.8% from May, while

exports were $314.7 billion, down 0.9% from May.

That yielded a trade deficit of $73.3 billion versus $77.6 billion in

May. Analysts polled by The Wall Street Journal were expecting a $72.9

billion monthly deficit.

SpaceX Revenue Rises 92% in Second Quarter

SpaceX brought in $7.8 billion in revenue in the second quarter, up

92% from the same period last year. The company disclosed the figures

Tuesday in its first earnings report as a public company.

SpaceX, which raised $86 billion in a record-setting initial public

offering in June, reported a net loss of $541 million. Its capital

expenditures hit $18.4 billion for the quarter.

Shares in SpaceX were up slightly in after-market trading.

P&G Agrees to Buy Supplements Maker for $3.8 Billion

Procter & Gamble will buy supplement company Thorne for $3.8 billion,

bolstering the consumer giant's presence in the beauty and wellness

industry.

The deal will help the company build its portfolio in an area where it

feels demographics are on its side, P&G's Chief Executive Shailesh

Jejurikar said on CNBC Tuesday.

"For growth, definitely one of the areas we're looking at is a much

bigger play in growing our beauty and health business," he said.

Antitrust Trial Over Paramount-Warner Merger Set for March

Paramount will have to wait until March 2027 to face off in court

against the dozen states opposing its $81 billion takeover of Warner

Bros. Discovery.

A California federal judge said Tuesday that the antitrust trial will

begin March 2 with an expectation that it will run for 12 court days.

The timeline the judge laid out in a written order is much later than

the November 2026 start date Paramount had sought. California Attorney

General Rob Bonta had petitioned for an April 2027 start.

McDonald's Aims to Improve Service and Food, and Chose a New U.S. Boss to

Help

McDonald's is shaking up its U.S. business, picking a new leader to

help boost sluggish domestic sales and improve service and quality at the

world's biggest burger chain.

The company on Tuesday appointed Skye Anderson president of its U.S.

business, succeeding Joe Erlinger, who had held the role since 2019. It

marked a rapid advance for Anderson, a 26-year veteran of the company who

was named U.S. chief operating officer in April after serving in a global

business role.

McDonald's Chief Executive Chris Kempczinski said Tuesday that the

chain's U.S. business didn't meet expectations during its most recent

quarter, with inconsistent performance at restaurants. The chain's World

Cup promotion didn't generate as many sales as hoped, he said, and

shuffling value offerings didn't pay off.

Pfizer's Quarterly Results Beat Expectations on Cancer, Heart Drugs

Pfizer reported better-than-expected second-quarter results, as rising

sales of drugs for cancer and heart disease helped offset steep declines

for Covid-19 products.

The New York company also slightly raised the bottom end of its

forecast range for full-year 2026 revenue.

Pfizer shares were largely unchanged in premarket trading.

Caterpillar Says the AI Boom Continues to Drive Construction Demand

Caterpillar said the artificial intelligence boom continues to drive

demand for its engines and generators, while healthy construction

spending is spurring sales of its dump trucks, bulldozers and excavators.

The trends lifted the company's total sales and revenue during the

latest quarter by 24%, to $20.54 billion. That marks the first time in

company history Caterpillar generated over $20 billion in sales and

revenues in a single quarter, Chief Executive Joe Creed said on a call

with analysts.

The company also raised its full-year sales outlook on the back of the

stronger-than-expected quarter, during which lower-than-expected tariff

costs and a large tariff refund helped expand margins and improve

profitability, he said.

OpenAI to Pay $3.2 Million to Settle DOJ's Employee Discrimination Claims

OpenAI will pay $3.2 million to settle claims by the Justice

Department that it discriminated against U.S. workers when advertising

jobs through its immigration sponsorship program.

The DOJ's civil rights division alleged that OpenAI and its subsidiary

Statsig discriminated by choosing workers with temporary employment visas

over others.

When advertising positions it sought to fill through its Permanent

Labor Certification program, OpenAI allegedly didn't post on its external

job website and required applicants to mail paper applications for jobs

listed as part of the program, the DOJ said.

Officials Probe Salmonella Cases Tied to Jalapeño Peppers Served at

Chipotle

Minnesota public health authorities said they are investigating an

outbreak of salmonella associated with jalapeños served at Mexican-style

quick-service restaurants, with Chipotle a focus.

The Minnesota Department of Health said it has identified 110

salmonella javiana cases in the state tied to the outbreak. Among the 84

people who were interviewed after coming down with symptoms, 89% reported

eating at Chipotle from mid-June to last month, said Carlota Medus,

senior epidemiologist supervisor in the department's foodborne diseases

unit.

Those who didn't report eating at Chipotle ate at other Mexican-style

restaurants, she said.

Huggies Stumble in China After Social-Media Firestorm

The maker of Huggies diapers said its China sales have been hurt in

recent weeks by a social-media firestorm involving allegations that its

diapers contain formamide, a solvent used in a number of manufacturing

processes.

A Beijing-based state-run newspaper reported in June that Huggies and

other brands that sell in China had tested positive for the substance.

Huggies maker Kimberly-Clark said Tuesday that an independent analysis

conducted by a government-certified tester showed its products were safe.

It characterized the newspaper's findings as false.

Still, the claims attracted attention on Chinese social media, and the

resulting attention "significantly impacted" second-quarter sales,

Kimberly-Clark said. The spread of the claims was "expected to further

impact sales and profits in the near term," the company said.

Merck Cuts Full-Year Profit Forecast as Acquisition Costs Weigh on Bottom

Line

Merck slashed its profit outlook for the year due to charges tied to

its acquisition of cancer biotech company Terns Pharmaceuticals.

However, Merck also bumped up its full-year sales outlook as new

product launches bolstered its topline in the second quarter, helping

sales come in above Wall Street's expectations.

For the full year, the company now projects adjusted earnings per

share of $2.66 to $2.76, down from $5.04 to $5.16 previously.

New Jersey Sues Amazon, Alleging Delivery Network Illegally Suppresses

Wages

New Jersey sued Amazon on Tuesday, alleging the e-commerce giant

illegally used its dominance over its package-delivery network to

suppress wages and working conditions for thousands of delivery drivers

while preventing them from organizing.

The lawsuit, filed in federal court in New Jersey, alleges Amazon

violated federal and state antitrust laws through its Delivery Service

Partner, or DSP, program, arguing the company exercises unlawful

"monopsony," or a dominant buyer's ability to dictate prices and

terms-over the small businesses that deliver Amazon packages and the

drivers they employ.

Unlike traditional monopoly cases focused on consumer prices, New

Jersey argues Amazon used its buying power to hold down compensation for

delivery contractors and drivers by making DSPs almost entirely dependent

on the company while tightly controlling their operations. The complaint

alleges Amazon dictates routes, hiring, compensation, performance

standards and other aspects of the businesses, leaving them with little

ability to negotiate or work for other customers.

TALKING POINT Retail Investors Just Got a Lot More Bullish on the Market, Schwab Says Investors are expressing positive vibes about U.S. equities, despite ongoing concerns that the market is overvalued. That's the takeaway from Charles Schwab's most recent quarterly report on investor sentiment published Tuesday.

The report shows that 47% of retail clients are bullish on the U.S. stock market. That's a meaningful increase from 28% in the firm's second quarter report.

A separate report from The CFP Board also suggests that clients are more optimistic about their financial outlook this summer than they were three months ago. Fifty percent of advisors described their clients' outlook as positive, compared with 36% in the spring. CFP professionals are more bullish too, with 61% reporting a positive financial outlook compared with 54% in the spring, the report found.

The optimism comes as investor dollars continue to pour into the market, even as many investment professionals express concerns about overvaluation.

Markets surged Tuesday and on Monday, the S&P 500 gained 1.5%, marking its best first day of a month since October 2022. For its part, the Dow Jones Industrial Average closed at a record high, buoyed by Amazon, a member of the so-called Magnificent Seven technology stocks. The Roundhill Magnificent Seven ETF (MAGS), which provides concentrated exposure to these stocks, is trending up in Tuesday's trading, after closing at 68.38 on Monday.

Strong corporate earnings as well as talks in the Middle East that could lead to an end to conflict have lifted investor sentiment recently. In June, a general easing (but not end) of conflict in the Middle East, lower oil prices, and healthy earnings may have contributed to the positive investor sentiment recorded by Schwab. Investors' optimism is reflected in the data, with 49% of retail clients saying it's a good time to invest in equities. That compares with 43% who gave this response last quarter. Almost half-45%-plan to add money to their investment portfolios.

Retail clients are most bullish on the energy and information technology sectors and least bullish on real estate and consumer discretionary stocks. Meanwhile, 61% of retail clients said the stock market is overvalued, compared with 52% last quarter, Schwab says.

--Cheryl Winokur Munk, Barron's

Expected Major Events for Wednesday 00:30/JPN: Jul Japan Services PMI

06:00/JPN: Jun Revised Machine Tool Orders

06:00/RUS: Jul Russian Services PMI

06:45/FRA: Jun Industrial production index

07:45/ITA: Jul Italy Services PMI

07:50/FRA: Jul France Services PMI

07:55/GER: Jul Germany Services PMI

08:00/UK: Jul UK monthly car registrations figures

08:30/UK: Jul S&P Global UK Services PMI

08:30/UK: Jul UK Official Reserves

08:30/UK: Jul Narrow money (Notes & Coin) and reserve balances

11:00/US: 07/31 MBA Weekly Mortgage Applications Survey

12:15/US: Jul ADP National Employment Report

13:45/US: Jul US Services PMI

14:00/US: Jul ISM Report On Business Services PMI

14:30/US: 07/31 EIA Weekly Petroleum Status Report

15:00/US: Jul Global Services PMI

All times in GMT. Powered by Onclusive and Dow Jones.

Expected Earnings for Wednesday Arbutus Biopharma Corp (ABUS) is expected to report $-0.02 for 2Q.

Archrock Inc $(AROC)$ is expected to report $0.45 for 2Q.

BioCryst Pharmaceuticals Inc $(BCRX)$ is expected to report $0.15 for 2Q.

BorgWarner Inc $(BWA)$ is expected to report $1.24 for 2Q.

CDW Corp $(CDW)$ is expected to report $2.38 for 2Q.

CVS Health Corp $(CVS)$ is expected to report $1.60 for 2Q.

Carlyle Group Inc $(CG)$ is expected to report $0.92 for 2Q.

Cencora Inc $(COR)$ is expected to report $3.90 for 3Q.

Clear Secure Inc (YOU) is expected to report $0.44 for 2Q.

CorVel Corp (CRVL) is expected to report for 1Q.

Dorian LPG Ltd (LPG) is expected to report $2.45 for 1Q.

EVgo Inc $(EVGO)$ is expected to report $-0.11 for 2Q.

Edgewell Personal Care Co (EPC) is expected to report $0.20 for 3Q.

Eos Energy Enterprises Inc $(EOSE)$ is expected to report $-0.19 for 2Q.

Freshpet Inc (FRPT) is expected to report $0.22 for 2Q.

Gibraltar Industries Inc (ROCK) is expected to report $0.85 for 2Q.

GlobalFoundries Inc $(GFS)$ is expected to report $0.32 for 2Q.

Hudson Pacific Properties Inc (HPP) is expected to report for 2Q.

Icahn Enterprises LP $(IEP)$ is expected to report $0.32 for 2Q.

InMode Ltd $(INMD)$ is expected to report $0.29 for 2Q.

Iron Mountain Inc $(IRM)$ is expected to report $0.43 for 2Q.

J&J Snack Foods Corp $(JJSF)$ is expected to report $1.63 for 3Q.

Kraft Heinz Co $(KHC)$ is expected to report $0.53 for 2Q.

Kyndryl Holdings Inc (KD) is expected to report $-0.27 for 1Q.

LCI Industries (LCII) is expected to report $2.47 for 2Q.

LENZ Therapeutics Inc (LENZ) is expected to report for 2Q.

Lineage Inc (LINE) is expected to report for 2Q.

Materion Corp (MTRN) is expected to report $1.39 for 2Q.

NNN REIT Inc $(NNN)$ is expected to report $0.50 for 2Q.

Northwest Natural Holding Co $(NWN)$ is expected to report $-0.14 for 2Q.

Oaktree Specialty Lending Corp (OCSL) is expected to report $0.38 for 3Q.

Phillips 66 (PSX) is expected to report $7.67 for 2Q.

Recursion Pharmaceuticals Inc (RXRX) is expected to report $-0.28 for 2Q.

Regal Rexnord Corp (RRX) is expected to report $1.49 for 2Q.

Riot Platforms Inc (RIOT) is expected to report $-0.29 for 2Q.

Shake Shack Inc (SHAK) is expected to report $0.34 for 2Q.

Spire Inc $(SR)$ is expected to report $-0.31 for 3Q.

Thomson Reuters Corp (TRI,TRI.T) is expected to report for 2Q.

United Therapeutics Corp $(UTHR)$ is expected to report $6.87 for 2Q.

Vishay Precision Group Inc (VPG) is expected to report $0.15 for 2Q.

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This article is a text version of a Wall Street Journal newsletter published earlier today.