Signs of Euphoria Are Popping Up Everywhere Lately in Markets

US stocks, European junk bonds and frontier markets are all flying

Five things you need to know

• House lawmakers are voting today on the Senate version of Donald Trump’s multitrillion-dollar tax bill, and the legislation is running into Republican resistance. Moderates and ultraconservatives are threatening to defy the president and sink his domestic agenda. Here’s what’s in the bill.
• Trump also threatened Japan with tariffs of up to 35% as he ramped up tensions for a third straight day, fueling fears of a worst-case scenario among market players and raising doubts over Tokyo’s tactics in trade talks. Japanese stocks dropped.
• US equity futures held firm as traders await tomorrow’s jobs report and keep an eye on trade talks before the July 9 deadline. With the job openings data pointing to a hotter economy, expectations are building that today’s ADP employment numbers and tomorrow’s payrolls could also reflect that.
• Foxconn has asked hundreds of Chinese engineers and technicians to return home from its iPhone factories in India, dealing a blow to Apple’s manufacturing push in the country.
• Wall Street’s largest lenders boosted their dividends after passing this year’s Federal Reserve stress tests, a hurdle that regulators made easier to clear by softening some of the requirements.

Exuberant markets

The furious rally in US stocks from the depths of April’s tariff selloff has triggered a swift jump in an equity euphoria indicator created by Barclays.

The proprietary gauge has swung back into the double digits for the first time since February, to levels that have signaled extreme frothiness in the past.

Among the signs of speculative fervor:

• Listings of new blank-check companies in 2025 already surpass the last two years combined.
• Cathie Wood’s ARK Innovation ETF — a proxy for profitless technology companies — posted one of its best rallies in history, second only to the post-Covid surge.
• There’s been “a dash to trash,” or volatile, highly speculative corners of the market: Bitcoin-linked stocks, quantum computing shares, meme stocks and a basket of highly shorted securities have all soared lately.

“Fundamentals have taken a back seat again as stocks with hot narratives are trading like lottery tickets,” said Dave Mazza at Roundhill Investments. “That sets the stage for a sharp air pocket on the next bad headline.”

The Barclays measure has averaged around 7%, but occasionally it peaks above 10%, as in the Dotcom era of the late 1990s and the meme-stock frenzy of 2021. The gauge currently sits around 10.7%.

Despite elevated levels, bubbles are difficult to time and can expand for extended periods before correcting, said Stefano Pascale, head of US equity derivatives strategy at Barclays. As such, he recommends riding the wave for now and hedging with options to curb potential losses if things go awry. —Alexandra Semenova

On the move

• Centene falls 27% in premarket trading after the the health insurer pulled its 2025 guidance, citing insurance market trends that veered from its assumptions and threaten $1.8 billion in revenue.
• Constellation Brands, which markets Mexican beers including Modelo and Corona, falls 0.9%. Quarterly profit trailed expectations because of weaker consumer demand for alcoholic beverages and higher costs from aluminum tariffs.
• Crocs falls 1.5% after Goldman Sachs reinstated coverage of the footwear maker with a sell rating and set a price target of $88, implying an 18% downside from the last close.
• Enphase Energy rises 1.9% and First Solar gains 1.4%. The Senate version of Trump’s tax bill would soften the blow for wind and solar developers, which had feared a sharp reduction in subsidies. The bill now faces conservatives in the House eager to kill those credits.
• Verint Systems jump 13% after Bloomberg News reported that buyout firm Thoma Bravo is in talks to acquire the call-center software maker.
• BrightView shares fall 8.9% after the commercial landscaping company cut its revenue guidance for the full year. The diminished guidance missed the average analyst estimate. —Phil Serafino and Jonas Ekblom

Exuberant markets, the international edition

It’s not just the US stock market where animal spirits are roaring.

We told you yesterday about the junkiest of junk borrowers that raised €400 million in the European corporate bond market this week. Well, that was part of a record month for high-yield bond offerings in the region.

Companies sold €22.5 billion of junk-rated bonds in June, beating the previous record from June 2021 by almost €4 billion, according to data compiled by Bloomberg.

And there is no sign of a letup: Cruise-ship operator Carnival priced a €1 billion offering yesterday, and Softbank Group is in the market with a deal too.

Meanwhile, frontier-market stocks just posted their strongest first half in 18 years, bolstered by a weaker dollar, relative insulation from global risks and the reduced threat of an oil-price spike.

MSCI’s gauge of 25 smaller and less liquid equity markets advanced 17% in the first six months of the year, its biggest rally for that period since 2007.

Investors have pumped funds into frontier nations like Vietnam and Morocco as they chase higher returns and options outside the US, where unpredictable trade policies and rising debt levels have spooked markets. The slump in the dollar, which is down about 9% for the year, has helped reduce import costs and support growth in developing economies. —Abhinav Ramnarayan, Anthony Osae-Brown and Srinivasan Sivabalan

Magnificent laggards

One of the more surprising aspects of the equity rally: The S&P 500 has risen to records despite a drag from three of the market’s biggest companies.

Shares of Apple, Alphabet and Tesla have all fallen this year, subtracting more than 120 points from the index. Meanwhile, the S&P 500 is up 5.4%.

All else equal, if the trio at least erased losses for 2025, the benchmark would be about 2 percentage points higher.

After collectively leading the market higher for more than two years, the Magnificent 7 stocks have diverged in 2025. Microsoft, Nvidia and Meta are all up 14% or more.

“You would really need to see a strong broad market to compensate for weakness in the Mag 7,” said Paul Stanley at Granite Bay Wealth Management. —Carmen Reinicke

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Written by: Alexandra Semenova and Phil Serafino — With assistance from Jonas Ekblom, Abhinav Ramnarayan, Anthony Osae-Brown, Srinivasan Sivabalan, and Carmen Reinicke @Bloomberg

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