Stocks Rebound as US Government Shutdown Seems Averted

The S&P 500 Index ($SPX) (SPY) on Friday closed up +2.13%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.65%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +2.49%.  March E-mini S&P futures (ESH25) rose +1.85%, and March E-mini Nasdaq futures (NQH25) rose +2.18%. 

Stock indexes Friday traded higher as a US government shutdown on March 15 appeared unlikely after Senate Democratic leader Schumer said Thursday night that he will not block the Republican continuing resolution (CR) to fund the government for 6 months.  The House passed the bill on Tuesday, and the Senate was expected to vote later Friday afternoon.

Global equity markets garnered support Friday from a rally in Chinese stocks to a 3-month high on signs of more policy support.  Officials from the finance ministry, commerce ministry, the PBOC, and other government bodies plan to hold a press conference on Monday to announce measures to boost consumption.

Stocks were undercut by Friday’s report from the University of Michigan showed that US consumer sentiment in March fell to a more than two-year low, and long-term inflation expectations soared to a 32-year high. 

The University of Michigan US Mar consumer sentiment index fell -6.8 to a 2-1/3 year low of 57.9, weaker than expectations of 63.0.

The University of Michigan’s US Mar 1-year inflation expectations indicator unexpectedly rose to a 2-1/3 year high of +4.9%, higher than expectations of no change at +4.3%.  The Mar 5-10 year inflation expectations indicator unexpectedly rose to a 32-year high of +3.9% versus expectations of a decline to +3.4%.

The price of Bitcoin (^BTCUSD) rose more than +4% after a stablecoin bill is on a fast track for consideration by the full Senate after the banking committee voted 18-6 to advance the bill late Thursday.  The bill, endorsed by President Trump, would govern privately issued, dollar-based stablecoins that could enable cheaper and faster transactions for anyone with a smartphone.  Bitcoin also saw support Friday on the recovery in stocks, which promoted more of a risk-on environment.

Stocks have been under pressure over the past week due to fears that US tariffs will weaken economic growth and corporate earnings.  Last Tuesday, President Trump imposed 25% tariffs on Canadian and Mexican goods and doubled the tariff on Chinese goods to 20% from 10%.  Mr. Trump also reiterated that he would impose reciprocal tariffs on foreign nations on April 2, as planned.  Trade tensions escalated on Wednesday when the European Union imposed tariffs on up to $28.3 billion of US goods, including soybeans, beef, and poultry, in retaliation for US tariffs on steel and aluminum imports.  Also, Canada announced 25% counter-tariffs on about $20.8 billion of US-made items, such as computers and sporting goods, along with US steel and aluminum products.

The markets are discounting the chances at 1% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets rose on Friday.  The Euro Stoxx 50 rose +1.42%.  China’s Shanghai Composite Index rallied to a 3-month high and closed up +1.81%.  Japan’s Nikkei Stock 225 closed up +0.72%.

Interest Rates

June 10-year T-notes (ZNM25) Friday fell -9 ticks.  The 10-year T-note yield rose +4.6 bp to 4.314%.  June T-notes fell on reduced safe-haven demand as stocks rallied after Senate Democratic leader Schumer said he would not block the Republican bill to keep funding the government, likely averting a government shutdown.  T-notes were also under pressure from carryover weakness from a slide in German bund prices following a report that German parties have agreed on a debt package. T-notes remained lower after Friday’s report from the University of Michigan showed US inflation expectations unexpectedly rose, a hawkish factor for Fed policy.

European bond yields were mixed.  The 10-year German bund yield rose +2.1 bp to 2.876%.  The 10-year UK gilt yield fell -1.1 bp to 4.666%.

The German Feb CPI (EU harmonized) was revised downward to +0.5% m/m and +2.6% y/y from the previously reported +0.6% m/m and +2.8% y/y.

ECB Governing Council member Holzmann said interest rates in the Eurozone are already at neutral levels, and he supports pausing ECB rate cuts next month.  He added that a resurgence in inflation is the greater risk, and higher European spending could force the ECB to hike interest rates.

Handelsblatt reported Friday that German chancellor-in-waiting Merz reached an agreement with the Green party on a fiscal reform package for large investments in infrastructure and defense.

Swaps are discounting the chances at 53% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

The Magnificent Seven stocks all rose on Friday, boosting the broader market.  Nvidia (NVDA) rose more than +5% to lead gainers in the Dow Jones Industrials.  Tesla (TSLA) rose more than +3%.  Meta Platforms (META), Microsoft (MSFT) and Amazon.com (AMZN) rose more than +2%.  Apple (AAPL) and Alphabet (GOOGL) rose more than +1%. 

Chip stocks moved higher Friday.  Micron Technology (MU) rose more than +6% after Aletheia Capital Limited upgraded the stock to buy from hold with a price target of $145.  ARM Holdings Plc (ARM) rose more than +5%, and Lam Research (LRCX) rose more than +4%.  Applied Materials (AMAT), GlobalFoundries (GFS), Microchip Technology (MCHP), and Qualcomm (QCOM) all closed up more than +3%.

Crypto stocks rallied Friday after Bitcoin rose more than +4%.  MicroStrategy (MSTR) was the largest winner in the Nasdaq 100 with a rally of +13%. MARA Holdings (MARA) rallied by more than +7%, and 

Riot Platforms (RIOT) and Bit Digital (BTBT) rallied by more than +6%.  Coinbase (COIN) closed up more than +2%. 

DocuSign (DOCU) rallied more than +14% after forecasting 2026 billings of $3.30 billion-$3.35 billion, well above the consensus of $3.22 billion. 

Semtech (SMTC) rallied more than +20% after reporting Q4 adjusted EPS of 40 cents, better than the consensus of 32 cents. 

Ulta Beauty (ULTA) rallied more than +13% to lead gainers in the S&P 500 after reporting Q4 EPS of $8.46, well above the consensus of $7.12.

Crown Castle (CCI) rallied more than +8% after agreeing to sell separate parts of its fiber business to an EQT AB fund and Zayo Group Holdings for a combined $8.5 billion. 

Rubrik (RBRK) rallied more than +27% after forecasting 2026 revenue of $1.15 billion-$1.16 billion, above the consensus of $1.11 billion. 

American Express (AXP) rallied more than +3% after Baird upgraded the stock to neutral from underperform.

Abbot Laboratories (ABT) fell nearly -3% to lead losers in the S&P 500 after a judge overturned an infant formula verdict from last year that rejected claims that formulas made by the company caused necrotizing enterocolitis in an infant. 

T-Mobile US (TMUS) fell more than -1% after Citigroup downgraded the stock to neutral from buy on valuation. 

Xponential Fitness (XPOF) plunged -39% after forecasting full-year revenue of $315 million-$325 million, weaker than the consensus of $342.9 million. 

Earnings Reports (3/17/2025)

Altus Power Inc (AMPS), Alumis Inc (ALMS), Bicara Therapeutics Inc (BCAX), BioAge Labs Inc (BIOA), CAMP4 Therapeutics Corp (CAMP), Consolidated Water Co Ltd (CWCO), Diversified Energy Co PLC (DEC), Eastman Kodak Co (KODK), Energy Vault Holdings Inc (NRGV), Getty Images Holdings Inc (GETY), Hallador Energy Co (HNRG), Harrow Inc (HROW), Inhibrx Biosciences Inc (INBX), Inspired Entertainment Inc (INSE), MBX Biosciences Inc (MBX), Natural Gas Services Group Inc (NGS), Open Lending Corp (LPRO), Quanterix Corp (QTRX), Science Applications International Corp (SAIC), Septerna Inc (SEPN), Sonida Senior Living Inc (SNDA), T1 Energy Inc (TE), Townsquare Media Inc (TSQ).