Stocks See Support on Strength in Chip Makers

The S&P 500 Index ($SPX) (SPY) today is up +0.08%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.28%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.08%.  September E-mini S&P futures (ESU25) are up +0.07%, and September E-mini Nasdaq futures (NQU25) are up +0.06%. 

Stock indexes are mostly higher today, with the S&P 500 and Nasdaq 100 posting new all-time highs.  Strength in technology stocks is supporting gains in the broader market, led by a rally in semiconductor stocks.  Also, expectations that the Fed will cut interest rates at the conclusion of the 2-day FOMC meeting that begins today are underpinning stock prices.

Signs that US consumer spending is holding up are a positive factor for the economy and equity markets after Aug retail sales rose more than expected.  However, stocks fell back from their best levels after bond yields rose on the stronger-than-expected US retail sales and manufacturing production reports.

US Aug retail sales rose +0.6% m/m, stronger than expectations of +0.2% m/m.  Also, Aug retail sales ex-autos rose +0.7% m/m, stronger than expectations of +0.4% m/m. 

The US Aug import price index ex-petroleum rose +0.2% m/m, slightly stronger than expectations of +0.1% m/m.

US Aug manufacturing production unexpectedly rose +0.2% m/m versus expectations for a -0.2% m/m decline.

Most major US benchmark indexes, including the S&P 500, the Dow Jones Industrials, and the Nasdaq 100, continue to post record highs, driven by expectations of Fed interest rate cuts.  Weak labor market news and relatively contained inflation reports bolstered expectations for at least a -25 bp rate cut by the Fed at the Tue/Wed FOMC meeting and a total of -70 bp of rate cuts by year's end. 

The markets this week will continue to focus on any fresh trade or tariff news.  Later today, the Sep NAHB housing market index is expected to rise by +1 to 33.  On Wednesday, the FOMC is expected to cut the federal funds rate target by -25 bp to 4.00%-4.25% from 4.25%-4.50% and Fed Chair Powell will deliver post-FOMC meeting comments.  On Thursday, weekly initial unemployment claims are expected to fall by -23,000 to 240,000.

The markets are pricing in a 100% chance of a -25 bp rate cut and a 5% chance of a -50 bp rate cut at the conclusion of the Tue/Wed FOMC meeting.  After the fully expected -25 bp rate cut at this week’s meeting, the markets are discounting an 82% chance of a second -25 bp rate cut at the next FOMC meeting on Oct 28-29.  The markets are pricing in an overall -67 bp rate cut in the federal funds rate by year-end to 3.66% from the current 4.33% rate.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is down -0.12%.  China's Shanghai Composite closed up +0.04%.  Japan's Nikkei Stock 225 rallied to a new record high and closed up +0.30%.

Interest Rates

December 10-year T-notes (ZNZ5) today are down -4 ticks.  The 10-year T-note yield is up by +2.1 bp to 4.056%.  Dec T-notes are moving slightly lower today as the S&P 500 climbs to a new record high, which reduces safe-haven demand for T-notes.  Also, supply pressures are weighing on T-notes as the Treasury will auction $13 billion of 20-year T-bonds later today.  T-notes extended their losses after the US retail sales and manufacturing production reports rose more than expected. 

Losses in T-notes are limited by expectations that the Fed will cut interest rates by at least -25 bp at the conclusion of today's 2-day FOMC meeting on Wednesday.

Concerns about Fed independence are negatively impacting T-note prices due to President Trump's attempt to fire Fed Governor Cook and Stephen Miran's intention to hold a Fed Governor position while remaining technically in his White House role on the Council of Economic Advisors.

European government bond yields are moving higher today.  The 10-year German bund yield is up +1.1 bp to 2.702%. The 10-year UK gilt yield is up +1.3 bp to 4.646%.

Eurozone July industrial production rose +0.3% m/m, weaker than expectations of +0.4% m/m, but June was revised upward to -0.6% m/m from -1.3% m/m.

Eurozone Q2 labor costs increased to +3.6% y/y from +3.4% y/y in Q1. 

The German Sep ZEW survey expectations of economic growth unexpectedly rose +2.6 to 37.3, stronger than expectations of a decline to 25.0.

ECB Governing Council member Simkus said, "It is clear that inflation in the Eurozone is currently at the target level, and if we look at the medium term, it is still hovering around 2% or very close to it. Given these trends, the sequence of interest rate cuts by the ECB is very close to the end."

Swaps are discounting a 3% chance for a -25 bp rate cut by the ECB at its next policy meeting on October 30.

US Stock Movers

Strength in chip makers today is leading technology stocks higher. ON Semiconductor (ON) is up more than +2%.  Also, Microchip Technology (MCHP), NXP Semiconductors NV (NXPI), GlobalFoundries (GFS), Applied Materials (AMAT), ASML Holding NV (ASML), Texas Instruments (TXN), KLA Corp (KLAC), and Qualcomm (QCOM) are up more than +1%.

Webtoon Entertainment (WBTN) is up more than +29% after Walt Disney said it plans to acquire a 2% equity interest in the company. 

Ferguson Enterprises (FERG) is up more than +7% after reporting Q4 revenue of $8.50 billion, stronger than the consensus of $8.41 billion. 

Bloom Energy (BE) is up more than +6% after Morgan Stanley raised its price target on the stock to $85 from $44. 

Oracle (ORCL) is up more than +4% to lead gainers in the S&P 500 after CBS News reported that the company is among a consortium of firms that would enable TikTok to continue operations in the US if a framework deal is finalized. 

Steel Dynamics (STLD) is up more than +4% after forecasting Q3 adjusted EPS of $2.60-$2.64, better than the consensus of $2.58.

Hershey (HSY) is up more than +2% after Goldman Sachs double upgraded the stock to buy from sell with a price target of $222. 

Chipotle Mexican Grill (CMG) is up more than +2% after its board approves an additional $500 million for its share buyback program. 

Dave & Buster's Entertainment (PLAY) is down more than -14% after reporting Q2 adjusted EPS of 40 cents, well below the consensus of 89 cents. 

Rocket Lab (RKLB) is down more than -9% after announcing it plans to offer $750 million shares of common stock in an at-the-market offering. 

Warner Bros Discovery (WBD) is down more than -7% to lead losers in the S&P 500 and Nasdaq 100 after TD Cowen downgraded the stock to hold from buy.

Ralph Lauren (RL) is down more than -3% after it projected sales to grow at a mid-single-digit percentage annually through fiscal 2028, slower growth than the company has posted in recent quarters.

The New York Times (NYT) is down more than -2% after President Trump said he is bringing a $15 billion defamation and libel suit against the company. 

Earnings Reports(9/16/2025)

Evolution Petroleum Corp (EPM), Ferguson Enterprises Inc (FERG), Ispire Technology Inc (ISPR), NexPoint Diversified Real Estate Trust (NXDT), US Gold Corp (USAU).