Stock Indexes Post New Record Highs on AI Optimism

The S&P 500 Index ($SPX) (SPY) on Monday closed up +0.44%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.55%.  December E-mini S&P futures (ESZ25) rose +0.40%, and December E-mini Nasdaq futures (NQZ25) rose +0.50%. 

Stock indexes extended their bull run on Monday and settled higher, with the S&P 500, Dow Jones Industrials, and the Nasdaq 100 posting new record highs.  Strength in semiconductor and AI-infrastructure stocks lifted the broader market on Monday.  Gains in stocks were limited due to higher bond yields as hawkish Fed commentary pushed the 10-year T-note yield to a 2-week high of 4.15%.

Stock indexes continue to post new record highs on the view that a weakened US labor market with contained inflation will allow the Fed to keep cutting interest rates.  The price of gold rose more than +1% Monday to a new all-time high as dovish global central banks, geopolitical risks, and trade tensions have boosted demand for the metal as a store of value and as a safe-haven.

Monday's minor US economic news was supportive of stocks after the Aug Chicago Fed national activity index rose +0.16 to a 5-month high of -0.12, stronger than expectations of -0.15.

Fed comments today were on the hawkish side and negative for stocks.  St. Louis Fed President Alberto Musalem said he sees limited room for additional Fed interest rate cuts amid elevated inflation and believes rates are now "between modestly restrictive and neutral." Also, Atlanta Fed President Raphael Bostic said he sees "little reason" for the Fed to cut interest rates further as he is concerned about elevated inflation and does not see inflation returning to 2% until 2028.  In addition, Cleveland Fed President Beth Hammack said, "I think that we should be very cautious in removing monetary policy restrictions" to avoid overheating the economy.

The price of Bitcoin (^BTCUSD) on Monday fell more than -2% to a 1.5-week low, driven by long liquidation pressures.  According to data from Coinglass, more than 407,000 traders liquidated positions over the past twenty-four hours. 

Rising corporate earnings expectations are a bullish backdrop for stocks.  According to Bloomberg Intelligence, more than 22% of companies in the S&P 500 provided guidance for their Q3 earnings results that are expected to beat analysts' expectations, the highest in a year.  Also, S&P companies are expected to post +6.9% earnings growth in Q3, up from +6.7% as of the end of May. 

The markets this week will focus on any fresh trade or tariff news.  On Tuesday, the Sep S&P manufacturing PMI is expected to fall -0.8 to 52.2.  Also, Fed Chair Powell speaks on the economic outlook at an event at the Greater Providence Chamber of Commerce.  On Wednesday, Aug new home sales are expected to decline by -0.3% m/m to 650,000.  On Thursday, weekly initial unemployment claims are expected to increase by +2,000 to 233,000.  Also, Aug core (ex-defense and aircraft) capital goods new orders are expected to slip -0.1% m/m.  In addition, Q2 GDP is expected to be unrevised at +3.3% (q/q annualized). Finally, Aug existing home sales are expected to fall -1.3% m/m to 3.96 million.  On Friday, Aug personal spending is expected to be up by +0.5% m/m and Aug personal income is expected to be up by +0.3% m/m.  Also, the Aug core PCE price index, the Fed's preferred inflation gauge, is expected to rise by +0.2% m/m and +2.9% y/y.  Finally, the University of Michigan's Sep US consumer sentiment index is expected to remain unchanged at 55.4.

The markets are pricing in a 90% chance of a -25 bp rate cut at the next FOMC meeting on Oct 28-29. 

Overseas stock markets on Monday settled mixed.  The Euro Stoxx 50 closed down -0.30%.  China's Shanghai Composite closed up +0.22%.  Japan's Nikkei Stock 225 closed up +0.99%.

Interest Rates

December 10-year T-notes (ZNZ5) on Monday closed down by -1.5 ticks.  The 10-year T-note yield rose by +1.4 bp to 4.141%.  T-note prices today gave up an early advance and fell to a 2-week low, and the 10-year T-note yield rose to a 2-week high of 4.149%.  T-note came under pressure Monday on hawkish comments from St. Louis Fed President Alberto Musalem, Atlanta Fed President Raphael Bostic, and Cleveland Fed President Beth Hammack, who said they see limited room for additional Fed interest rate cuts.  Monday's rally in the S&P 500 to a new record high has also curbed safe-haven demand for T-notes.  Supply pressures are bearish for T-notes as the Treasury will auction $211 billion of T-notes and floating rate notes this week, beginning with Tuesday's $69 billion auction of 2-year T-notes. 

European government bond yields on Monday were mixed.  The 10-year German bund yield rose to a 2.5-week high of 2.762% and finished up by +0.1 bp at 2.748%.  The 10-year UK gilt yield fell from a 2-week high of 4.724% and finished down by -0.3 bp at 4.712%.

Swaps are discounting a 2% chance for a -25 bp rate cut by the ECB at its next policy meeting on October 30.

US Stock Movers

Applied Materials (AMAT) closed up more than +5% to lead semiconductor and AI-infrastructure stocks higher and gainers in the Nasdaq 100 after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $209. Also, Lam Research (LRCX), Seagate Technology Holdings Plc (STX), and Western Digital (WDC) closed up more than +4%, and Nvidia (NVDA) closed up more than +3%.   In addition, ASML Holding NV (ASML), KLA Corp (KLAC), and Marvell Technology (MRVL) closed up more than +2%, and Advanced Micro Devices (AMD), Micron Technology (MU), and Qualcomm (QCOM) closed up more than +1%.

Teradyne (TER) closed up more than +12% to lead gainers in the S&P 500 after Susquehanna Financial raised its price target on the stock to $200 from $133.

Apple (AAPL) closed up more than +4% to lead gainers in the Dow Jones Industrials after Wedbush raised its price target on the stock to $310 from $270. 

MBX Biosciences (MBX) closed up more than +101% after reporting its once-weekly canvuparatide met the main goal in a Phase 2 study to treat chronic hypoparathyroidism. 

Metsera (MTSR) closed up more than +61% after Pfizer agreed to buy the company for about $4.9 billion, or $47.50 per share. 

Sarepta Therapeutics (SRPT) closed up more than +7% after BMO Capital Markets upgraded the stock to outperform from market perform with a price target of $50.

Helmerich & Payne (HP) closed up more than +4% after Barclays upgraded the stock to overweight from equal weight with a price target of $25.

FactSet Research Systems (FDS) closed up more than +3% after UBS upgraded the stock to buy from neutral with a price target of $425.

NiSource (NI) closed up more than +3% after its Indiana unit, Nipsco, agreed to provide electric service to an undisclosed "large, investment-grade" company data center. 

Lennar (LEN) closed down more than -4% to lead home builders lower, after Raymond James downgraded the stock to underperform from market perform. DR Horton (DHI), PulteGroup (PHM), and Toll Brothers (TOL) closed down more than -1%. 

Cryptocurrency-exposed stocks retreated Monday after the price of Bitcoin fell more than -2% to a 1.5-week low.  Strategy (MSTR), Coinbase Global (COIN), Bit Digital (BTBT), MARA Holdings (MARA), and Riot Platforms (RIOT) closed down more than -2%.

Kenvue (KVUE) closed down more than -7% to lead losers in the S&P 500 after the Washington Post reported the Trump administration plans to link the active ingredient in the company's Tylenol medication to autism. 

Keurig Dr Pepper (KDP) closed down more than -4% to lead losers in the Nasdaq 100 after BNP Paribas Exane downgraded the stock to underperform from neutral with a price target of $24. 

Match Group (MTCH) closed down more than -5% to lead dating app makers lower after Meta Platforms said it is adding new features to Facebook Dating that help users "skip the swipe."

Amer Sports (AS) closed down more than -4% on news that Chinese authorities launched an investigation after a fireworks show in Tibet sponsored by the company's subsidiary Arc'teryx sparked concerns about the show's impact on the environment.   

United Airlines Holdings (UAL) closed down more than -1% after data from Cirium, an aviation analytics company, showed European planned air travel bookings to the US this fall are down -11% from last year. 

Earnings Reports(9/23/2025)

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