Stocks Settle Lower on Weakness in Big Tech

The S&P 500 Index ($SPX) (SPY) on Tuesday closed down -0.55%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.19%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.73%.  December E-mini S&P futures (ESZ25) fell -0.54%, and December E-mini Nasdaq futures (NQZ25) fell -0.70%. 

Stock indexes on Tuesday settled lower, with the S&P 500 and Dow Jones Industrials falling from new record highs.   Stocks retreated on Tuesday due to weakness in the megacap “Magnificent Seven” technology companies.  Stock extended their losses after Fed Chair Powell offered no hints on whether he would support an interest rate cut at next month’s FOMC meeting. 

On the positive side for stocks on Tuesday was lower bond yields as the 10-year T-note yield fell -3 bp to 4.12%.  Also, energy producers rallied on Tuesday after the price of WTI crude oil rose by more than +1%.

The US Q2 current account balance was -$251.3 billion, a smaller deficit than expectations of -$256.6 billion.

The US Sep S&P manufacturing PMI fell -1.0 to 52.0, weaker than expectations of 52.2.

The US Sep Richmond Fed manufacturing sentiment survey unexpectedly fell -10 to -17, versus expectations of an increase to -5.

Fed Chair Powell said, “Near-term risks to inflation are tilted to the upside and risks to employment to the downside, a challenging situation.  Two-sided risks mean that there is no risk-free path” on Fed policy.

Chicago Fed President Austan Goolsbee said the Fed is mildly restrictive and the neutral policy rate is 100-125 basis points below the current rate.

Fed Governor Michelle Bowman said, “Now that we have seen many months of deteriorating labor market conditions, it is time for the FOMC to act decisively and proactively to address decreasing labor market dynamism and emerging signs of fragility.”

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 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 91% chance of a -25 bp rate cut at the next FOMC meeting on Oct 28-29. 

Overseas stock markets on Tuesday settled mixed.  The Euro Stoxx 50 closed up +0.56%.  China’s Shanghai Composite fell to a 2-week low and closed down -0.18%.  Japan’s Nikkei Stock 225 did not trade as markets in Japan are closed today for the Autumnal Equinox Day holiday.

Interest Rates

December 10-year T-notes (ZNZ5) on Tuesday closed up by +5.5 ticks.  The 10-year T-note yield fell by -3.1 bp to 4.116%.  T-note prices moved higher Tuesday on dovish comments from Fed Governor Michelle Bowman, who said policymakers are in danger of falling behind the curve and need to act decisively to cut interest rates as the labor market weakens.  Also, Tuesday’s weaker-than-expected US economic reports on the September S&P manufacturing PMI and the September Richmond Fed manufacturing sentiment survey were supportive for T-notes.  Decent demand for the Treasury’s $69 billion auction of 2-year T-notes was also positive for T-note prices as the auction drew a 3.571% yield, lower than the 3.572% pre-sale when-issued yield. 

European government bond yields on Tuesday were mostly lower.  The 10-year German bund yield was unchanged at 2.749%.  The 10-year UK gilt yield fell -3.2 bp to 4.680%.

The Eurozone Sep S&P manufacturing PMI fell -1.2 to 49.5, weaker than expectations of no change at 50.7.  The Sep S&P composite PMI rose +0.2 to 51.2, stronger than expectations of 51.1 and the strongest pace of expansion in 16 months.

The UK Sep S&P manufacturing PMI unexpectedly fell -0.8 to a 5-month low of 46.2, weaker than expectations of an increase to 47.1.

Swaps are discounting a 1% chance for a -25 bp rate cut by the ECB at its next policy meeting on October 30.

US Stock Movers

The weakness in the Magnificent Seven megacap technology stocks on Tuesday was a drag on the broader market.  Amazon.com (AMZN) closed down more than -3% to lead losers in the Dow Jones Industrials, and Nvidia (NVDA) closed down more than -2%.  Also, Tesla (TSLA), Meta Platforms (META), and Microsoft (MSFT) closed down more than -1%.  In addition, Apple (AAPL) closed down -0.64%, and Alphabet (GOOGL) closed down -0.21%. 

Cryptocurrency-exposed stocks fell Tuesday as the price of Bitcoin (^BTCUSD) dropped more than -1% to a 1.5-week low.  Coinbase Global (COIN) and MARA Holdings (MARA) closed down more than -3%.  Also, Riot Platforms (RIOT) and Strategy (MSTR) closed down more than -2%.  In addition, Bit Digital (BTBT) and Galaxy Digital (GLXY) closed down more than -1%.

Firefly Aerospace (FLY) closed down more than -15% after reporting Q2 revenue of $15.5 million, weaker than the consensus of $16.1 million.

Vistra Corp (VST) closed down more than -6% after Jeffries downgraded the stock to hold from buy and cut its price target to $230 from $241. 

Vertiv Holdings (VRT) closed down more than -6% and Eaton Corp Plc (ETN) closed down more than -2% on a potential threat to their sales after Microsoft announced that it had developed an in-chip cooling system that can effectively cool a server running core services for a simulated Teams meeting.  

Kingsoft Cloud Holdings (KC) closed down more than -4% after proposing to offer 282 million shares in a placement.

Americold Realty Trust (COLD) closed down more than -1% after JPMorgan Chase downgraded the stock to underweight from neutral. 

Energy producers and energy service providers moved higher Tuesday as the price of WTI crude oil rose more than +1%.  As a result, Halliburton (HAL) is up more than +7% to lead gainers in the S&P 500, and Baker Hughes (BKR) closed up more than +2% to lead gainers in the Nasdaq 100.  Also, Diamondback Energy (FANG), Devon Energy (DVN), Phillips 66 (PSX), and Valero Energy (VLO) closed up more than +2%.  In addition, Schlumberger (SLB), Exxon Mobil (XOM), Occidental Petroleum (OXY), Marathon Petroleum (MPC), APA Corp (APA), and ConocoPhillips (COP) closed up more than +1%.

McKesson (MCK) closed up more than +6% after raising its 2026 adjusted EPS forecast to $38.05-$38.55 from a prior estimate of $37.10-$37.90, stronger than the consensus of $37.92.

ACM Research (ACMR) closed up more than +6% after S&P Dow Jones Indices said the stock will replace WK Kellogg in the S&P SmallCap 600 index before the opening of trading on Friday.

Onto Innovation (ONTO) closed up more than +5% after Jeffries upgraded the stock to buy from hold with a price target of $170. 

Sempra (SRE) closed up more than +4% after agreeing to sell a 45% equity stake in its infrastructure arm to KKR and the Canada Pension Plan Investment Board for $10 billion. 

Boeing (BA) closed up +2% to lead gainers in the Dow Jones Industrials after US Ambassador to China Perdue said the US and China are weeks away from finalizing negotiations on a “huge” Boeing order. 

MP Materials (MP) closed up more than +2% after Daiwa Securities initiated coverage of the stock with a recommendation of outperform and a price target of $80.

Palantir Technologies (PLTR) closed up more than +1% after the Treasury Department awarded the company a contract relating to data integrity and technical infrastructure.

Earnings Reports(9/24/2025)

Barnes & Noble Education Inc (BNED), Cintas Corp (CTAS), HB Fuller Co (FUL), KB Home (KBH), PACS Group Inc (PACS), Steelcase Inc (SCS), Stitch Fix Inc (SFIX), Thor Industries Inc (THO), Uranium Energy Corp (UEC), Worthington Steel Inc (WS).