Stocks Retreat on Higher Bond Yields

The S&P 500 Index ($SPX) (SPY) on Wednesday closed down -0.28%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.37%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.31%.  December E-mini S&P futures (ESZ25) fell -0.27%, and December E-mini Nasdaq futures (NQZ25) fell -0.34%. 

Stock indexes gave up early gains and settled lower on Wednesday, as rising bond yields sparked long liquidation pressure in equities.  The 10-year T-note yield rose +4 basis points to a 2.5-week high of 4.15% following hawkish Fed comments and the jump in US Aug new home sales to a 3.5-year high.

The strength of chip makers on Wednesday was a supportive factor for the stock market.  Also, Wednesday's +2% increase in WTI crude oil helped to push energy producers higher. In addition, AI optimism was supportive for AI-infrastructure stocks after China's Alibaba announced plans to increase its AI spending beyond an initial $50 billion target. 

US MBA mortgage applications rose +0.6% in the week ended September 19, with the purchase mortgage sub-index up +0.3% and the refinancing mortgage sub-index up +0.8%.  The average 30-year fixed-rate mortgage fell -5 bp to 6.34% from 6.39% in the prior week.

US Aug new home sales unexpectedly jumped +20.5% m/m to a 3.5-year high of 800,000, versus expectations of a decline to 650,000.

Chicago Fed President Austan Goolsbee said he could be less willing to support further Fed rate cuts as inflation has been above the Fed's target and was "now heading the wrong way," and "we've still got a mostly steady and solid jobs market."

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 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 92% chance of a -25 bp rate cut at the next FOMC meeting on Oct 28-29. 

Overseas stock markets on Wednesday settled mixed.  The Euro Stoxx 50 closed down -0.14%.  China's Shanghai Composite closed up +0.83%.  Japan's Nikkei Stock 225 closed up +0.30%.

Interest Rates

December 10-year T-notes (ZNZ5) on Wednesday closed down by -7.5 ticks.  The 10-year T-note yield rose +4.1 bp to 4.147%.  Dec T-notes dropped to a 2.5-week low on Wednesday, and the 10-year T-note yield rose to a 2.5-week high of 4.151%.  Wednesday's stronger-than-expected Aug new home sales report weighed on T-note prices. Also, hawkish comments from Chicago Fed President Austan Goolsbee undercut T-note prices when he said he could be less willing to support further Fed rate cuts.  T-notes fell to their lows on Wednesday afternoon on weak demand for the Treasury's $70 billion auction of 5-year T-notes that had a bid-to-cover ratio of 2.34, below the 10-auction average of 2.38. 

European government bond yields on Wednesday moved lower.  The 10-year German bund yield fell -0.1 bp at 2.748%. The 10-year UK gilt yield fell -1.1 bp to 4.669%.

The German Sep IFO business climate survey unexpectedly fell -1.2 to a 4-month low of 87.7, versus expectations of an increase to 89.4.

ECB Executive Board member Cipollone said that "risks on inflation in the Eurozone are very balanced" and he doesn't see major threats to inflation in either direction, with interest rates currently well positioned.

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

Freeport-McMoRan (FCX) closed down more than 16% to lead the losers in the S&P 500 after declaring force majeure on contracted copper supplies and suspending activity at its Grasberg mine in Indonesia following a deadly mudslide. 

Bloom Energy (BE) closed down more than -10% after Jeffries downgraded the stock to underperform from hold with a price target of $31. 

Acadia Pharmaceuticals (ACAD) closed down more than -9% after reporting that a Phase 3 trial of its intranasal carbetocin in patients with hyperphagia in Prader-Willi syndrome failed to meet its primary endpoint. 

James Hardie Industries Plc (JHX) closed down more than -4% after projecting a fiscal 2025-28 target EBITDA margin of 28.5%, below the consensus of 31%-32%. 

Electronic Arts (EA) closed down more than -3% on mixed reviews for its new EA Sports FC 26 video game that launches on Friday.

Micron Technology (MU) closed down more than 2% despite forecasting Q1 revenue of $12.5 billion, which is above the consensus of $11.9 billion but below the whisper number of $13 billion.

Adobe (ADBE) closed down more than -2% to lead losers in the Nasdaq 100 after Morgan Stanley downgraded the stock to equal weight from overweight. 

Chip stocks rose on Wednesday, led by a +7% jump in Marvell Technology (MRVL) to lead gainers in the Nasdaq 100 after its board authorized a new $5 billion share repurchase program.  Intel (INTC) closed up more than 6% after Treasury Secretary Bessent said Nvidia's acquisition of a stake in Intel validates the US government's decision to become an Intel shareholder.  Also, ARM Holdings Plc (ARM) and Qualcomm (QCOM) closed up more than +2%.  In addition, Microchip Technology (MCHP), ON Semiconductor (ON), NXP Semiconductor (NXPI), and Texas Instruments (TXN) closed up more than +1%.

Energy producers and energy service providers moved higher on Wednesday, as the price of WTI crude oil rose by more than +2%.  As a result, Phillips 66 (PSX) closed up more than +3%.  Also, ConocoPhillips (COP) and Devon Energy (DVN) closed up more than +2%.  In addition, APA Corp (APA), Baker Hughes (BKR), Diamondback Energy (FANG), Marathon Petroleum (MPC), Occidental Petroleum (OXY), and Chevron (CVX) all closed up by more than +1%.

uniQure NV (QURE) closed up more than 240% after reporting that its Phase I/II trial of AMT-130 in treating Huntington's disease met its prespecified endpoint, with a high dose demonstrating a statistically significant slowing of disease progression at 36 months. 

Iren Ltd (IREN) closed up more than +13% after Arete initiated coverage of the stock with a recommendation of buy and a price target of $78. 

Thor Industries (THO) closed up more than +6% after reporting Q4 net sales of $2.52 billion, well above the consensus of $2.33 billion. 

General Motors (GM) closed up more than +2% after UBS upgraded the stock to buy from neutral with a price target of $81. 

Earnings Reports(9/25/2025)

Accenture PLC (ACN), CarMax Inc (KMX), Concentrix Corp (CNXC), Costco Wholesale Corp (COST), Jabil Inc (JBL), TD SYNNEX Corp (SNX).