Stocks Fall as Bond Yields Rise on Economic Strength

The S&P 500 Index ($SPX) (SPY) today is down -0.83%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.42%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.16%.  December E-mini S&P futures (ESZ25) are down -0.80%, and December E-mini Nasdaq futures (NQZ25) are down -1.12%. 

Stock indexes are moving lower today, with the S&P 500, the Dow Jones Industrials, and the Nasdaq 100 sliding to 1-week lows. Stocks are falling for the third consecutive session as rising bond yields undercut stock prices.  Signs that the US economy is stronger than expected are pushing T-note yields higher today due to the better-than-expected US GDP, jobless claims, and core capital goods orders reports.  The 10-year T-note yield today posted a 3-week high and is up +2 bp. 

US Q2 GDP was revised upward to +3.8% (q/q annualized), stronger than expectations of no change at +3.3%.  Q2 personal consumption was revised upward to +2.5%, stronger than expectations of +1.7%.  The Q2 core PCE price index was unexpectedly revised upward to +2.6%, versus expectations of no change at +2.5%.

US weekly initial unemployment claims fell by -14,000 to a 2-month low of 218,000, showing a stronger labor market than expectations of an increase to 233,000.

US Aug core (ex-defense and aircraft) capital goods new orders, a proxy for capital spending, rose +0.6% m/m, stronger than expectations of no change.

Kansas City Fed President Jeff Schmid signaled the Fed may not need to lower interest rates again soon and said the current stance of Fed policy is "slightly restrictive, which I think is the right place to be as inflation remains too high while the labor market, though cooling, still remains largely in balance."

The price of Bitcoin (^BTCUSD) is down by more than -2% at a 2-week low, ahead of the expiration of monthly options.  More than $17 billion in notional open interest tied to Bitcoin are set to expire on Friday, according to derivatives exchange Deribit.

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.  Later today, 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 an 84% chance of a -25 bp rate cut at the next FOMC meeting on Oct 28-29. 

Overseas stock markets today are mixed.  The Euro Stoxx 50 is down -0.64%.  China's Shanghai Composite closed down -0.01%.  Japan's Nikkei Stock 225 closed up +0.270%.

Interest Rates

December 10-year T-notes (ZNZ5) are down -9 ticks.  The 10-year T-note yield is up +2.1 bp to 4.168%.  Dec T-notes fell to a 3-week low today, and the 10-year T-note yield climbed to a 3-week high of 4.192%.  Today’s stronger-than-expected US economic reports were hawkish for Fed policy and bearish for T-notes.  Also, supply pressures are weighing on T-notes ahead of the Treasury's $44 billion auction of 7-year T-notes later today. 

European government bond yields today are moving higher.  The 10-year German bund yield rose to a 3-week high of 2.780% and is up +0.8 bp at 2.755%.  The 10-year UK gilt yield climbed to a 3-week high of 4.741% and is up +3.8 bp to 4.706%.

Eurozone Aug new car registrations rose +5.3% y/y to 678,000 units.

Eurozone Aug M3 money supply rose +2.9% y/y, weaker than expectations of +3.3% y/y and the slowest pace of increase on a year.

The German Oct GfK consumer confidence survey rose +1.2 to -22.3, stronger than expectations of -23.3.

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 chip stocks today is a bearish factor for the overall market.  Marvell Technology (MRVL), ARM Holdings Plc (ARM), Micron Technology (MU), and Advanced Micro Devices (AMD) are down more than -3%.  Also, Microchip Technology (MCHP), ON Semiconductor (ON), Applied Materials (AMAT), GlobalFoundries (GFS), Qualcomm (QCOM), and NXP Semiconductors NV (NXPI) are down more than -2%.  In addition, Analog Devices (ADI), KLA Corp (KLAC), Lam Research (LRCX), and Texas Instruments (TXN) are down more than -1%.

Cryptocurrency-exposed stocks are under pressure today with the price of Bitcoin down more than -2% at a 2-week low.  As a result, Strategy (MSTR) is down more than -3% to lead losers in the Nasdaq 100.  Also, Coinbase Global (COIN), Bit Digital (BTBT), Galaxy Digital (GLXY), MARA Holdings (MARA), and Riot Platforms (RIOT) are down more than -3%. 

CarMax (KMX) is down more than -20% to lead losers in the S&P 500 after reporting Q2 net sales and operating revenue of $6.59 billion, well below the consensus of $7.01 billion. 

Oklo Inc (OKLO) is down more than -13% after Goldman Sachs initiated coverage on the stock with a recommendation of neutral with a price target of $117. 

JabiI (JBL) is down more than -8% despite reporting better-than-expected Q4 net revenue after Vital Knowledge said the results show pressure on margins in its AI-exposed Intelligent Infrastructure segment. 

Oracle (ORCL) is down more than -5% after Rothschild & Co Redburn initiated coverage on the stock with a sell recommendation and a price target of $175. 

Wendy's (WEN) is down more than -1% after Northcoast Research downgraded the stock to sell from neutral with a price target of $7. 

Lithium Americas (LAC) is up more than +13%, adding to Wednesday's +96% surge following reports that the Trump administration is pursuing a stake in the company.   

International Business Machines (IBM) is up more than +3% to lead gainers in the S&P 500 and Dow Jones Industrials after HSBC Holdings Plc said it achieved a breakthrough in deploying quantum computing in financial markets, using IBM's Heron quantum processor to improve bond price predictions. 

Intel (INTC) is up more than +2% on a report that the company approached Apple about securing an investment in the company. 

Vertex Pharmaceuticals (VRTX) is up more than +1% after Leerink Partners upgraded the stock to outperform from market perform with a price target of $456.

CME Group (CME) is up more than +1% after Citigroup upgraded the stock to buy from neutral with a price target of $300. 

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).