Stocks Climb on Lower Bond Yields and Strength in Chip Makers

The S&P 500 Index ($SPX) (SPY) today is up +0.42%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.04%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.85%.  December E-mini S&P futures (ESZ25) are up +0.41%, and December E-mini Nasdaq futures (NQZ25) are up +0.84%.

Stock indexes are mixed today.  The broader market is climbing, and bond yields are falling on hopes that weak US labor market news this week, including the August JOLTS job openings, the September ADP employment change, and the September nonfarm payrolls, will prompt the Fed to continue cutting interest rates.  The 10-year T-note yield is down -3 bp to 4.14%. 

Stock indexes are in the midst of a 5.5-month-long rally that pushed the S&P 500, the Dow Jones Industrial Average, and the Nasdaq 100 to record highs last week, driven by strong earnings growth, the Fed’s easing measures without a recession, and global fiscal policy easing.  Stocks extended their gains today after US Aug pending home sales rose more than expected by the most in 5 months. 

Chip makers are climbing today to lead technology stocks higher.  However, weakness in energy producers is limiting gains in the overall market and weighing on the Dow Jones Industrial Average, with the price of WTI crude oil down by more than 3%.

The price of COMEX gold (GCZ25) is up more than 1% today, reaching a record above $3,800 an ounce, driven by the outlook for additional Fed easing, uncertainty tied to US tariffs, and the increased risk of a US government shutdown. 

US Aug pending home sales rose +4.0% m/m, stronger than expectations of +0.4% m/m and the biggest increase in 5 months.

The US Sep Dallas Fed manufacturing activity survey unexpectedly fell -6.9 to -8.7, weaker than expectations of an increase to -1.0.

Comments today from Cleveland Fed President Beth Hammack were hawkish when she said inflation “is not really getting back down to the Fed’s objective of 2% until the end of 2027 or early 2028” and that “we really need to maintain a restrictive stance for policy.”

A potential negative factor for market sentiment is the likelihood that the US government will shut down on Wednesday if lawmakers fail to pass a spending bill or continuing resolution (CR) by then.  Congressional leaders are scheduled to meet with President Trump later today to negotiate a short-term spending bill.  The White House warned last Wednesday that a shutdown would trigger widespread dismissals of employees in government programs that don’t align with President Trump’s priorities.

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 are pricing in an 89% chance of a -25 bp rate cut at the next FOMC meeting on Oct 28-29. 

Market focus this week will be on any new trade or tariff news. On Tuesday, the Sep MNI Chicago PMI is expected to climb by +1.8 to 43.3.  Also, Aug JOLTS job openings are expected to slip -11,000 to 7.170 million.  Finally, the Conference Board’s Sep consumer confidence index is expected to fall -1.4 to 96.0.  On Wednesday, the Sep ADP employment change is expected to increase by +50,000.  Also, the Sep ISM manufacturing index is expected to rise by +0.3 to 49.0.  On Thursday, weekly initial unemployment claims are expected to increase by +7,000 to 225,000.  Also, Aug factory orders are expected to increase by +1.4% m/m.  On Friday, Sep nonfarm payrolls are expected to increase by +50,000, and the Sep unemployment rate is expected to remain unchanged at 4.3%.  Also, Sep average hourly earnings are expected to increase by +0.3% m/m and +3.7% y/y.  Finally, the Sep ISM services index is expected to slip -0.3 to 51.7.

Overseas stock markets today are mixed.  The Euro Stoxx 50 climbed to a 6.75-month high and is up +0.23%.  China’s Shanghai Composite rose to a 1-week high and closed up +0.90%.  Japan’s Nikkei Stock 225 fell to a 1-week low and closed down -0.69%.

Interest Rates

December 10-year T-notes (ZNZ5) today are up +7 ticks.  The 10-year T-note yield is down -3.3 bp to 4.143%.  T-notes are slightly higher today on expectations that this week’s US labor market news will show weakness in the labor market that will allow the Fed to keep cutting interest rates.  Also, today’s -3% plunge in WTI crude oil prices has lowered inflation expectations, a supportive factor for Fed policy and T-note prices, as the 10-year breakeven inflation rate fell to a 1.5-week low of 2.363%.  T-notes fell back from their best level after Cleveland Fed President Beth Hammack said she was still worried about inflation and argued against additional Fed rate cuts. 

European government bond yields today are moving lower.  The 10-year German bund yield fell to a 1-week low of 2.714% and is down -3.0 bp at 2.716%.  The 10-year UK gilt yield is down -4.2 bp to 4.704%.

Eurozone Sep economic confidence unexpectedly rose +0.2 to 95.5, stronger than expectations of 95.3. 

ECB Governing Council member Makhlouf said the ECB is “near the bottom” of its rate-cutting cycle and policymakers need to remain vigilant because the full impact of US tariffs “is still to feed through” to European Union imports.

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

Chipmakers are moving higher today, providing a boost to the overall market.  GlobalFoundries (GFS) is up more than +6% and Micron Technology (MU) is up more than +5%.  Also, Nvidia (NVDA) is up more than +2% to lead gainers in the Dow Jones Industrials.  In addition, Advanced Micro Devices (AMD), ASML Holding NV (ASML), and Applied Materials (AMAT) are up more than +2%.  Finally, KLA Corp (KLAC) and ARM Holdings Plc (ARM) are up more than +1%. 

Energy producers and energy service providers are sliding today with the price of WTI crude oil down more than -2%.  ConocoPhillips (COP) is down more than -3%, and APA Corp (APA), Devon Energy (DVN), Diamondback Energy (FANG), and Exxon Mobil (XOM) are down more than -2%.  Also, Chevron (CVX) is down more than -2% to lead losers in the Dow Jones Industrials.  In addition, Marathon Petroleum (MPC), Schlumberger (SLB), Phillips 66 (PSX), and Valero Energy (VLO) are down more than -1%.

Merus NV (MRUS) is up more than +36% after Genmab announced a deal to acquire the company for $8 billion or $97 per share. 

Western Digital (WDC) is up more than +8% to lead gainers in the S&P 500 after Rosenblatt Securities raised its target on the stock to $125 from $90. 

AppLovin (APP) is up more than +8% to lead gainers in the Nasdaq 100 after Phillip Securities initiated coverage on the stock with a recommendation of accumulate with a price target of $725.

Oklo (OKLO) is up more than +6% after Barclays initiated coverage on the stock with a recommendation of overweight with a price target of $146. 

Electronic Arts (EA) is up more than +4% after a consortium comprised of PIF, Silver Lake, and Affinity partners acquired the company for $55 billion or $210 per share.   

Lam Research (LRCX) is up more than +2% after Deutsche Bank upgraded the stock to buy from hold with a price target of $150. 

MoonLake Immunotherapeutics (MLTX) is down more than -89% on disappointing late-stage clinical trial data on the company’s experimental drug to treat the skin condition known as hidradenitis suppurativa. 

Western Alliance Bancorp (WAL) is down more than -2% after Wells Fargo Securities downgraded the stock to underweight from equal weight. 

Choice Hotels (CHH) is down more than -1% after Bank of America Global Research downgraded the stock to underperform from buy with a price target of $110. 

M&T Bank (MTB) is down more than -1% after Morgan Stanley downgraded the stock to equal weight from overweight.

Earnings Reports(9/29/2025)

Carnival Corp (CCL), IDT Corp (IDT), Jefferies Financial Group Inc (JEF), Lionsgate Studios Corp (LION), Progress Software Corp (PRGS), ReposiTrak Inc (TRAK), Vail Resorts Inc (MTN).