Stocks Settle Higher as Chip Makers and AI Infrastructure Stocks Rally

The S&P 500 Index ($SPX) (SPY) on Thursday closed up +0.06%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.17%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.37%.  December E-mini S&P futures (ESZ25) rose +0.06%, and December E-mini Nasdaq futures (NQZ25) rose +0.39%.

Stock indexes finished the day higher on Thursday, with the S&P 500 and Nasdaq 100 posting new all-time highs, and the Dow Jones Industrial Average posting a one-week high.  Strength in chip makers and AI-infrastructure stocks supported gains in the broader market on Thursday as investors rushed to gain exposure to artificial intelligence.  Also, positive carryover from Thursday's rally in European stocks to a new record high is underpinning US equities.  Stocks rose again on Thursday despite the US government being shut down for a second day.  

The government shutdown means a delay in the release of government reports, including Thursday's weekly jobless claims report and Friday's monthly payroll report.  A prolonged shutdown could also delay the government's inflation data, scheduled for release on October 15. 

The White House has warned that if the government shutdown lingered, it would trigger widespread dismissals of employees in government programs that don't align with President Trump's priorities.  Bloomberg Economics estimates that 640,000 federal workers will be furloughed during a shutdown, which would expand jobless claims and push the unemployment rate up to 4.7%.

Thursday's report from private firm Challenger, Gray & Christmas signals ongoing weakness in the US labor market.  US Sep Challenger job cuts fell 25.8% y/y to 54,064.  Employers have announced plans to cut 946,426 jobs so far this year (Jan-Sep), the most for the same comparable period since 2020.  For January through September, US-based employers announced plans to add almost 205,000 jobs, the weakest year-to-date stretch since 2009.

Fed comments on Thursday were hawkish and negative for stocks.  Dallas Fed President Lorie Logan signaled that she may not support a Fed rate cut at this month's FOMC meeting, saying, "I see inflation running above our 2% target."  As a result, "my forecast has a little bit slower of a normalization of the policy path in order to make sure we get all the way to 2%.  So, it will take some time."  Also, Chicago Fed President Austan Goolsbee said the US economy is still growing "pretty solidly" and we want to "be careful" about overly frontloading rate cuts.

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 a 98% 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 Friday, if the US government reopens, Sep nonfarm payrolls are expected to increase by +51,000, 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 -0.2 to 51.8.

Overseas stock markets on Thursday settled higher.  The Euro Stoxx 50 rallied to a new record high and closed up +1.164%.  China's Shanghai Composite did not trade and is closed for the week-long Lunar New Year holiday.  Japan's Nikkei Stock 225 closed up +0.87%.

Interest Rates

December 10-year T-notes (ZNZ5) on Thursday closed up +2.5 ticks.  The 10-year T-note yield fell -1.5 bp to 4.083%.  Dec T-notes recovered from early losses on Thursday and matched Wednesday's 1-week high, and the 10-year T-note yield fell to a 2-week low of 4.081%. 

T-notes found support on Thursday with the report from private firm Challenger, Gray & Christmas, which showed that US employers have announced plans to cut 946,426 jobs so far this year (January-September), the most for the same comparable period since 2020.  T-notes also garnered support from a slide in inflation expectations after the 10-year breakeven inflation rate fell to a 1.75-month low Thursday at 2.336%. The ongoing US government shutdown is also boosting safe-haven demand for T-notes. 

Gains in T-notes were limited on Thursday after the S&P 500 climbed to a new record high, which reduced safe-haven demand for government debt securities.  Also, hawkish Fed comments on Thursday weighed on T-note prices after Dallas Fed President Lorie Logan and  Chicago Fed President Austan Goolsbee signaled they may not support a Fed rate cut at this month's FOMC meeting.

European government bond yields today are mixed.  The 10-year German bund yield fell -1.3 bp at 2.6997%. The 10-year UK gilt yield rose +1.4 bp to 4.710%.

The Eurozone Aug unemployment rate unexpectedly rose by +0.1 to 6.3%, showing a weaker labor market than expectations of no change at 6.2%.

The UK DMP Sep 1-year CPI expectations unexpectedly rose +0.1 to a 2.75-year high of 3.5% versus expectations of no change at 3.4%. 

ECB Governing Council member Kazaks said, "If nothing significant happens, the ECB can keep interest rates where they are and the 2% rate is very appropriate."

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

Chip makers and AI-infrastructure stocks moved higher on Thursday, a supportive factor for the broader market.  Advanced Micro Devices (AMD) closed up more than +3% to lead gainers in the Nasdaq 100.  Also, Intel (INTC) and GlobalFoundries (GFS) closed up more than +3%.  In addition, Applied Materials (AMAT), Lam Research (LRCX), ASML Holding NV (ASML), and Marvell Technology (MRVL) all closed up by more than +2%.  Finally, Broadcom (AVGO), Qualcomm (QCOM), NXP Semiconductors NV (NXPI), and Texas Instruments (TXN) closed up more than +1%. 

Cryptocurrency-exposed stocks rallied on Thursday after the price of Bitcoin rose more than +2% to a 1.5-month high.  As a result, Coinbase Global (COIN) closed up more than +7%, and Strategy (MSTR) closed up more than +4%.  Also, Galaxy Digital (GLXY), MARA Holdings (MARA), and Riot Platforms (RIOT) closed up more than +1%.

Energy producers and energy service providers tumbled on Thursday after the price of WTI crude oil fell more than -2% to a 4-month low.  As a result, APA Corp (APA) closed down more than -4%.  Also, Devon Energy (DVN), ConocoPhillips (COP), Schlumberger (SLB), and Halliburton (HAL) closed down more than -2%.

Fair Isaac Corp (FICO) closed up more than +17% to lead gainers in the S&P 500 after announcing a new program giving mortgage lenders the option to calculate and distribute FICO scores directly to customers.

Stellantis NV (STLA) closed up more than +8% after reporting Q3 auto deliveries rose +6%, the first quarterly sales gain in more than two years. 

Celanese Corp (CE) closed up more than +7% after Citigroup upgraded the stock to buy from neutral with a price target of $53.

AngioDynamics (ANGO) closed up more than +6% after boosting its 2026 det sales forecast to $308 million-$313 million from a previous estimate of $305 million-$310 million, stronger than the consensus of $307.5 million. 

Caterpillar (CAT) closed up more than +2% to lead gainers in the Dow Jones Industrials on speculation that demand for the company's power-generation turbines will increase as AI firms and data centers ramp up their power needs.

Starbucks (SBUX) closed up more than +2% after increasing its quarterly dividend by 1 cent to 62 cents per share.

Charles River Laboratories International (CRL) closed up more than +2% after Barclays upgraded the stock to overweight from equal weight with a price target of $195. 

Equifax (EFX) closed down more than -8% to lead losers in the S&P 500, and TransUnion (TRU) closed down more than -10% after Fair Isaac Corp announced a new program giving mortgage lenders the option to calculate and distribute FICO scores directly to customers.

Occidental Petroleum (OXY) closed down more than -7% after it agreed to sell its OxyChem petrochemical unit to Berkshire Hathaway for $9.7 billion, below analysts' expectations of $10 billion.

Tesla (TSLA) closed down more than -5% to lead losers in the Nasdaq 100 on concern that demand for the company's vehicles will slump now that federal electric-car subsidies have expired.   

Edison International (EIX) closed down more than -3% after Jeffries downgraded the stock to hold from buy, citing a higher risk profile.

AbbVie (ABBV) closed down more than -3% after HSBC downgraded the stock to hold from buy.

Synopsys (SNPS) closed down more than -3% after BNP Paribas Exane initiated coverage of the stock with a recommendation of underperform and a price target of $425.

Mondelez International (MDLZ) closed down more than -2% after Berenberg downgraded the stock to hold from buy. 

Bloom Energy (BE) closed down more than -2% after Mizuho Securities downgraded the stock to neutral from outperform. 

Earnings Reports(10/3/2025)

C&F Financial Corp (CFFI), Lifecore Biomedical Inc (LFCR), Pathward Financial Inc (CASH).