Stocks Supported by AI Spending

The S&P 500 Index ($SPX) (SPY) today is up +0.20%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.10%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.60%.  December E-mini S&P futures (ESZ25) are up +0.21%, and December E-mini Nasdaq futures (NQZ25) are up +0.61%.

Stock indexes are mostly higher today, with the Nasdaq 100 posting a new all-time high.  Gains in chipmakers and AI-infrastructure stocks lead the overall market higher, driven by optimism that growth in the AI sector and spending on artificial intelligence will translate into corporate profits.  Stocks are also underpinned by hopes that a resilient US economy and additional Fed easing will continue to support the economy. 

Higher bond yields are limiting gains in stocks, with the 10-year T-note yield up +3 bp to 4.15%.  Also, the shutdown of the US government has now entered a second week, weighing on market sentiment and delaying key economic reports.

The government shutdown means delays in the release of government reports, including last 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%.

The ongoing US government shutdown, expectations of additional Fed easing, and political uncertainty in France and Japan are also driving investors to haven assets, such as gold and Bitcoin.  French Prime Minister Lecornu resigned after President Macron named a new cabinet, raising uncertainty about the Eurozone's second-largest economy.  Meanwhile, Sanae Takaichi, a proponent of easy fiscal and monetary policy, won Saturday's election to become Japan's new leader of the ruling LDP party and potential prime minister.  Gold and Bitcoin both jumped to new record highs today, adding momentum to the so-called "debasement trade" as investors flee fiat currencies.

Market focus this week will be on any new developments regarding tariffs, trade, or attempts by lawmakers to end the ongoing US government shutdown.  On Wednesday, the minutes of the September 16-17 FOMC meeting will be released.  On Thursday, Fed Chair Powell will give welcoming remarks at a Fed Community Bank Conference.  On Friday, the University of Michigan Oct consumer sentiment index is expected to fall -1.1 to 54.0.

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.  However, Q3 profits are expected to have risen by +7.2%, the smallest increase in two years.  Also, Q3 sales growth is projected to slow to 5.9% from 6.4% in Q2. 

The markets are pricing in a 95% 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 -0.17%.  China's Shanghai Composite did not trade and is closed for the week-long Lunar New Year holiday.  Japan's Nikkei Stock 225 surged to a record high and closed up +4.75%.

Interest Rates

December 10-year T-notes (ZNZ5) today are down by -8 ticks.  The 10-year T-note yield is up +3.9 bp to 4.158%.  T-note prices are under pressure today from strength in stocks.  Also, supply pressures are undercutting T-note prices as the Treasury will auction $119 billion of T-notes and T-bonds this week, beginning with Tuesday's $58 billion auction of 3-year T-notes.  Losses in T-notes are limited as a protracted US government shutdown could weaken the economy, a supportive factor for T-notes. 

European government bond yields are moving higher today.  The 10-year German bund yield is up +2.2 bp at 2.720%. The 10-year UK gilt yield rose to a 1-week high of 4.751% and is up +4.4 bp to 4.734%.

Eurozone Aug retail sales rose +0.1% m/m, right on expectations.

The Eurozone Oct Sentix investor confidence index rose +3.8 to -5.4, stronger than expectations of -7.7.

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

Advanced Micro Devices (AMD) is up more than +26% to lead chipmakers and AI-infrastructure stocks higher and gainers in the S&P 500 and Nasdaq 100 after the company signed a deal with OpenAI to deploy 6 gigawatts of AMD GPUs over multiple years and gave OpenAI a warrant for up to 160 million shares of AMD stock.  Also, Super Micro Computer (SMCI) and Marvell Technology (MRVL) are up more than +4% and Palantir Technologies (PLTR), Lam Research (LRCX), and Intel (INTC) are up more than +3%.  In addition, KLA Corp (KLAC), Applied Materials (AMAT), and ARM Holdings Plc (ARM) are up more than +2%.   

Cryptocurrency-exposed stocks are rallying today after the price of Bitcoin rose more than +1% to a record above $125,000.  Coinbase Global (COIN), Galaxy Digital (GLXY), MARA Holdings (MARA), Strategy (MSTR), and Riot Platforms (RIOT) are up more than +2%.

Critical Metals Corp (CRML) is up more than +63% after Reuters reported that the Trump administration has discussed taking a stake in the company. 

Comerica (CMA) is up more than +15% after Fifth Third Bancorp agreed to buy the company for about $10.9 billion in stock. 

Firefly Aerospace (FLY) is up more than +8% after it said it entered into a definitive agreement to acquire SciTec for about $855 million in cash and stock. 

Micron Technology (MU) is up more than +6% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $220.

Intellia Therapeutics (NTLA) is up more than 5% after Citizens JMP Securities LLC upgraded the stock to top market outperform from market perform, with a price target of $33.

International Paper (IP) is down more than -4% to lead losers in the S&P 500 after Seaport Global Securities downgraded the stock to neutral from buy.

Abercrombie & Fitch (ANF) is down more than -5% after JPMorgan Chase downgraded the stock to neutral from overweight. 

Shake Shack (SHAK) is down more than -3% after Bank of America Global Research downgraded the stock to underperform from neutral with a price target of $86. 

Verizon Communications (VZ) is down more than -2% to lead losers in the Dow Jones Industrials after announcing Dan Schulman is replacing Hans Vestberg as CEO, effective immediately.

AT&T (T) is down more than -2% after Scotiabank downgraded the stock to sector perform from sector outperform.

Nvidia (NVDA) is down nearly 1% after competitor Advanced Micro Devices announced a multibillion-dollar deal with OpenAI, which could challenge Nvidia's dominance in AI chips.

Bath & Body Works (BBWI) is down more than -1% after JPMorgan Chase downgraded the stock to neutral from overweight.

Earnings Reports(10/6/2025)

Aehr Test Systems (AEHR), Constellation Brands Inc (STZ).