Stocks Supported by AI Optimism and Lower Bond Yields

The S&P 500 Index ($SPX) (SPY) today is up +0.38%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.20%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.55%.  December E-mini S&P futures (ESZ25) are up +0.10%, and December E-mini Nasdaq futures (NQZ25) are up +0.08%.

Stock indexes are moving higher today on strength in semiconductor and AI infrastructure stocks. Optimism that growth in the AI sector and spending on artificial intelligence will translate into corporate profits is a major bullish factor for stocks.  Stocks are also underpinned by hopes that a resilient US economy and additional Fed easing will continue to support the economy.  In addition, lower bond yields are bullish for stocks as the 10-year T-note yield is down -2 bp to 4.10%.

US MBA mortgage applications fell -4.7% in the week ended October 3, with the purchase mortgage sub-index down -1.2% and the refinancing mortgage sub-index down -7.7%.  The average 30-year fixed rate mortgage fell -3 bp to 6.43% form 6.46% in the prior week.

The shutdown of the US government is now into its second week, weighing on market sentiment and delaying key economic reports.  The government shutdown means delays in the release of government reports, including Tuesday's Aug US trade report and 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 the 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, President Trump’s assault on the Fed, and political uncertainty in France and Japan are all driving investors to haven assets, such as gold and Bitcoin.  Gold prices soared above $4,000 an ounce to another record high today.  According to the latest data, the People's Bank of China added to its gold holdings in September for an eleventh consecutive month.  

Market focus this week will be on any new developments regarding tariffs, trade, or attempts by lawmakers to end the ongoing US government shutdown. Later today, 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 up +0.40%.  China's Shanghai Composite did not trade and is closed for the week-long Lunar New Year holiday.  Japan's Nikkei Stock 225 closed down -0.45%.

Interest Rates

December 10-year T-notes (ZNZ5) today are up by +4 ticks.  The 10-year T-note yield is down -1.9 bp to 4.104%.  T-note prices are supported by the ongoing US government shutdown, which could add to job losses, reduce consumer spending and weaken the US economy, allowing the Fed to continue cutting interest rates.  Supply pressures are limiting gains in T-note prices as the Treasury will auction $39 billion of 10-year T-notes later today as part of this week’s $119 billion of T-note and T-bond auction package.

European government bond yields are moving lower today.  The 10-year German bund yield dropped to a 3-week low of 2.666% and is down -3.4 bp at 2.676%.  The 10-year UK gilt yield is down by -2.0 bp to 4.699%.

German Aug industrial production fell -4.3% m/m, weaker than expectations of -1.0% m/m and the biggest decline in almost 3.5 years.

ECB Governing Council Member Muller said the Eurozone economy is slowly picking up and inflation is in line with the ECB's 2% target.

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 are climbing today, a supportive factor for the broader market.  Dell Technologies (DELL) is up more than +4% to lead gainers in the S&P 500 and Advanced Micro Devices (AMD) is up more than +3% to lead gainers in the Nasdaq 100.  Also, Micron Technology (MU) is up more than +2%.  In addition, Nvidia (NVDA), Marvell Technology (MRVL), Broadcom (AVGO), and ON Semiconductor (ON) are up more than +1%.  

Gold mining stocks are moving higher today after the price of gold soared over $4,000 an ounce to a new record high.  Anglogold Ashanti Plc (AU), Coeur Mining (CDE), and Gold Fields Ltd (GFI) are up more than +2%, and Newmont (NEM) is up nearly +1%.

AST SpaceMobile (ASTS) is up more than +18% after signing an agreement to provide direct-to-cellular connectivity when needed for Verizon customers starting in 2026.   

Confluent (CFLT) is up more than +11% after Reuters reported the company is exploring a sale after receiving acquisition interest. 

QuantumScape (QS) is up more than +11% after entering into a joint agreement with Murta Manufacturing.  

Rocket Lab (RKLB) is up more than +10% after signing a contract with iQPS to launch three more satellites for the Japanese company.

Freeport-McMoRan (FCX) is up more than +4% after Citigroup upgraded the stock to buy from neutral with a price target of $48.

Constellation Energy (CEG) is up more than +3% to lead gainers in the Nasdaq 100 after Seaport Global Securities upgraded the stock to buy from neutral with a price target of $407. 

Penguin Solutions (PENG) is down more than -17% after forecasting fiscal 2026 sales of $1.31 billion-$1.59 billion, the midpoint below the consensus of $1.48 billion. 

Joby Aviation (JOBY) is down more than -10% after offering a $500 million block of shares overnight in a range of $16.85-$17.35, well below Tuesday’s closing price of $18.91. 

Intercontinental Exchange (ICE) is down more than -3% after TD Cown cut its price target on the stock to $199 from $212.

Fair Isaac Corp (FICO) is down more than -2% after rival Equifax said its VantageScore 4.0 service will offer mortgage credit scores at $4.50 through the end of 2027. 

Live Nation Entertainment (LYV) is down more than -2% after announcing it intends to offer $1.3 billion in convertible senior notes due 2031.

Edwards Lifesciences (EW) is down more than -2% after Oppenheimer & Co downgraded the stock to market perform from outperform.

FedEx (FDX) is down more than -1% after JPMorgan Chase downgraded the stock to neutral from overweight.

Earnings Reports(10/8/2025)

Acuity Inc (AYI), Cal-Maine Foods Inc (CALM), Conagra Brands Inc (CAG), Novagold Resources Inc (NG), Rezolve AI PLC (RZLV), RPM International Inc (RPM).