Stocks Tumble as Chinese Trade Tensions Resurface

The S&P 500 Index ($SPX) (SPY) today is down -0.80%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.88%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.89%.  December E-mini S&P futures (ESZ25) are down -0.86%, and December E-mini Nasdaq futures (NQZ25) are down -1.77%.

Stock indexes gave up an early advance today and turned sharply lower, with the S&P 500 falling to a 1-week low and the Dow Jones Industrials sliding to a 2-week low.  Stocks retreated on signs of rising trade tensions with China after President Trump threatened a “massive increase” of tariffs on Chinese goods, citing recent “hostile” export controls on rare-earth minerals.  Mr. Trump also said there seems to be no reason to meet Chinese President Xi Jinping at the APEC meeting in South Korea later this month.

Stocks initially moved higher today, with the Nasdaq 100 posting a new all-time high.  Lower bond yields initially supported stocks today, with the 10-year T-note yield falling to a 3-week low of 4.06%.  T-note yields fell today after stocks slumped and on dovish comments from Fed Governor Christopher Waller, who said, “The labor market is weak,” and he’s open to quarter-point interest rate cuts at the coming FOMC meetings. 

The University of Michigan US Oct consumer sentiment index fell -0.1 to a 5-month low of 55.0, stronger than expectations of 54.0.

The University of Michigan US Oct 1-year inflation expectations unexpectedly fell -0.1 to 4.6%, versus expectations of no change at 4.7%. The Oct 5-10 year inflation expectations remained unchanged at 3.7%, right on expectations.

Most stock indexes rallied to record highs this week on 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.

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 the last two weeks of weekly initial unemployment claims, 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%.

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 University of Michigan’s Oct consumer sentiment index is expected to fall by 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 lower.  The Euro Stoxx 50 is down -1.12%.  China’s Shanghai Composite closed down -0.94%.  Japan’s Nikkei Stock 225 closed down -1.01%.

Interest Rates

December 10-year T-notes (ZNZ5) today are up by +17 ticks.  The 10-year T-note yield is down -7.7 bp to 4.061%.  Dec T-notes rallied to a 3-week high today, and the 10-yer T-note yield fell to a 3-week low of 4.059%.  T-notes rallied on dovish comments today from Fed Governor Christopher Waller, who stated he’s open to quarter-point interest rate cuts at the upcoming FOMC meetings. Gains in T-notes accelerated today after stocks sold off on threats from President Trump of “massive increases” in tariffs on Chinese goods. 

T-notes also have support amid concerns about the ongoing US government shutdown, which could lead to additional job losses, reduced consumer spending, and a weakened US economy, potentially allowing the Fed to continue cutting interest rates.  

European government bond yields are moving lower today.  The 10-year German bund yield fell to a 3-week low of 2.633% and is down -6.7 bp at 2.636%.  The 10-year UK gilt yield fell to a 2-week low of 4.664% and is down -7.7 bp to 4.669%.

ECB Governing Council member and Bundesbank President Nagel said “the bar is rather high” to alter his assessment that the current ECB monetary policy stance is appropriate.

ECB Governing Council member Kazaks said we are about neutral on ECB rates as inflation remains contained and the current 2% rate is 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

Chipmakers are slumping today, dragging the overall market lower. Advanced Micro Devices (AMD) and GlobalFoundries (GFS) are down more than -4%.  Also, ARM Holdings Plc (ARM), ON Semiconductor (ON), and Qualcomm (QCOM) are down more than -3%.  In addition, Microchip Technology (MCHP), Lam Research (LRCX), KLA Corp (KLAC), Micron Technology (MU), ASML Holding NV (ASML), and NXP Semiconductors NV (NXPI) are down more than -2%.

Energy producers and energy service providers are under pressure today, with the price of WTI crude oil down by more than -2%.  As a result, Baker Hughes (BKR), ConocoPhillips (COP), and Devon Energy (DVN) are down more than -2%.  Also, APA Corp (APA), Diamondback Energy (FANG), Occidental Petroleum (OXY), and Halliburton (HAL) are down more than -1%. 

Venture Global (VG) is down more than -20% as it potentially faces multibillion-dollar damages over disputed liquefied natural gas shipments, after an unexpected loss in a BP Plc arbitration that could pave the way for additional claims. 

Levi Strauss (LEVI) is down more than -11% after forecasting full-year adjusted EPS of $1.27-$1.32, the midpoint below the consensus of $1.31.

Mosaic (MOS) is down more than -8% to lead losers in the S&P 500 after reporting Q3 preliminary phosphate sales volumes of 1.70 million tons, weaker than the consensus of 1.83 million tons. 

Doximity (DOCS) is down more than -5% after JPMorgan Chase downgraded the stock to underweight from neutral with a price target of $62. 

Align Technology (ALGN) is down more than -2% after Jeffries downgraded the stock to hold from buy.

Applied Digital (APLD) is up more than +24% after saying it is in advanced discussions with a hyperscaler client for its second data center in North Dakota. 

Centrus Energy (LEU) is up more than +9% after Evercore ISI raised its price target on the stock to $452 from $252. 

Elastic NV (ESTC) is up more than +7% after announcing a $500 million stock buyback program and raising its full-year 2026 sales outlook to $1.697 billion-$1.703 billion from a previous estimate of $1.697 billion-$1.689 billion. 

Arista Networks (ANET) is up more than +2% after Morgan Stanley raised its price target on the stock to $171 from $140.

Amcor Plc (AMCR) is up more than +1% after forecasting full-year adjusted EPS of 80 cents to 83 cents, above the consensus of 80 cents.

nCino Inc (NCNO) is up more than +1% after William Blair upgraded the stock to outperform from market perform.

Aptiv Plc (APTV) is up more than +1% after Citigroup initiated coverage on the stock with a recommendation of buy and a price target of $109. 

Earnings Reports(10/10/2025)

Compass Diversified Holdings (CODI), Hingham Institution For Saving (HIFS), Immersion Corp (IMMR), Mercurity Fintech Holding Inc (MFH), Nurix Therapeutics Inc (NRIX), Triller Group Inc (ILLR), Unity Bancorp Inc (UNTY), XCF Global Inc (SAFX).