Stocks Fall as US-China Trade Conflict Escalates

The S&P 500 Index ($SPX) (SPY) today is down -0.99%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.86%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.37%.  December E-mini S&P futures (ESZ25) are down -1.00%, and December E-mini Nasdaq futures (NQZ25) are down -1.42%.

Stock indexes are retreating today as the US-China trade conflict escalates further after China sanctioned five US units of South Korean shipbuilder Hanwha Ocean Co., in the latest in a series of tit-for-tat moves.  Both countries have slapped special port fees on each other's vessels.  The moves have implications for the global economy, as vessels are responsible for moving more than 80% of international trade.

The escalation of trade tensions has sparked buying of precious metals as a haven today, as gold and silver rallied to new record highs. Also, global bond markets are the recipients of haven demand from the trade turmoil as bond yields declined worldwide.  The 10-year German bund yield dropped to a 3.25-month low of 2.58% and the 10-year T-note yield fell to a 3.5-week low of 4.00%. 

Today's minor economic news showed that the US Sep NFIB small business optimism index fell -2.0 to 98.8, weaker than expectations of 100.6.

Most stock indexes rallied to record highs last 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 continues, 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, the Aug US trade report, and the Sep nonfarm payrolls report.  Last Friday, the Bureau of Labor Statistics (BLS) said that it will release the September consumer price report on October 24 if the government shutdown continues into Wednesday, when the Sep CPI report is scheduled for release.  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 markets this week will focus on trade or tariff news and any attempts to reopen the government.  Later today, Fed Chair Powell delivers the keynote address at the NABE Annual Meeting.  Also, major banks, including JPMorgan Chase, Goldman Sachs, Citigroup, and Wells Fargo & Co., will begin releasing their earnings results as the Q3 earnings season begins. 

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 98% 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 fell to a 1-week low and is down -0.83%.  China's Shanghai Composite closed down -0.62%.  Japan's Nikkei Stock 225 dropped to a 1-week low and closed down sharply by -2.58%.

Interest Rates

December 10-year T-notes (ZNZ5) today are up +3 ticks.  The 10-year T-note yield is down -0.5 bp to 4.027%.  Dec -T-notes rallied to a 3.5-week high today, and the 10-year T-note yield fell to a 3.5-week low of 3.998%.  The escalation of the US-China trade conflict hammered global equity markets today, sparking safe-haven buying of government debt securities.  Also, today's -1% slump in the price of WTI crude oil to a 5.25-month low has lowered inflation expectations, a supportive factor for T-notes.  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 dropped to a 3.25-month low of 2.583% and is down -3.5 bp at 2.601%.  The 10-year UK gilt yield fell to a 2-month low of 4.570% and is down -6.8 bp to 4.590%.

The German Oct ZEW expectations of economic growth survey rose +2.0 to 39.3, weaker than expectations of 41.1.

UK Aug employment rose +91,000 in the 3-months ending August, which was weaker than expectations of +125,000.  The ILO unemployment rate rose +0.1 to a 4.25-year high of 4.8% in the 3-months ending August, showing a weaker labor market than expectations of no change at 4.7%.

Swaps are discounting a 2% chance for a -25 bp rate cut by the ECB at its next policy meeting on October 30.

US Stock Movers

Chipmakers are retreating today, weighing on the overall market.  Intel (INTC) is down more than -5% to lead losers in the Nasdaq 100, and Broadcom (AVGO) and Marvell Technology (MRVL) are down more than -3%.  Also, Micron Technology (MU) is down more than -2%, and GlobalFoundries (GFS), Analog Devices (ADI), KLA Corp (KLAC), NXP Semiconductors NV (NXPI), Microchip Technology (MCHP), ON Semiconductor (ON), ASML Holding NV (ASML), and Lam Research (LRCX) are down more than-1%.

The Magnificent Seven technology stocks are retreating today, a negative factor for the broader market.  Tesla (TSLA) and Nvidia (NVDA) are down more than -3%.  Also, Amazon.com (AMZN) is down more than -2%, Alphabet (GOOGL), Meta Platforms (META), and Microsoft (MSFT) are down more than -1%.  In addition, Apple (AAPL) is down -0.81% 

Cryptocurrency-linked stocks are under pressure as the price of Bitcoin is down by more than -4%.  As a result, Coinbase Global (COIN), Galaxy Digital (GLXY), and Strategy (MSTR) are down more than -3%, and Riot Platforms (RIOT) is down more than -1%.

Goldman Sachs (GS) is down more than -4% to lead losers in the Dow Jones Industrials after reporting Q3 equities sales and trading revenue of $3.74 billion, below the consensus of $3.94 billion.  

JPMorgan Chase (JPM) is down more than -4% despite raising its full-year net interest income estimate after CEO Dimon said he sees some softness in the US economy.

Albemarle (ALB) is down more than -3% after Bank of America Global Research downgraded the stock to neutral from buy. 

Salesforce (CRM) is down by more than -2% after Northland Securities downgraded the stock to market perform from outperform.

Navitas Semiconductor (NVTS) is up more than +15% after unveiling its 100 V GaN FETs, 650 V GaN, and high voltage SIC devices for Nvidia's 800 VDC AI factory architecture.  This will enable direct conversion from 13.8 kVAC utility power to 88 VDC within the data center power room.

Polaris Inc. (PII) is up more than +9% after saying it will separate Indian Motorcycle from its portfolio into a standalone company and enter into a definitive agreement to sell a majority stake to Carolwood LP. 

Domino's Pizza (DPZ) is up more than 4% to lead gainers in the S&P 500 after reporting Q3 total domestic stores comparable sales growth of 5.2%, which is better than the consensus of 4.28%. 

ARM Holdings Plc (ARM) is up more than +3% to lead gainers in the Nasdaq 100 after The Information reported that OpenAI is working with the company on the Broadcom AI chip.

Wells Fargo & Co. (WFC) is up more than +2% after reporting Q3 revenue of $21.44 billion, above the consensus of $21.16 billion. 

Earnings Reports(10/14/2025)

Albertsons Cos Inc (ACI), Blackrock Inc (BLK), Citigroup Inc (C), Domino's Pizza Inc (DPZ), Goldman Sachs Group Inc/The (GS), Johnson & Johnson (JNJ), JPMorgan Chase & Co (JPM), Wells Fargo & Co (WFC).