Stocks Boosted by Strength in Chipmakers and Earnings Optimism

The S&P 500 Index ($SPX) (SPY) on Wednesday closed up +0.40%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.04%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.68%.  December E-mini S&P futures (ESZ25) rose +0.43%, and December E-mini Nasdaq futures (NQZ25) rose +0.72%.

Stock indexes mainly settled higher on Wednesday as better-than-expected quarterly earnings results sparked risk-on sentiment in equity markets. Strength in chipmakers led the broader market higher, as ASML Holding closed up more than +2% after reporting stronger-than-expected Q3 new orders.  Also, Morgan Stanley and Bank of America closed up more than +4% after reporting solid Q3 earnings.

Stocks also found support on Wednesday as trade concerns over China eased slightly after Treasury Secretary Bessent suggested the possibility of a longer China tariff truce, tied explicitly to rare earth materials. Bessent also said that as far as he's aware, President Trump "is a go" on meeting Chinese President Xi Jinping later this month in South Korea.

Stocks fell back from their best levels Wednesday when T-note yields turned higher on the day after the Fed's Beige Book stated that input costs increased at a faster pace, a hawkish factor for Fed policy.  The 10-year T-note yield initially fell to a 4-week low of 4.00% on Wednesday after dovish Fed comments bolstered expectations for the Fed to cut interest rates at the next FOMC meeting on October 28-29.  Boston Fed President Susan Collins said it is prudent for the Fed to cut rates a bit more this year. 

The escalation of trade tensions between the US and China, along with the ongoing US government shutdown, has sparked a buying spree in precious metals as a haven, with gold reaching a fresh all-time high on Wednesday. 

Wednesday's private survey news was supportive of stocks after the Oct Empire manufacturing survey general business conditions index rose +19.4 to 10.7, stronger than expectations of -1.8.

The Fed Beige Book based on information collected by the Fed's 12 regional banks through October 6 stated that US economic activity was little changed in recent weeks and employment levels held stable.  However, overall consumer spending edged lower, and prices continued to rise, with several districts reporting that input costs increased at a faster pace.

US MBA mortgage applications fell -1.8% in the week ended October 10, with the purchase mortgage sub-index down -2.7% and the refinancing mortgage sub-index down -1.0%.  The average 30-year fixed rate mortgage fell -1 bp to 6.42% from 6.43% in the prior week.

Boston Fed President Susan Collins said, "With inflation risks somewhat more contained, but greater risks to employment, it seems prudent to normalize policy a bit further this year to support the labor market."

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 payroll report.  Last Friday, the Bureau of Labor Statistics (BLS) said that it will release the September consumer price report, which was originally scheduled to be released Wednesday, on October 24.  The White House has warned that if the government shutdown lingers, 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 earnings results as the Q3 earnings season begins.  Rising corporate earnings expectations are a bullish backdrop for stocks.  According to Bloomberg Intelligence, 71% of the 24 S&P 500 companies that have reported so far have beaten forecasts.  Also, more than 22% of companies in the S&P 500 that provided guidance for their Q3 earnings results are expected to beat analysts' expectations, the highest in a year.  However, Q3 profits are expected to have risen by +7.2% y/y, the smallest increase in two years.  Also, Q3 sales growth is projected to slow to +5.9% y/y 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 settled higher on Wednesday.  The Euro Stoxx 50 closed up +0.95%.  China's Shanghai Composite closed up +1.22%.  Japan's Nikkei Stock 225 closed up +1.76%.

Interest Rates

December 10-year T-notes (ZNZ5) on Wednesday closed down -5.5 ticks.  The 10-year T-note yield rose +0.6 bp to 4.038%.  Dec -T-notes fell from a 4-week high and turned lower on Wednesday, and the 10-year T-note rose from a 4-week low of 3.998%.  T-note prices turned lower as strength in stocks on Wednesday curbed some safe-haven demand for T-notes.  Also, the stronger-than-expected Oct Empire manufacturing index was hawkish for Fed policy and bearish for T-notes.  In addition, the Fed Beige Book stated that input costs were rising at a faster pace, a hawkish factor for Fed policy.

T-note prices initially moved higher on Wednesday due to dovish comments from Boston Fed President Susan Collins, who said it is prudent for the Fed to cut rates a bit more this year. 

Also, falling inflation expectations are bullish for T-notes after the 10-year breakeven inflation rate fell to a 3.25-month low on Wednesday of 2.293%.  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 moved lower on Wednesday.  The 10-year German bund yield dropped to a 3.25-month low of 2.558% and finished down -4.0 bp at 2.571%.  The 10-year UK gilt yield fell to a 2.25-month low of 4.523% and finished down -4.7 bp to 4.543%.

Eurozone Aug industrial production fell -1.2% m/m, the biggest decline in 4 months, but better than expectations of -1.6% m/m.

ECB Governing Council member Makhlouf said he's more worried that inflation will come in above the ECB's 2% target than below it.

ECB Governing Council member Dolenc said that the current ECB policy "doesn't stimulate inflationary pressures on one hand, while not hindering economic activity on the other," so he sees no reason to change interest rates this month or in the coming months.

ECB Governing Council member and Bundesbank President Nagel stated that there are currently no grounds for the ECB to change interest rates and warned that some inflation components require continued vigilance.

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 and AI infrastructure stocks rallied on Wednesday, with ASML Holding NV (ASML) closing up more than +2% after reporting stronger-than-expected Q3 new orders.  Also, Advanced Micro Devices (AMD) closed up more than +9% to lead gainers in the Nasdaq 100, and KLA Corp (KLAC) closed up more than +6%.  In addition, Lam Research (LRCX), Applied Materials (AMAT), and Intel (INTC) closed up more than +4%.  Finally, Marvell Technology (MRVL), Micron Technology (MU), and Broadcom (AVGO) closed up more than +2%.

Gold mining stocks rose on Wednesday after the price of COMEX gold climbed to a new record high.  As a result, Kinross Gold (KGC) closed up more than +5% and Barrick Mining (B) closed up more than +4%.  Also, Newmont (NEM) and Gold Fields Ltd (GFI) closed up more than +3%, and  Anglogold Ashanti Plc (AU) closed up more than +2%. 

Bunge Global SA (BG) closed up more than +12% to lead gainers in the S&P 500 after it projected full-year adjusted EPS of $7.30 to $7.60 for its combined merger with Viterra.

Papa John's International (PZZA) closed up more than +9% after Reuters reported that Apollo Global Management submitted a bid within the last week to take the company private at $64 a share.

Morgan Stanley (MS) closed up more than +4% after reporting Q3 FICC sales and trading revenue of $2.17 billion, stronger than the consensus of $2.07 billion.

Bank of America (BAC) closed up more than +4% after reporting Q3 net interest income of $15.23 billion, above the consensus of $15.03 billion. 

BrightSpring Health (BTSG) closed up more than +2% after S&P Dow Jones Indices said the company will replace Veritex Holdings in the S&P SmallCap 600 effective before the opening of trading on Monday, October 20. 

Amphenol Corp (APH) closed up more than +2% after Bank of America Global Research upgraded the stock to buy from neutral with a price target of $150. 

Sable Offshore (SOC) closed down more than -20% after the Santa Barbara Superior Court issued a tentative ruling that will deny the firm's claims against the Coastal Commission for issuing cease and desist orders during Sable's repair program on the Las Flores pipeline.  

Hancock Whitney (HWC) closed down more than -6% after reporting a Q3 net interest margin of 3.49%, below the consensus of 3.52%. 

Progressive Corp (PGR) closed down more than -5% after reporting Q3 net premiums written of $21.38 billion, below the consensus of $21.65 billion.

GE Vernova (GEV) closed down more than -4% after Rothschild & Co Redburn downgraded the stock to sell from neutral with a price target of $475.

PNC Financial Services Group (PNC) closed down more than -3% after forecasting Q4 revenue will be "stable to down 1%" q/q. 

F5 Inc (FFIV) closed down more than -3% after it reported that a nation-state cyberattack had gained long-term unauthorized access to parts of its system.

Abbott Laboratories (ABT) closed down more than -2% after cutting the top end of its 2025 earnings guidance to $5.18 from $5.20.

Earnings Reports(10/16/2025)

Bank of New York Mellon Corp/The (BK), Bank OZK (OZK), Charles Schwab Corp/The (SCHW), Commerce Bancshares Inc/MO (CBSH), CSX Corp (CSX), FNB Corp/PA (FNB), Interactive Brokers Group Inc (IBKR), KeyCorp (KEY), M&T Bank Corp (MTB), ManpowerGroup Inc (MAN), Marsh & McLennan Cos Inc (MMC), Snap-on Inc (SNA), Travelers Cos Inc/The (TRV), US Bancorp (USB).