The S&P 500 Index ($SPX) (SPY) on Thursday closed down -0.63%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.65%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.36%. December E-mini S&P futures (ESZ25) fell -0.68%, and December E-mini Nasdaq futures (NQZ25) fell -0.41%.
Stock indexes gave up an early advance on Thursday and retreated after regional bank stocks tumbled due to concerns about credit quality, which fueled long liquidation and risk-off sentiment in the stock market. Zions Bancorp sank by more than 13% and Western Alliance Bancorp dropped by more than 10% to drag regional bank stocks lower after they disclosed problems with loans involving allegations of fraud.
Stocks initially moved higher on Thursday as strong technology earnings boosted market sentiment. Optimism that AI spending will continue to rise is pushing stocks higher today after Taiwan Semiconductor Manufacturing Co., the world’s most advanced semiconductor manufacturer and chipmaker for Apple and Nvidia, raised its projections for 2025 revenue growth for the second time this year. This underscored the strength in global AI spending.
Dovish Fed comments on Thursday knocked T-note yields lower and also supported stocks. The 10-year T-note yield dropped to a 6.25-month low of 3.97% on Thursday after Fed Governor Christopher Waller said the Fed can continue to lower interest rates in quarter-percentage-point increments to support a faltering labor market. Also, Richmond Fed President Tom Barkin said US productivity growth seems to be improving “significantly,” possibly containing any inflationary impacts from trade tariffs.
Thursday’s US economic news was mixed for stocks. On the negative side, the Oct Philadelphia Fed business outlook survey fell -36.0 to a 6-month low of -12.8, weaker than expectations of 10.0. Conversely, the Oct NAHB housing market index rose +5 to a 6-month high of 37, stronger than expectations of 33.
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 and silver reaching fresh all-time highs today.
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 three 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 the September consumer price report, which was originally scheduled to be released on Wednesday, will be released 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, 78% of the 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 100% chance of a -25 bp rate cut at the next FOMC meeting on Oct 28-29.
Overseas stock markets settled higher on Thursday. The Euro Stoxx 50 closed up +0.84%. China’s Shanghai Composite closed up +0.10%. Japan’s Nikkei Stock 225 closed up +1.27%.
Interest Rates
December 10-year T-notes (ZNZ5) on Thursday closed up +16.5 ticks. The 10-year T-note yield fell -5.2 bp to 3.976%. Dec T-notes recovered from early losses on Thursday and rallied to a 5-week high, and the 1-year T-note yield dropped to a 6.25-month low of 3.967%.
T-notes rallied Thursday due to dovish Fed comments. Fed Governor Christopher Waller said the Fed can continue to lower interest rates to support a faltering labor market, and Richmond Fed President Tom Barkin stated that US productivity growth appears to be improving “significantly.” T-notes also found support after the Oct Philadelphia Fed business outlook survey fell more than expected to a 6-month low, and after inflation expectations fell when the 10-year breakeven inflation rate dropped to a 5-month low of 2.270%. T-notes surged to their highs on Thursday afternoon when regional bank stocks plummeted due to concerns about credit quality, sparking safe-haven demand for T-notes.
T-notes also have support from 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 were mostly lower on Thursday. The 10-year German bund yield was unchanged at 2.570%. The 10-year UK gilt yield dropped to a 3.25-month low of 4.496% and finished down -4.2 bp to 4.501%.
UK Aug manufacturing production rose +0.7% m/m, stronger than expectations of +0.2% m/m
ECB Governing Council member Wunsch said, “I would say that the probability that the ECB cuts interest rates again has been receding over the last few weeks or months.”
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
Regional bank stocks tumbled on Thursday, led by a -13% decline in Zions Bancorp (ZION) and a -10% slide in Western Alliance Bancorp (WAL) after they disclosed problems with loans involving allegations of fraud. Zions Bancorp announced that it will record a $60 million provision and charge-off of $50 million after legal action was initiated by banks and other lenders related to two commercial and industrial loans extended by a bank division. Also, Citizens Financial Group (CFG) closed down more than -6%, and Regions Financial (RF), KeyCorp (KEY), Truist Financial (TFC), and Huntington Bancshares (HBAN) closed down more than -5%.
Kenvue Inc (KVUE) closed down more than -13% to lead losers in the S&P 500 after Citigroup published a research note flagging a “major” lawsuit in the UK related to the use of baby powder that could cause financial implications for the company.
Hewlett Packard Enterprise (HPE) closed down more than -10% after projecting 2026 earnings of $2.20 to $2.40 a share, weaker than the consensus of $2.41.
F5 Inc (FFIV) closed down more than -10%, adding to Wednesday’s -3% loss, after a potentially “catastrophic” breach of the cybersecurity provider blamed on state-backed hackers from China, with the hackers gaining “long-term, persistent access” to certain systems and stealing files, including source code.
Marsh & McLennan Cos (MMC) closed down more than -8% after reporting Q3 adjusted operating margin of 22.7%, below the consensus of 22.9%.
Verisk Analytics (VRSK) closed down more than -6% to lead losers in the Nasdaq 100 after Rothschild & Co Redburn downgraded the stock to sell from neutral with a price target of $220.
Travelers Cos (TRV) closed down more than -2% to lead losers in the Dow Jones Industrials after reporting Q3 net premiums written of $11.47 billion, below the consensus of $11.84 billion.
Lululemon Athletica (LULU) closed down more than -1% after Bernstein downgraded the stock to market perform from outperform.
Chipmakers and AI infrastructure stocks moved higher Thursday after Taiwan Semiconductor Manufacturing Co., the world’s most advanced semiconductor manufacturer and chipmaker for Apple and Nvidia, raised its projections for 2025 revenue growth for the second time this year. As a result, Micron Technology (MU) closed up more than +5% to lead gainers in the Nasdaq 100, and ON Semiconductor (ON) closed up more than +5%. Also, Western Digital (WDC) closed up by more than +4% and Seagate Technology Holdings Plc (STX) closed up by more than +3%. In addition, Nvidia (NVDA), Analog Devices (ADI), KLA Corp (KLAC), and Arista Networks (ANET) closed up more than +1%.
Gold mining stocks rallied on Thursday after the price of COMEX gold climbed to a new record high. As a result, Kinross Gold (KGC), Barrick Mining (B), Newmont (NEM), Gold Fields Ltd (GFI), and Anglogold Ashanti Plc (AU) closed up more than +2%.
Praxis Precision Medicines (PRAX) closed up more than +183% after two studies in its Phase 3 Essential3 program of ulixacaltamide to treat tremors met their primary endpoints.
JB Hunt Transport Services (JBHT) closed up more than +22% to lead gainers in the S&P 500 after reporting Q3 revenue of $3.05 billion, stronger than the consensus of $3.02 billion.
Knight-Swift Transportation Holdings (KNX) closed up more than +6% after Bank of America upgraded the stock to buy from neutral with a price target of $50.
Salesforce (CRM) closed up more than +3% to lead gainers in the Dow Jones Industrials after projecting revenue growth will accelerate to double digits in the coming years, and announced it will purchase an additional $7 billion of shares in the next six months.
Snap-on Inc (SNA) closed up more than +3% after reporting Q3 EPS of $5.02, stronger than the consensus of $4.64.
Earnings Reports(10/17/2025)
Ally Financial Inc (ALLY), American Express Co (AXP), Comerica Inc (CMA), Fifth Third Bancorp (FITB), Huntington Bancshares Inc/OH (HBAN), Regions Financial Corp (RF), SLB Ltd (SLB), State Street Corp (STT), Truist Financial Corp (TFC), Webster Financial Corp (WBS).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
