Stocks Stabilize as Bank Stocks Recover and US-China Trade Tensions Ease

The S&P 500 Index ($SPX) (SPY) today is up +0.14%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.43%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.07%.  December E-mini S&P futures (ESZ25) are up +0.10%, and December E-mini Nasdaq futures (NQZ25) are up +0.05%.

Stock index futures recovered from sharp overnight losses to trade slightly higher as solid earnings results from regional banks helped lift market sentiment.  Truist Financial, Regions Financial, and Fifth Third Bancorp are moving higher today to lead bank stocks higher after reporting better-than-expected Q3 earnings. Regional bank stocks tumbled on Thursday amid concerns about the credit quality of regional banks, sparked by news that Zions Bancorp and Western Alliance Bancorp were victims of fraud involving loans to funds that invest in distressed commercial mortgages.

Stock indexes also garnered support today as China-US trade concerns eased slightly after President Trump said current tariffs on China were "not sustainable" and affirmed that he will meet with Chinese President Xi Jinping at the end of the month in South Korea.

The escalation of trade tensions between the US and China, the ongoing US government shutdown, and fears about credit quality in the US have 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 are lower today.  The Euro Stoxx 50 is down -0.59%.  China's Shanghai Composite closed down -1.95%.  Japan's Nikkei Stock 225 closed down -1.44%.

Interest Rates

December 10-year T-notes (ZNZ5) today are down -6 ticks.  The 10-year T-note yield is up +1.7 bp to 3.992%.  Dec T-notes fell from a 6.25-month high today and turned lower, and the 10-year T-note yield rebounded from a 6.25-month low of 3.934% and moved higher.

T-notes gave up overnight gains and turned lower after several regional bank stocks reported better-than-expected Q3 earnings, which eased concerns over credit quality in regional banks, improved market sentiment, and sparked long liquidation in T-notes.  Additionally, the easing of US-China trade tensions has curbed safe-haven demand for government debt securities and weighed on T-notes today, following President Trump's statement that the high tariffs he has threatened to impose on China are unsustainable. 

T-notes 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 are moving higher today.  The 10-year German bund yield recovered from a 3.5-month low of 2.523% and is up +0.3 bp to 2.573%.  The 10-year UK gilt yield recovered from a 3.5-month low of 4.451% and is up +3.3 bp to 4.534%.

Eurozone Sep core CPI was revised upward by +0.1 to a 5-month high of 2.4% y/y from the previously reported 2.3% y/y.

ECB Governing Council member Simkus said, "downside risks to both growth and inflation" may require the ECB to lower interest rates further in the months ahead.

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 are sliding today, a negative factor for the broader market.  Oracle (ORCL) is down more than -5% to lead losers in the S&P 500.  Also, ARM Holdings Plc (ARM) is down more than -2% to lead losers in the Nasdaq 100, and Arista Networks (ANET) is down more than -2%.  In addition, Advanced Micro Devices (AMD), Broadcom (AVGO), Dell Technologies (DELL), GlobalFoundries (GFS), and Super Micro Computer (SMCI) are down more than -1%. 

Cryptocurrency-exposed stocks are falling today as the price of Bitcoin is down more than -1% at a 2.75-month low.  As a result, Coinbase Global (COIN), Galaxy Digital (GLXY), MARA Holdings (MARA), and Riot Platforms (RIOT) are down more than -2%.

State Street Corp (STT) is down more than -5% after reporting Q3 net interest income of $715 million, below the consensus of $731.3 million.

AST SpaceMobile (ASTS) is down more than -3% after Barclays double-downgraded the stock to underweight from overweight with a price target of $60. 

Eli Lilly (LLY) is down more than 3% after President Trump announced that the White House will negotiate the price of the diabetes drug Ozempic down to as low as $150 a month.

Micron Technology (MU) is down more than -1% after Reuters reported the company plans to stop supplying server chips to data centers in China after it failed to recover from a 2023 government ban on its products in critical Chinese infrastructure. 

Booz Allen Hamilton Holding (BAH) is down more than -1% after TD Cowen downgraded the stock to hold from buy. 

Jeffries Financial Group (JEF) is up more than +4% after Oppenheimer & Co. upgraded the stock to outperform from market perform with a price target of $81. 

American Express (AXP) is up more than +3% to lead gainers in the Dow Jones Industrials after reporting Q3 EPS of $4.14, stronger than the consensus of $3.99. 

Truist Financial (TFC) is up more than +3% after reporting Q3 non-interest income of $1.56 billion, better than the consensus of $1.49 billion. 

CSX Corp (CSX) is up more than +2% after reporting Q3 revenue of $3.59 billion, better than the consensus of $3.57 billion. 

Zions Bancorp (ZION) is up more than +2% after Baird upgraded the stock to outperform from neutral with a price target of $65. 

Fifth Third Bancorp (FITB) is up more than +2% after reporting Q3 net interest income of $1.53 billion, above the consensus of $1.52 billion.   

Huntington Bancshares (HBAN) is up more than +1% after reporting Q3 adjusted EPS of 40 cents, above the consensus of 37 cents.

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).