The S&P 500 Index ($SPX) (SPY) on Friday closed up +0.53%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.52%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.65%. December E-mini S&P futures (ESZ25) rose +0.55%, and December E-mini Nasdaq futures (NQZ25) rose +0.70%.
Stock index futures recovered from sharp overnight losses and moved higher on Friday as banking worries and trade tensions eased. Solid earnings results from regional banks on Friday lifted market sentiment after Truist Financial and Fifth Third Bancorp reported better-than-expected Q3 earnings. Regional bank stocks had 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 on Friday as China-US trade tensions 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. Stocks added to their gains Friday afternoon when Treasury Secretary Bessent expressed optimism that upcoming talks with China’s leaders could yield a broader trade deal.
Dovish comments on Friday from St. Louis Fed President Alberto Musalem were supportive for stocks when he said he estimates current Fed policy to be “somewhere between modestly restrictive and neutral,” and he could support another interest rate cut to bolster a slowing labor market.
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 on Friday. However, both metals plunged on Friday as the easing of trade tensions and stabilization of bank stocks prompted long liquidation in precious metals.
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 lower on Friday. The Euro Stoxx 50 closed down -0.79%. 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) on Friday closed down -9 ticks. The 10-year T-note yield rose +2.8 bp to 4.003%. Dec T-notes fell from a 6.25-month high on Friday 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 on Friday 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 on Friday, 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. T-notes also garnered support Friday on dovish comments from St. Louis Fed President Alberto Musalem, who said he could support another interest rate cut to bolster a slowing labor market.
European government bond yields on Friday finished higher. The 10-year German bund yield recovered from a 3.5-month low of 2.523% and finished up +1.0 bp to 2.580%. The 10-year UK gilt yield recovered from a 3.5-month low of 4.451% and finished up +3.0 bp to 4.531%.
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
Most of the Magnificent Seven technology stocks rallied on Friday and lent support to the overall market. Tesla (TSLA) closed up more than +2% and Apple (AAPL) closed up more than +1%. Also, Nvidia (NVDA) closed up +0.78%, Alphabet (GOOGL) closed up +0.76%, Meta Platforms (META) closed up +0.68%, and Microsoft (MSFT) closed up +0.39%.
American Express (AXP) closed up more than +7% to lead gainers in the Dow Jones Industrials after reporting Q3 EPS of $4.14, stronger than the consensus of $3.99.
Zions Bancorp (ZION) closed up more than +5% after Baird upgraded the stock to outperform from neutral with a price target of $65.
Jeffries Financial Group (JEF) closed up more than +5% after Oppenheimer & Co. upgraded the stock to outperform from market perform with a price target of $81.
Truist Financial (TFC) closed up more than +3% after reporting Q3 non-interest income of $1.56 billion, better than the consensus of $1.49 billion.
Ally Financial (ALLY) closed up more than +3% after reporting Q3 adjusted EPS of $1.15, stronger than the consensus of $1.00.
CSX Corp (CSX) closed up more than +1% after reporting Q3 revenue of $3.59 billion, better than the consensus of $3.57 billion.
Fifth Third Bancorp (FITB) closed up more than +1% after reporting Q3 net interest income of $1.53 billion, above the consensus of $1.52 billion.
Chipmakers and AI infrastructure stocks moved lower on Friday on long liquidation following their recent blistering rallies. Oracle (ORCL) closed down more than -6% and Super Micro Computer (SMCI) closed down more than -3%. Also, ARM Holdings Plc (ARM) closed down more than -3% to lead losers in the Nasdaq 100. In addition, Broadcom (AVGO), NXP Semiconductors NV (NXPI), Applied Materials (AMAT), Arista Networks (ANET), and Dell Technologies (DELL) closed down more than -1%.
Mining stocks tumbled on Friday after gold prices dropped by more than 1% and silver prices sank by more than 5%. Kinross Gold (KGC) closed down more than -9% and Newmont (NEM) closed down more than -7% to lead losers in the S&P 500. Also, Barrick Mining (B) closed down more than -6% and Freeport-McMoRan (FCX) closed down more than -1%.
AST SpaceMobile (ASTS) closed down more than -6% after Barclays double-downgraded the stock to underweight from overweight with a price target of $60.
Eli Lilly (LLY) closed down more than 2% 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.
State Street Corp (STT) closed down more than -1% after reporting Q3 net interest income of $715 million, below the consensus of $731.3 million.
Earnings Reports(10/20/2025)
AGNC Investment Corp (AGNC), BOK Financial Corp (BOKF), Cleveland-Cliffs Inc (CLF), Crown Holdings Inc (CCK), RLI Corp (RLI), Steel Dynamics Inc (STLD), Summit Therapeutics Inc (SMMT), W R Berkley Corp (WRB), Wintrust Financial Corp (WTFC), Zions Bancorp NA (ZION).
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.
