The S&P 500 Index ($SPX) (SPY) on Thursday closed down -0.99%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.23%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.47%. December E-mini S&P futures (ESZ25) fell -0.95%, and December E-mini Nasdaq futures (NQZ25) fell -1.37%.
US stock indexes retreated on Thursday. The broader market was under pressure from divergent earnings results from megacap technology companies. Meta Platforms fell by more than 11% and Microsoft dropped by more than 2% after the companies failed to meet lofty expectations. However, Alphabet rose more than +2% after beating Q3 earnings estimates.
Stocks also have some negative carryover from Wednesday when Fed Chair Powell cautioned against the assumption that the Fed will cut interest rates again in December. The 10-year T-note yield climbed to a 2.5-week high of 4.11% on Thursday, pressuring stocks.
The markets are discounting a 72% chance of another -25 bp rate cut at the next FOMC meeting on December 9-10. The markets are discounting an overall 82 bp rate cut by the end of 2026 to 3.06% from the current effective federal funds rate of 3.88%.
Stocks have support after President Trump and President Xi Jinping on Thursday agreed to extend a tariff truce, roll back export controls, and reduce other trade barriers. The US will cut fentanyl-related tariffs on Chinese goods to 10% from 20% and extend a pause on some reciprocal tariffs for an additional year, while China resumes purchases of US soybeans, sorghum, and other farm products. The agreement also includes China pausing controls on rare-earth magnets in exchange for the US rolling back an expansion of restrictions on Chinese companies.
This is a heavy earnings week, with 173 of the S&P 500 companies reporting earnings. Apple and Amazon.com report after Thursday’s close. Q3 earnings have been running strong so far. According to Bloomberg Intelligence, 84% of the S&P 500 companies that have reported so far have beaten forecasts, on course for the best quarter since 2021. 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.
Regarding President Trump’s reciprocal tariffs, markets are looking ahead to oral arguments at the Supreme Court scheduled for November 5 on whether the tariffs are legal. Lower courts have already ruled that Mr. Trump’s reciprocal tariffs are illegal, finding they are based on a specious claim of emergency authority. If the US Supreme Court upholds those rulings and strikes down the tariffs, then the US government will have to refund the reciprocal tariffs already collected, and Mr. Trump’s power to impose tariffs will be limited to well-founded sections of US trade law. Observers expect the US Supreme Court to announce its final ruling on the reciprocal tariffs by late 2025 or early 2026.
The US government shutdown continues into its fifth week, weighing on market sentiment and the US economy. The government shutdown is delaying the release of government reports, including all the recent weekly unemployment claims reports, the September unemployment and payroll report, Aug trade balance, Sep retail sales, Sep PPI, Sep housing starts, Sep industrial production, Sep leading indicators, and others. 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%.
Overseas stock markets settled mixed on Thursday. The Euro Stoxx 50 closed down -0.12%. China’s Shanghai Composite fell from a 10-year high and closed down -0.73%. Japan’s Nikkei Stock 225 rose to a new record high and closed up by +0.04%.
Interest Rates
December 10-year T-notes (ZNZ5) on Thursday closed down by -6.5 ticks. The 10-year T-note yield rose +1.9 bp to 4.095%. T-note prices extended Wednesday’s slide on Thursday to a 2.5-week low, and the 10-year T-note yield rose to a 2.5-week high of 4.114%. T-notes moved lower on Thursday on reduced safe-haven demand after President Trump and President Xi Jinping agreed to extend a tariff truce. Also, rising inflation expectations are bearish for T-notes, as the 10-year breakeven inflation rate climbed to a 2-week high of 2.312% on Thursday. In addition, T-notes have carryover pressure from Wednesday when Fed Chair Powell said, “A further reduction in the policy rate at the December FOMC meeting is not a foregone conclusion.”
T-note prices have continued to receive underlying 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 moved higher on Thursday. The 10-year German bund yield rose to a 2.5-week high of 2.661% and finished up +2.2 bp to 2.643%. The 10-year UK gilt yield rose +3.2 bp to 4.424%.
Eurozone Q3 GDP rose +0.2% q/q and +1.3% y/y, stronger than expectations of +0.1% q/q and +1.2% y/y.
The Eurozone Oct economic sentiment indicator rose +1.2 to a 2.5-year high of 96.8, stronger than expectations of 96.0.
German Oct CPI (EU harmonized) rose +0.3% m/m and +2.3% y/y, stronger than expectations of +0.2% m/m and +2.2% y/y.
As expected, the ECB kept its deposit facility rate unchanged at 2.00%.
ECB President Lagarde said the EU trade deal with the US, the ceasefire in the Middle East, and progress in China-US relations have “mitigated downside risks to growth.”
Swaps are discounting a 5% chance for a -25 bp rate cut by the ECB at its next policy meeting on December 18.
US Stock Movers
Weakness in most of the Magnificent Seven technology stocks weighed on the broader market. Meta Platforms (META) closed down more than -11% and Tesla (TSLA) fell more than -4%. Also, Amazon.com (AMZN) closed down more than -3%, and Microsoft (MSFT) and Nvidia (NVDA) closed down more than -2%.
Meta Platforms (META) closed down more than -11% to lead losers in the Nasdaq 100 after raising its full-year total expense forecast to $116-$118 billion from a previous forecast of $114-$118 billion, with the new midpoint being above the consensus of $115.63 billion.
FMC Corp (FMC) closed down more than -45% after cutting its full-year adjusted EPS forecast to $2.92-$3.14 from a previous forecast of $3.26-$3.70, well below the consensus of $3.47.
Sprouts Farmers Market (SFM) closed down more than -26% after reporting Q3 net sales of $2.20 billion, weaker than the consensus of $2.23 billion, and cutting full-year comparable sales forecast to +7% from a previous view of +7.5% to +9%, below the consensus of +8.44%.
Chipotle Mexican Grill (CMG) closed down more than -18% to lead losers in the S&P 500 after lowering its full-year sales forecast for the third time this year, as it cut its comparable restaurant sales forecast to a decline in low single digits from a previous forecast of flat.
Cigna Group (CI) closed down more than -17% after executives said during an earnings call that they expect margin pressure in the company’s pharmacy benefits unit in the next two years.
eBay (EBAY) closed down more than -15% after forecasting full-year adjusted EPS from continuing operations of $5.42-$5.47, with the midpoint below the consensus of $5.46.
International Paper (IP) closed down more than -12% after reporting Q3 net sales of $6.22 billion, below the consensus of $6.54 billion.
Boeing (BA) closed down more than -6% to lead losers in the Dow Jones Industrials after Deutsche Bank downgraded the stock to hold from buy, saying the company’s finances are “constrained by the burdens of the past.”
Microsoft (MSFT) closed down more than -2% despite reporting better-than-expected Q1 earnings after CFO Hood said demand for its Azure cloud services is “significantly ahead of the capacity we have available.”
Alphabet (GOOGL) closed up more than +3% after reporting Q3 revenue ex-TAC of $87.47 billion, stronger than the consensus of $85.11 billion.
Guardant Health (GH) closed up more than +28% after boosting its full-year revenue forecast to $965 million-$970 million from a previous forecast of $915 million-$925 million, well above the consensus of $922 million.
Metsera (MTSR) closed up by more than +23% after Novo Nordisk offered nearly $6.5 billion, or $56.50 per share, for the company, with the possibility of an additional $21.25 per share if specific targets are met, bringing the total to as much as $77.75 per share.
C.H. Robinson Worldwide (CHRW) closed up more than +19% to lead gainers in the S&P 500 after reporting Q3 adjusted EPS of $1.40, above the consensus of $1.30, and announcing a $2 billion share repurchase program.
AMETEK Inc. (AME) closed up more than +7% after reporting Q3 net sales of $1.89 billion, better than the consensus of $1.81 billion.
Huntington Ingalls Industries (HII) closed up more than +6% after reporting Q3 revenue of $3.20 billion, stronger than the consensus of $2.95 billion.
Align Technology (ALGN) closed up more than +5% after reporting Q3 net revenue of $995.7 million, better than the consensus of $976 million.
Eli Lilly & Co. (LLY) closed up more than +4% raising its full-year revenue forecast to $63.0 billion-$63.5 billion from a previous estimate of $60.0 billion-$62.0 billion.
Earnings Reports(10/31/2025)
AbbVie Inc (ABBV), AGCO Corp (AGCO), Aon PLC (AON), Carlyle Group Inc/The (CG), Cboe Global Markets Inc (CBOE), Charter Communications Inc (CHTR), Chevron Corp (CVX), Church & Dwight Co Inc (CHD), Colgate-Palmolive Co (CL), Dominion Energy Inc (D), Exxon Mobil Corp (XOM), Federal Realty Investment Trust (FRT), Lear Corp (LEA), Linde PLC (LIN), LyondellBasell Industries NV (LYB), Madison Square Garden Sports Corp (MSGS), Middleby Corp/The (MIDD), Newell Brands Inc (NWL), nVent Electric PLC (NVT), OneMain Holdings Inc (OMF), Organon & Co (OGN), RBC Bearings Inc (RBC), T Rowe Price Group Inc (TROW), WW Grainger Inc (GWW).
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.
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