Stocks Rally on Strong Amazon Earnings

The S&P 500 Index ($SPX) (SPY) today is up +0.46%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.10%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.94%.  December E-mini S&P futures (ESZ25) are up +0.43%, and December E-mini Nasdaq futures (NQZ25) are up +0.91%.

US stock indexes are climbing today on some positive earnings results from Amazon.com, which is up more than +11% to lead megacap technology stocks higher after reporting blowout earnings and giving an optimistic forecast. Also, Western Digital is up more than +8% after reporting Q1 net revenue above consensus.  In addition, Nvidia is up by more than +1% after unveiling new partnerships with South Korea's biggest firms as it extends its push to expand artificial intelligence infrastructure. 

Today's minor US economic news was supportive for stocks after the Oct MNI Chicago PMI rose +3.2 to 43.8, stronger than expectations of 42.3.

Hawkish Fed comments today are negative for stocks.  Kansas City Fed President Jeff Schmid said he voted against the Fed's 25 bp interest rate cut on Wednesday because "the labor market is largely in balance, the economy shows continued momentum, and inflation remains too high."  Also, Dallas Fed President Lorie Logan said, "I did not see a need to cut rates this week, and I'd find it difficult to cut rates again in December unless there is clear evidence that inflation will fall faster than expected or that the labor market will cool more rapidly."

The markets are discounting a 65% 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.  Q3 earnings have been running strong so far.  According to Bloomberg Intelligence, 80% 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 are mixed today.  The Euro Stoxx 50 is down -0.49%.  China's Shanghai Composite closed down -0.81%.  Japan's Nikkei Stock 225 rose to a new record high and closed up sharply by +2.12%.

Interest Rates

December 10-year T-notes (ZNZ5) today are up by +2 ticks.  The 10-year T-note yield is down -1.0 bp to 4.087%.  T-note prices recovered from early losses today and turned higher on an increase in safe-haven demand after the Miami Herald reported that the US has decided to attack military fixtures in Venezuela and could act at any time.

T-note prices initially moved lower today as strength in equity markets has curbed safe-haven demand for T-notes.  Also, negative carryover from Thursday, when President Trump and President Xi Jinping agreed to extend a tariff truce, is curbing safe-haven demand for T-notes.  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 are moving lower today.  The 10-year German bund yield is down -0.7 bp to 2.636%. The 10-year UK gilt yield is down -0.9 bp to 4.415%.

The Eurozone Oct CPI eased to +2.1% y/y from +2.2% y/y in Sep, right on expectations.  Oct core CPI remained unchanged from Sep at +2.4% y/y, stronger than expectations of +2.3% y/y.

German Sep retail sales rose +0.2% m/m and +2.8% y/y, slightly stronger than expectations of +0.2% m/m and +2.7% y/y.

Swaps are discounting a 4% chance for a -25 bp rate cut by the ECB at its next policy meeting on December 18.

US Stock Movers

Amazon.com (AMZN) is up more than +11% to lead gainers in the S&P 500, Dow Jones Industrials, and Nasdaq 100 after reporting Q3 net sales of $180.17 billion, stronger than the consensus of $177.82 billion, and forecasting Q4 net sales of $206 billion-$213 billion, the midpoint above the consensus of $208.45 billion. 

Western Digital (WDC) is up more than +8% after reporting Q1 net revenue of $2.82 billion, stronger than the consensus of $2.73 billion. 

Brighthouse Financial (BHF) is up more than +21% after the Financial Times reported that Aquarian Holdings is in advanced talks to acquire the company. 

Twilio (TWLO) is up more than +15% after forecasting Q4 revenue of $1.31 billion to $1.32 billion, stronger than the consensus of $1.29 billion. 

Reddit (RDDT) is up more than +14% after reporting 116 million daily active users in Q3, above the consensus of 114.16 million. 

Cloudflare (NET) is up more than +8% after raising its full-year revenue forecast to $2.14 billion from a previous forecast of $2.11 billion-$2.12 billion, above the consensus of $2.12 billion. 

Coinbase Global (COIN) is up more than +5% after reporting Q3 total revenue of $1.87 billion, above the consensus of $1.80 billion. 

Rocket Cos.  (RKT) is up more than +4% after reporting Q3 adjusted revenue of $1.78 billion, better than the consensus of $1.70 billion. 

GoDaddy (GDDY) is up more than +3% after reporting Q3 revenue of $1.30 billion, above the consensus of $1.23 billion, and raising its full-year revenue forecast to $4.93 billion-$4.95 billion from a previous forecast of $4.89 billion-$4.94 billion.

Nvidia (NVDA) is up more than +1% after forging a deal to supply its technology to South Korea's biggest companies, including Samsung Electronics, Hyundai Motor Group, and SK Group. 

Dexcom (DXCM) is down more than -14% to lead losers in the S&P 500 and Nasdaq 100 after cutting its full-year adjusted gross margin estimate to 61% from a previous estimate of 62%, below the consensus of 61.8%. 

Charter Communications (CHTR) is down more than -4% after reporting Q3 revenue of $13.67 billion, weaker than the consensus of $13.75 billion. 

Motorola Solutions (MSI) is down more than -4% after forecasting Q4 adjusted EPS of $4.30 to $4.36, the midpoint below the consensus of $4.35.

FMC Corp (FMC) is down more than -3% after Wells Fargo Securities downgraded the stock to equal weight from overweight. 

Comcast Corp (CMCSA) is down more than -1% after Goldman Sachs downgraded the stock to neutral from buy. 

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).