Stocks Retreat on Valuation Concerns

The S&P 500 Index ($SPX) (SPY) today is down -0.97%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.69%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.29%.  December E-mini S&P futures (ESZ25) are down -0.95%, and December E-mini Nasdaq futures (NQZ25) are down -1.34%.

US stock indexes are sharply lower today, with the S&P 500 falling to a 1.5-week low and the Dow Jones Industrials and Nasdaq 100 dropping to 1-week lows.   Shares of AI bellwether Palantir Technologies are down more than -7% to lead AI-infrastructure stocks lower today despite reporting better-than-expected Q3 sales.  The price-to-sales ratio for Palantir Technologies rose to 85, the highest in the S&P 500, raising concerns about extreme valuations and sparking a long liquidation in the stock.  The weakness of the Magnificent Seven megacap technology stocks today is also weighing on the overall market.

Valuation concerns are also weighing on stock prices amid warnings from a couple of Wall Street banks.  At the Hong Kong Monetary Authority financial summit today, Morgan Stanley and Goldman Sachs both said that equity markets could be due for a pullback of more than 10% in the next 12 to 24 months, citing caution over stock prices after the S&P 500 surged more than +35% from April lows to a record high last week. 

US Oct Wards total vehicle sales slowed to 15.32 million, weaker than expectations of 15.50 million and the fewest in 14 months.

The markets are discounting a 70% chance of another -25 bp rate cut at the next FOMC meeting on December 9-10.

The markets are looking ahead to oral arguments at the Supreme Court this Wednesday about whether President Trump's reciprocal tariffs are legal. Oral arguments may provide hints about how the Supreme Court might rule.  The Supreme Court is expected to issue its ruling by late this year or early in 2026.  Lower courts have already ruled that Mr. Trump's reciprocal tariffs are illegal, finding they are based on a specious claim of emergency authority under the 1977 International Emergency Economic Powers Act.  If the US Supreme Court upholds those rulings and strikes down the tariffs, then the US government may have to refund the reciprocal and fentanyl-linked tariffs already collected, totaling more than $80 billion, and Mr. Trump's power to impose tariffs may be limited to well-founded sections of US trade law, such as sections 232, 301, and 201.

Q3 corporate earnings season continues at a strong clip this week, with 136 of the S&P 500 companies reporting earnings this week.  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.

The US government shutdown, now in its sixth week, is the longest in history, weighing on market sentiment and the US economy.  The government shutdown is delaying a host of government reports and is having an adverse effect on the US economy. 

Overseas stock markets are lower today.  The Euro Stoxx 50 fell to a 2-week low and is down -0.82%.  China's Shanghai Composite closed down -0.41%.  Japan's Nikkei Stock 225 dropped from a record high and closed down -1.74%.

Interest Rates

December 10-year T-notes (ZNZ5) today are up by +4 ticks.  The 10-year T-note yield is down -1.8 bp to 4.093%.  T-note prices are receiving support from today's stock weakness, which has boosted safe-haven demand for government debt. 

T-note prices have underlying support from the ongoing US government shutdown, which is now the longest in history and 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 -1.6 bp to 2.651%. The 10-year UK gilt yield is down -2.3 bp to 4.412%.

Swaps are discounting a 7% chance for a -25 bp rate cut by the ECB at its next policy meeting on December 18.

US Stock Movers

The Magnificent Seven stocks are under pressure today to weigh on the overall market.  Tesla (TSLA) is down more than -3% and Nvidia (NVDA) is down more than -2%.  Also, Alphabet (GOOG) and Microsoft (MSFT) are down more than -1%.  In addition, Meta Platforms (META) is down -0.58%, Amazon.com (AMZN) is down -0.57%, and Apple (AAPL) is down -0.03% 

Crypto stocks are sliding today with a -3% sell-off in Bitcoin (^BTCUSD) to a 4.25-month low.  Coinbase Global (COIN), Galaxy Digital (GLXY), Mara Holdings (MARA), Strategy (MSTR), and Riot Platforms (RIOT) are down more than -4%.

Sarepta Therapeutics (SRPT) is down more than -33% after it said a study of its Amondys 45 and Vyondys 53 on patients with Duchenne muscular dystrophy missed a primary endpoint. 

Zoetis (ZTS) is down more than -11% to lead losers in the S&P 500 after cutting its full-year revenue estimate to $9.40 billion-$9.48 billion from a previous forecast of $9.45 billion-$9.60 billion, below the consensus of $9.51 billion.

Norwegian Cruise Line Holdings Ltd (NCLH) is down more than -11% after reporting Q3 revenue of $2.94 billion, below the consensus of $3.02 billion. 

Marathon Petroleum (MPC) is down more than -9% after reporting Q3 adjusted EPS of $3.01, weaker than the consensus of $3.15.

Palantir Technologies (PLTR) is down more than 7% to lead the Nasdaq 100 losers, despite reporting better-than-expected Q3 sales, as the stock's price-to-sales ratio rose to 85 —the highest in the S&P 500 —raising concerns about extreme valuations and sparking long liquidation pressures in the stock.

Uber Technologies (UBER) is down more than -7% after forecasting Q4 adjusted Ebitda of $2.41 billion to $2.51 billion, the midpoint below the consensus of $2.49 billion.

Eaton Crop (ETN) is down more than -6% after reporting Q3 net sales of $6.99 billion, weaker than the consensus of $7.08 billion, and forecasting full-year organic revenue of +8.5% to +9.5%, the midpoint below the consensus of +9.22%.

Henry Scein (HSIC) is up more than +11% to lead gainers in the S&P 500 after reporting Q3 net sales of $3.34 billion, above the consensus of $3.28 billion.

Sanmina (SANM) is up more than +12% after reporting Q4 net sales of $2.10 billion, stronger than the consensus of $2.06 billion. 

Fabrinet (FN) is up more than +11% after reporting Q1 revenue of $978.1 million, above the consensus of $933.6 million.

Whitestone REIT (WSR) is up more than +6% after MCB Real Estate is said to be making a renewed push to acquire the company and may make a $15.20-per share offer as soon as today.

Yum!  Brands (YUM) is up more than +4% after reporting Q3 adjusted EPS of $1.58, above the consensus of $1.48. 

Marriott International (MAR) is up more than +2% to lead gainers in the Nasdaq 100 after reporting Q3 adjusted EPS of $2.47, stronger than the consensus of $2.39.

Global Payments (GPN) is up more than +2% after reporting Q3 adjusted net revenue of $2.43 billion, better than the consensus of $2.42 billion.

Earnings Reports(11/4/2025)

Expeditors International (EXPD), Marathon Petroleum Corp (MPC), Pfizer Inc (PFE), Zoetis Inc (ZTS), Shopify Inc (SHOP), Uber Technologies Inc (UBER), Ball Corp (BALL), Thomson Reuters Corp (TRI), Apollo Global Management Inc (APO), Exelon Corp (EXC), Archer-Daniels-Midland Co (ADM), Martin Marietta Materials Inc (MLM), Eaton Corp PLC (ETN), Leidos Holdings Inc (LDOS), Waters Corp (WAT), Stanley Black & Decker Inc (SWK), Global Payments Inc (GPN), Gartner Inc (IT), CDW Corp/DE (CDW), Henry Schein Inc (HSIC), Broadridge Financial Solutions (BR), Molson Coors Beverage Co (TAP), Norwegian Cruise Line Holdings (NCLH), Marriott International Inc/MD (MAR), Yum!  Brands Inc (YUM), Advanced Micro Devices Inc (AMD), Mosaic Co/The (MOS), American International Group I (AIG), Arista Networks Inc (ANET), Corteva Inc (CTVA), Match Group Inc (MTCH), International Flavors & Fragra (IFF), Live Nation Entertainment Inc (LYV), Assurant Inc (AIZ), AES Corp/The (AES), Eversource Energy (ES), Super Micro Computer Inc (SMCI), Jack Henry & Associates Inc (JKHY), Aflac Inc (AFL), Amgen Inc (AMGN), Axon Enterprise Inc (AXON), Skyworks Solutions Inc (SWKS).