Stock Indices Recover Following Sharp Sell-Off on Tuesday

The S&P 500 Index ($SPX) (SPY) today is up +0.39%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.17%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.58%.  

Some weaker-than-expected earnings are weighing on technology stocks.  Super Micro Computer is down more than -8%. However, stocks recovered after today's monthly US ADP employment report showed private-sector employers added more jobs than expected, easing economic concerns.

The US Treasury today announced $125 billion in sales of T-notes and T-bonds in next week's quarterly refunding, right on expectations.  The Treasury also said it's not looking to boost sales of notes and bonds until well into next year and will increasingly rely on short-term T-bills to fund the budget deficit.

US MBA mortgage applications fell -1.9% in the week ended October 31, with the purchase mortgage sub-index down -0.6% and the refinancing sub-index down -2.8%.  The average 30-year fixed rate mortgage rose +1 bp to 6.31% from 6.30% the prior week.

The US Oct ADP employment change rose by +42,000, stronger than expectations of +30,000.

The markets are discounting a 68% 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 today 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 mixed today.  The Euro Stoxx 50 is down -0.40%.  China's Shanghai Composite recovered from a 1.5-week low and closed up +0.23%.  Japan's Nikkei Stock 225 fell to a 1.5-week low and closed down -2.50%.

Interest Rates

December 10-year T-notes (ZNZ5) today are down by -5 ticks.  The 10-year T-note yield is up +2.7 bp to 4.112%.  T-note prices gave up overnight gains and turned lower after the Oct ADP employment change showed private-sector employers added more jobs than expected last month, a hawkish factor for Fed policy. 

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 mixed today.  The 10-year German bund yield is down -0.1 bp to 2.653%. The 10-year UK gilt yield rose to a 2-week high of 4.456% and is up +2.1 bp to 4.447%.

The Eurozone Oct S&P composite PMI was revised upward by +0.3 to 52.5 from the previously reported 52.2, the strongest pace of expansion in nearly 2.5 years.

Eurozone Sep PPI fell -0.1% m/m and -0.2% y/y, slightly weaker than expectations of no change m/m and -0.2% y/y.

German Sep factory orders rose +1.1% m/m, stronger than expectations of +0.9% m/m and the biggest increase in 5 months.

Swaps are discounting a 6% chance for a -25 bp rate cut by the ECB at its next policy meeting on December 18.

US Stock Movers

Axon Enterprise (AXON) is down more than -17% to lead losers in the S&P 500 and Nasdaq 100 after reporting Q3 adjusted EPS of $1.17, well below the consensus of $1.51. 

Pinterest (PINS) is down more than -20% after forecasting Q4 revenue of $1.31 billion to $1.34 billion, weaker than the consensus of $1.34 billion. 

Kratos Defense & Security Solutions (KTOS) is down more than -11% after forecasting Q4 revenue of $320 million to $330 million, weaker than the consensus of $333.5 million. 

Humana (HUM) is down more than -10% after cutting its full-year EPS forecast to $12.26 from a previous forecast of $13.77, well below the consensus of $14.69. 

Arista Networks (ANET) is down more than -7% after forecasting Q4 adjusted gross margin of 62% to 63%, below the consensus of 63.2%.

Super Micro Computer (SMCI) is down more than -7% after reporting Q1 net sales of $5.02 billion, well below the consensus of $6.09 billion. 

Lumentum Holdings (LITE) is up more than +16% after reporting Q1 adjusted EPS of $1.10, above the consensus of $1.03, and forecasting Q2 adjusted EPS of $1.30 to $1.50, stronger than the consensus of $1.17. 

Unity Software (U) is up more than +10% after reporting Q3 revenue of $470.6 million, above the consensus of $452.6 million, and forecasting Q4 revenue of $480 million to $490 million, better than the consensus of $477 million.

Johnson Controls International (JCI) is up more than +6% after reporting Q4 net sales of $6.44 billion, better than the consensus of $6.33 billion.

Toast (TOST) is up more than +6% after reporting Q3 revenue of $1.63 billion, better than the consensus of $1.59 billion. 

International Flavors & Fragrances (IFF) is up more than +4% after reporting Q3 net sales of $2.69 billion, stronger than the consensus of $2.64 billion. 

Amgen (AMGN) is up more than +3% to lead gainers in the Dow Jones Industrials after reporting Q3 product sales of $9.14 billion, stronger than the consensus of $8.57 billion. 

Cencora (COR) is up more than +3% after reporting Q4 adjusted EPS of $3.84, better than the consensus of $3.78, and forecasting 2025 adjusted EPS of $17.45 to $17.75, the midpoint above the consensus of $17.50.

Earnings Reports(11/5/2025)

Albemarle Corp (ALB), Allstate Corp/The (ALL), Amcor PLC (AMCR), Ameren Corp (AEE), APA Corp (APA), AppLovin Corp (APP), ARM Holdings PLC (ARM), Atmos Energy Corp (ATO), Bio-Techne Corp (TECH), Bunge Global SA (BG), Cencora Inc (COR), CF Industries Holdings Inc (CF), Charles River Laboratories Int (CRL), Corpay Inc (CPAY), Devon Energy Corp (DVN), DoorDash Inc (DASH), Emerson Electric Co (EMR), Fair Isaac Corp (FICO), Fidelity National Information (FIS), Fortinet Inc (FTNT), Host Hotels & Resorts Inc (HST), Humana Inc (HUM), Iron Mountain Inc (IRM), Johnson Controls International (JCI), McDonald's Corp (MCD), McKesson Corp (MCK), MetLife Inc (MET), Paycom Software Inc (PAYC), PPL Corp (PPL), PTC Inc (PTC), QUALCOMM Inc (QCOM), Robinhood Markets Inc (HOOD), Sempra (SRE), STERIS PLC (STE), Targa Resources Corp (TRGP), Texas Pacific Land Corp (TPL), TKO Group Holdings Inc (TKO), Trimble Inc (TRMB), Zimmer Biomet Holdings Inc (ZBH).