Economic Angst Weighs on Stocks

The S&P 500 Index ($SPX) (SPY) today is down -0.95%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.54%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.55%.  December E-mini S&P futures (ESZ25) are down -0.97%, and December E-mini Nasdaq futures (NQZ25) are down -1.56%.

US stock indexes extended this week's slide today, with the S&P 500, the Dow Jones Industrials, and the Nasdaq 100 falling to fresh 2-week lows.  The weakness in megacap technology stocks and semiconductor makers is weighing on the broader market today.  Also, economic concerns are weighing on stocks, following Thursday's report from outplacement firm Challenger, Gray & Christmas, which showed that US companies announced the most job cuts in any October in more than 20 years.  Stocks maintained their losses today after the University of Michigan's US Nov consumer sentiment index fell more than expected to a nearly 3.5-year low.

Comments today from Fed Vice Chair Philip Jefferson were slightly hawkish and negative for stocks, as he said interest rates continue to have a "somewhat restrictive" effect on the economy and that "it makes sense to proceed slowly with rate cuts as we approach the neutral rate."

The University of Michigan US Nov consumer sentiment index fell -3.3 to a nearly 3.5-year low of 50.3, weaker than expectations of 53.0.

News on inflation expectations was mixed.  The University of Michigan US Nov 1-year inflation expectations unexpectedly increased to +4.7%, above expectations of no change at +4.6%.  However, the Nov 5-10 year inflation expectations eased to +3.6%, weaker than expectations of +3.8% y/y.

Chinese trade news was weaker than expected, a negative factor for global growth prospects.  China Oct exports unexpectedly fell -1.1% y/y, versus expectations of +2.9% y/y and the biggest decline in 8 months.  Also, Oct imports rose +1.0% y/y, weaker than expectations of +2.7% y/y.

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. 

The markets are discounting a 72% chance of another -25 bp rate cut at the next FOMC meeting on December 9-10.

The US Supreme Court appeared skeptical on Wednesday about whether President Trump's reciprocal tariffs are legal.  Chief Justice Roberts and Justices Gorsuch and Coney questioned President Trump's use of an emergency-powers law to collect tariffs, with Roberts saying the tariffs were an "imposition of taxes on Americans, and that has always been the core power of Congress." 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, 81% 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.

Overseas stock markets are lower today.  The Euro Stoxx 50 dropped to a 3-week low and is down -0.60%.  China's Shanghai Composite fell from a 1-week high and closed down -0.25%.  Japan's Nikkei Stock 225 closed down -1.19%.

Interest Rates

December 10-year T-notes (ZNZ5) today are up by +3 ticks.  The 10-year T-note yield is down -1.2 bp to 4.072%.  T-notes are moving higher today as weakness in stocks boosts safe-haven demand for government debt.  T-notes also found support from today's report on the University of Michigan's US Nov consumer sentiment index, which fell more than expected to a nearly 3.5-year low.  In addition, a decline in inflation expectations is supportive of T-notes as the 10-year breakeven inflation rate slid to a 2-week low of 2.272% today.

Gains in T-notes are limited today due to hawkish comments from Fed Vice Chair Philip Jefferson, who said the Fed should proceed slowly with any additional interest rate cuts as rates approach neutral.

T-note prices also 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 higher today.  The 10-year German bund yield rose to a 4-week high of 2.681% and is up +1.6 bp to 2.666%.  The 10-year UK gilt yield rose to a 2.5-week high of 4.490% and is up +2.9 bp to 4.463%.

German trade news was better than expected as German Sep exports rose +1.4% m/m, stronger than expectations of +0.5% m/m and the largest increase in 10 months.  Also, Sep imports rose +3.1% m/m, stronger than expectations of +0.5% m/m and the biggest increase in 8 months.

ECB Executive Board member Elderson said, "If you look at the Eurozone economy, some of the downside risks that we saw earlier in the year have been mitigated."

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

Microchip Technology (MCHP) is down more than -10% to lead losers in the S&P 500 and Nasdaq 100, and semiconductor stocks lower after forecasting Q3 net sales of $1.11 billion to $1.15 billion, weaker than the consensus of $1.18 billion.  Also, Marvell Technology (MRVL) is down by more than -7% and ARM Holdings Plc (ARM) is down by more than -5%.  In addition, Advanced Micro Devices (AMD) is down more than -4%, and ON Semiconductor (ON), Applied Materials (AMAT), GlobalFoundries (GFS), Broadcom (AVGO), Lam Research (LRCX), Micron Technology (MU) are down more than -3%. 

The Magnificent Seven technology stocks are under pressure today and are weighing on the overall market.  Tesla (TSLA) and Nvidia (NVDA) are down more than -3%.  Also, Alphabet (GOOGL) and Meta Platforms (META) are down more than -2%, and Amazon.com (AMZN) is down more than -1%.  In addition, Microsoft (MSFT) is down -0.38%, and Apple (AAPL) is bucking the trend and is up +0.39%. 

Intellia Therapeutics (NTLA) is down more than -20% after reporting that a patient died following treatment with the company's gene editing therapy to treat a rare disease. 

Universal Display (OLED) is down more than -14% after reporting Q3 revenue of $139.6 million, well below the consensus of $166 million. 

Block (XYZ) is down more than -9% after reporting Q3 net revenue of $6.11 billion, well below the consensus of $6.34 billion. 

Take-Two Interactive Software (TTWO) is down more than -8% after delaying the release of Grand Theft Auto VI again, pushing back the release of the video game by six months to November 2026.   

CNH Industrial NV (CNH) is down more than -6% after reporting Q3 adjusted EPS of 8 cents, weaker than the consensus of 13 cents, and cutting its full-year adjusted EPS forecast to 44 cents-50 cents from a previous estimate of 50 cents-70 cents, below the consensus of 59 cents.

Globus Medical (GMED) is up more than +32% after reporting Q3 net sales of $769 million, better than the consensus of $734.8 million, and raising its full-year net sales forecast to $2.86 billion-$2.90 billion from a previous estimate of $2.80 billion-$2.90 billion, above the consensus of $2.86 billion.

Expedia Group (EXPE) is up more than +17% to lead gainers in the S&P 500 after reporting Q3 adjusted EPS of $7.57, well above the consensus of $6.83. 

Akamai Technologies (AKAM) is up more than +10% after forecasting Q4 revenue of $1.07 billion to $1.09 billion, above the consensus of $1.07 billion. 

Monster Beverage (MNST) is up more than +7% to lead gainers in the Nasdaq 100 after reporting Q3 net sales of $2.20 billion, stronger than the consensus of $2.11 billion. 

Affirm Holdings (AFRM) is up more than +5% after raising its 2026 gross merchandise volume forecast to above $47.5 billion from a previous forecast of above $46 billion, stronger than the consensus of $47.4 billion. 

Solventum (SOLV) is up more than +4% after reporting Q3 adjusted EPS of $1.50, above the consensus of $1.43.

News Corp (NWSA) is up more than +4% after reporting Q1 revenue of $2.14 billion, above the consensus of $2.11 billion.   

Earnings Reports(11/7/2025)

Constellation Energy Corp (CEG), Duke Energy Corp (DUK), Franklin Resources Inc (BEN), KKR & Co Inc (KKR).