Stocks Recover on Government Reopening Hopes

The S&P 500 Index ($SPX) (SPY) on Friday closed up +0.13%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.16%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.28%.  December E-mini S&P futures (ESZ25) rose +0.14%, and December E-mini Nasdaq futures (NQZ25) fell -0.22%.

US stock indexes recovered early losses on Friday and settled mixed. Stocks rebounded Friday afternoon after Senate Democrats scaled back their demands to reopen the government, calling for a one-year extension of expiring health care subsidies.  However, Republicans rejected the offer and said they would meet with Democrats on health care tax credits only if Democrats agreed to reopen the government.  The fact that both parties were trading offers was seen as a positive step toward finally ending the shutdown, leading to a recovery in stocks.

Stock indexes initially moved lower on Friday, with the S&P 500, the Dow Jones Industrials, and the Nasdaq 100 falling to fresh 2-week lows.  The weakness in semiconductor makers weighed on the broader market Friday.  Also, economic concerns weighed 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 were also pressured on Friday after the University of Michigan's US Nov consumer sentiment index fell more than expected to a nearly 3.5-year low.

Comments on Friday 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.

US Sep consumer credit rose by +$13.093 billion, stronger than expectations of +$10.230 billion.

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 66% 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 continued at a strong clip this week, with 136 of the S&P 500 companies reporting earnings results.  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 settled lower on Friday.  The Euro Stoxx 50 dropped to a 3-week low and closed down -0.80%.  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) on Friday closed up by +1 tick.  The 10-year T-note yield rose +0.4 bp to 4.087%.  T-notes settled little changed on Friday.  The early weakness in stocks on Friday boosted some safe-haven demand for government debt.  T-notes also found support from Friday'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. 

Gains in T-notes were limited on Friday 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 moved higher on Friday.  The 10-year German bund yield rose to a 4-week high of 2.681% and finished up +1.6 bp to 2.666%.  The 10-year UK gilt yield rose to a 2.5-week high of 4.490% and finished up +3.2 bp to 4.466%.

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

US Stock Movers

Globus Medical (GMED) closed up more than +35% 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) closed 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) closed up more than +15% after forecasting Q4 revenue of $1.07 billion to $1.09 billion, above the consensus of $1.07 billion. 

Affirm Holdings (AFRM) closed up more than +11% 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) closed up more than +7% after reporting Q3 adjusted EPS of $1.50, above the consensus of $1.43.

News Corp (NWSA) closed up more than +6% after reporting Q1 revenue of $2.14 billion, above the consensus of $2.11 billion.   

Monster Beverage (MNST) closed up more than +5% after reporting Q3 net sales of $2.20 billion, stronger than the consensus of $2.11 billion. 

Microchip Technology (MCHP) closed down more than -5% to lead 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, ARM Holdings Plc (ARM) closed down more than -3%, and Marvell Technology (MRVL) closed down more than -2%.  In addition, Advanced Micro Devices (AMD), ON Semiconductor (ON), Analog Devices (ADI), Applied Materials (AMAT), KLA Corp (KLAC), Broadcom (AVGO), Lam Research (LRCX), and Qualcomm (QCOM) closed down more than -1%. 

Intellia Therapeutics (NTLA) closed down more than -25% after reporting that a patient died following treatment with the company's gene editing therapy to treat a rare disease. 

Take-Two Interactive Software (TTWO) closed down more than -8% to lead losers in the S&P 500 and Nasdaq 100 after delaying the release of Grand Theft Auto VI again, pushing back the release of the video game by six months to November 2026.   

Universal Display (OLED) closed down more than -8% after reporting Q3 revenue of $139.6 million, well below the consensus of $166 million. 

Block (XYZ) closed down more than -7% after reporting Q3 net revenue of $6.11 billion, well below the consensus of $6.34 billion. 

CNH Industrial NV (CNH) closed 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.

Franklin Resources (BEN) closed down more than -4% after reporting a Q4 operating margin of 3.6%, well below the consensus of 8.33%. 

Earnings Reports(11/10/2025)

AST SpaceMobile Inc (ASTS), Howard Hughes Holdings Inc (HHH), Interpublic Group of Cos Inc/The (IPG), Maplebear Inc (CART), Occidental Petroleum Corp (OXY), Paramount Skydance Corp (PSKY), Rocket Lab Corp (RKLB), Roivant Sciences Ltd (ROIV), StandardAero Inc (SARO), Starwood Property Trust Inc (STWD), Tyson Foods Inc (TSN).