Stocks Finish Sharply Higher on Plans to Reopen the US Government

The S&P 500 Index ($SPX) (SPY) on Monday closed up +1.54%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.81%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +2.20%.  December E-mini S&P futures (ESZ25) rose +1.56%, and December E-mini Nasdaq futures (NQZ25) rose +2.22%.

US stock indexes settled sharply higher on Monday in hopes that the US government will soon reopen.  On Sunday, a group of eight Senate Democrats broke with their party to vote with Republicans to advance a bill to reopen the government.  The move boosted market sentiment and sparked a risk-on mood in asset markets.  The Senate must still schedule a final vote, and the measure must pass the House before reaching President Trump for his signature.  The bill would provide full-year funding for some departments, fund other agencies through January 30, and provide pay for furloughed government workers.  The bill will also resume withheld federal payments to states and localities and recall agency employees who were laid off during the shutdown.

Stocks added to their gains Monday afternoon after the White House expressed support for the bipartisan deal to end the US government shutdown.  House Speaker Johnson said he would give House lawmakers 36 hours’ notice to return to the Capitol once the Senate passes the bill.  The ending of the shutdown would remove a growth headwind and uncertainty clouding the economic outlook.

Positive comments from San Francisco Fed President Mary Daly on Monday were supportive for stocks and bonds when she said, “So far, the effects of the tariffs have largely been confined to goods, with little spillover into services inflation or inflation expectations, which remain relatively well-anchored around our 2% target.” She added that “we also see a labor market that’s softening and wage growth that is moderating, so you’re really not going to see a lot of pressure on the cost side of labor, meaning we don’t want to make the mistake of holding on too long to high interest rates only to find out we’ve injured the economy.”

Comments from St. Louis Fed President Alberto Musalem on Monday were hawkish when he said he expects “a substantial rebound in the US economy in the first quarter, and there’s limited room for further interest rate reductions without monetary policy becoming overly accommodative.”

The US government shutdown, now in its seventh week —the longest in history —is 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 63% chance of another -25 bp rate cut at the next FOMC meeting on December 9-10.

The US Supreme Court last Wednesday appeared skeptical 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 is nearing its end as 456 of the S&P 500 companies have reported earnings results.  According to Bloomberg Intelligence, 82% of the S&P 500 companies that have reported so far have beaten forecasts, on course for the best quarter since 2021.  Q3 profits have risen +14.6% thus far, more than doubling expectations of +7.2% y/y. 

Overseas stock markets settled higher on Monday.  The Euro Stoxx 50 closed up +1.769%.  China’s Shanghai Composite rose to a 1-week high and closed up +0.53%.  Japan’s Nikkei Stock 225 closed up +1.26%.

Interest Rates

December 10-year T-notes (ZNZ5) on Monday closed down -5.5 ticks.  The 10-year T-note yield rose by +1.5 bp to 4.112%.  T-notes were under pressure on Monday amid a stock rally, which curbed safe-haven demand for government debt.  Also, hopes that the US government shutdown might be nearing an end have reduced safe-haven demand for T-notes.  In addition, hawkish comments from St. Louis Fed President Alberto Musalem weighed on T-notes when he said there’s limited room for further Fed interest rate cuts.

Losses in T-notes were limited after San Francisco Fed President Mary Daly said the US economy is probably suffering a downturn in demand, while tariff-related inflation appears to be contained for now, and warned against keeping interest rates too high for too long.  T-notes also garnered support from strong demand seen for the Treasury’s $58 billion auction of 3-year T-notes that had a bid-to-cover ratio of 2.85, well above the 10-auction average of 2.61 and the highest in more than two years.

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 were mixed on Monday.  The 10-year German bund yield rose to a 1-month high of 2.697% and finished up +0.2 bp to 2.668%.  The 10-year UK gilt yield fell from a 2.5-week high of 4.509% and finished down -0.4 bp to 4.461%.

The Eurozone Nov Sentix investor confidence index unexpectedly fell -2.0 to -7.4, weaker than expectations of an increase to -4.0.

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

AI infrastructure and semiconductor stocks rallied on Monday and gave the broader market a lift.  Palantir Technologies (PLTR) closed up more than +9% to lead gainers in the S&P 500 and Nasdaq 100, and Micron Technology (MU) and Western Digital (WDC) closed up more than +6%.  Also, Advanced Micro Devices (AMD) and Lam Research (LRCX) closed up more than +4%, and ARM Holdings Plc (ARM), Broadcom (AVGO), Marvell Technology (MRVL), Applied Materials (AMAT), and KLA Corp (KLAC) closed up more than +2%.  In addition, Analog Devices (ADI) and GlobalFoundries (GFS) closed up more than +1%. 

The Magnificent Seven technology stocks moved higher on Monday, a supportive factor for the overall market.  Nvidia (NVDA) closed up more than +5% and Tesla (TSLA) and Alphabet (GOOGL) closed up more than +3%.  Also, Amazon.com (AMZN), Meta Platforms (META), and Microsoft (MSFT) closed up more than +1%.  In addition, Apple (AAPL) closed up +0.36%. 

Gold-producing stocks jumped on Monday after the price of COMEX gold rallied more than +2% to a 2-week high.  Anglogold Ashanti Plc (AU), Barrick Mining (B), Gold Fields Ltd (GFI), and Newmont (NEM) closed up more than +5%. 

TreeHouse Foods (THS) closed up more than +22% after Investindustrial agreed to buy the company for about $2.9 billion, or about $22.50 a share. 

Albemarle (ALB) closed up more than +6% after Scotiabank raised its price target on the stock to $85 from $70. 

Celestica (CLS) closed up more than +6% after Citigroup upgraded the stock to buy from neutral with a price target of $375.

Eli Lilly & Co. (LLY) closed up more than +4% after Leerink Partners upgraded the stock to outperform from market perform with a price target of $1,104.

Tyson Foods (TSN) closed up more than +2% after reporting Q4 adjusted EPS of $1.15, stronger than the consensus of 84 cents. 

Health insurance stocks retreated on Monday as US lawmakers moved closer to ending the government shutdown without addressing the health care system.  As a result, Oscar Health (OSCR) closed down more than -17% and Centene (CNC) closed down more than -8% to lead losers in the S&P 500.  Also, Molina Healthcare (MOH) closed down more than -7% and Humana (HUM) closed down more than -5%.  In addition, Elevance Health (ELV) closed down more than -4%, and HCA Healthcare (HCA) and Universal Health Services (UHS) closed down more than -3%.  Finally, Cigna Group (CI) closed down more than -2%. 

Metsera (MTSR) closed down by more than -15% after Novo Nordisk A/S declined to further raise its offer to buy the company, bringing a bidding war with Pfizer to an end. 

Monday.com (MNDY) closed down more than -12% after forecasting Q4 revenue of $328 million to $330 million, weaker than the consensus of $333.7 million. 

Applied Optoelectronics (AAOI) closed down more than -11% after B. Riley Securities downgraded the stock to sell from neutral with a price target of $15. 

Ball Corp (BALL) closed down more than -5% after CEO Fisher said he was stepping down, effective immediately.

FedEx (FDX) and United Parcel Service (UPS) closed down more than -3% after both companies grounded their fleets of MD-11 aircraft following last Wednesday’s fatal crash of a UPS MD-11 aircraft in Louisville, Kentucky.  

Earnings Reports(11/11/2025)

Amdocs Ltd (DOX) and Anglogold Ashanti Plc (AU).