Stocks Retreat as Fed Rate-Cut Chances Fade

The S&P 500 Index ($SPX) (SPY) today is down -0.90%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -1.06%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.17%.  December E-mini S&P futures (ESZ25) are down -0.85%, and December E-mini Nasdaq futures (NQZ25) are down -1.02%.

US stock indexes extended Thursday's sell-off today, as losses deepened amid concerns about a hawkish pivot by the Fed.  Doubts over a Fed interest rate cut next month have fueled jitters about stretched valuations of AI-infrastructure and semiconductor stocks and sparked long liquidation in stocks and risk-off sentiment in asset markets.

The chances of a Fed rate cut at December’s FOMC meeting have dropped to 51% from 70% last week, after a parade of Fed officials this week expressed skepticism about the need for additional rate cuts, citing the economy's resilience and lingering uncertainty about inflation. 

Weak economic news from China today added to concerns about global growth prospects and was negative for stocks.  China's Oct industrial production rose +4.9% y/y, weaker than expectations of +5.5% y/y and the smallest increase in 14 months.  Also, China's Oct new home prices fell -0.45% m/m, the biggest decline in a year and the twenty-ninth consecutive month that new home prices have fallen. 

The price of Bitcoin (^BTCUSD) is down more than -2% at a 6.25-month low as the 5-week-long sell-off continues. Bitcoin has fallen by a total of -24% from a record high last month on heavy long liquidation pressure.  Bitcoin ETFs saw net outflows of about $870 million on Thursday, the second-largest daily withdrawal since trading in Bitcoin ETFs began.

On Wednesday, President Trump signed legislation that ended the longest US government shutdown in history.  The bill provides full-year funding for some departments, funds other agencies through January 30, and includes pay for furloughed government workers. The bill also resumes federal payments to states and localities and recalls agency employees who were laid off during the shutdown. 

The Congressional Budget Office (CBO) projected that the six-week government closure reduced real GDP growth in the current quarter by 1.5 percentage points.  However, more than half of the loss may be recovered early next year as federal programs resume and government employees receive back pay, according to the CBO.

The White House on Wednesday said that the monthly October payrolls report and consumer price index are unlikely to be released due to the government shutdown.  The Bureau of Labor Statistics is expected to publish a calendar in the coming days with updated release dates for delayed economic data.

The markets are discounting a 51% chance of another -25 bp rate cut at the next FOMC meeting on December 9-10.

Q3 corporate earnings season is drawing to a close.  According to Bloomberg Intelligence, 82% of reporting S&P 500 companies exceeded forecasts, on course for the best quarter since 2021.  Q3 earnings rose +14.6%, more than doubling expectations of +7.2% y/y. 

Overseas stock markets are lower today.  The Euro Stoxx 50 is down -1.68%.  China's Shanghai Composite fell from a 10-year high and closed down -0.97%.  Japan's Nikkei Stock 225 closed down -1.77%.

Interest Rates

December 10-year T-notes (ZNZ5) today are up by +8 ticks.  The 10-year T-note yield is down -3.5 bp to 4.084%.  T-notes recovered from early losses and moved higher today, as a slump in equity markets has fueled safe-haven demand for government debt.  T-notes initially moved lower today on negative carryover from Thursday, when several Fed presidents cautioned against further rate cuts amid uncertainty over inflation.  

European government bond yields are moving higher today.  The 10-year German bund yield rose to a 5-week high of 2.715% and is up +0.5 bp to 2.693%.  The 10-year UK gilt yield climbed to a 1-month high of 4.571% and is up +10.5 bp to 4.542%.

Eurozone Q3 GDP was revised upward by +0.1 to +1.4% y/y from the previously reported +1.3% y/y.

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

Applied Materials (AMAT) is down more than -5% today to lead chip stocks lower after forecasting a -4% drop in Q1 sales. Also, Lam Research (LRCX), Advanced Micro Devices (AMD), and Marvell Technology (MRVL) are down more than -4%.  In addition, ARM Holdings Plc (ARM), ASML Holding NV (ASML), and  Intel (INTC) are down more than -3%.  Finally, Broadcom (AVGO), Analog Devices (ADI), KLA Corp (KLAC), and ON Semiconductor (ON) are down more than -2%.

The Magnificent Seven technology stocks are under pressure today, weighing on the broader market.  Tesla (TSLA) is down more than -2%, and Alphabet (GOOGL), Amazon.com (AMZN), and Meta Platforms (META) are down more than -1%.  Also, Apple (AAPL) is down -0.79%, Microsoft (MSFT) is down -0.31%, and Nvidia (NVDA) is down -0.05%.  

Cryptocurrency-exposed stocks are falling today, with Bitcoin down more than -2% at a 6.25-month low.  Coinbase Global (COIN), Galaxy Digital (GLXY), MARA Holdings (MARA), Riot Platforms (RIOT), and Strategy (MSTR) are down more than -3%.   

Stubhub Holdings (STUB) is down more than -25% after reporting a Q3 loss per share of -$4.27, wider than the consensus of -$2.49, and failed to provide a forecast for Q4. 

Bristol-Myers Squibb (BMY) is down more than -4% after ending a trial of its experimental drug milvexian to prevent strokes and blood clots following disappointing data.

Manitowoc (MTW) is down more than -3% after Wells Fargo Securities initiated coverage on the stock with a recommendation of underweight, with a price target of $9. 

Walmart (WMT) is down more than -2% after announcing that CEO Doug McMillon is retiring, effective February 1, 2026, and will be replaced by John Furner.

Cidara Therapeutics (CDTX) is up more than +104% after Merck & Co. agreed to acquire the company for about $9.2 billion or $221.50 a share. 

Avadel Pharmaceuticals (AVDL) is up more than +20% after it said it received an unsolicited proposal from H. Lundbeck A/S to acquire it for $23 per share. 

Warner Bros Discovery (WBD) is up more than +2% after the Wall Street Journal reported that Paramount, Comcast and Netflix are preparing to bid for the company. 

Shake Shack (SHAK) is up more than +2% after Loop Capital Markets upgraded the stock to buy from hold with a price target of $127.

Nubank (NU) is up more than +1% after reporting Q3 total revenue of $4.17 billion, better than the consensus of $3.92 billion. 

Gap Inc. (GAP) is up more than +1% after Jeffries upgraded the stock to buy from hold with a price target of $30. 

Earnings Reports(11/14/2025)

Qnity Electronics Inc (Q).