Stocks Retreat on Tech Weakness

The S&P 500 Index ($SPX) (SPY) on Tuesday closed down by -0.83%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down by -1.07%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down by -1.20%.  December E-mini S&P futures (ESZ25) fell -0.86%, and December E-mini Nasdaq futures (NQZ25) fell -1.25%.

US stock indexes on Tuesday extended Monday’s slide, with the S&P 500, the Dow Jones Industrial Average, and the Nasdaq 100 posting 1-month lows.  The weakness in technology stocks weighed on the overall market, with Amazon.com closing down more than -4% and Microsoft closing down more than -2% after being downgraded by Rothschild & Co Redburn.  Also, Home Depot fell more than -6% after cutting its full-year earnings guidance and warning that consumers are cutting back on big-ticket home improvement purchases. Concerns about lofty tech valuations also weighed on chipmakers and the broader market.

Stock indexes recovered from their worst levels on Tuesday after signs of weakness in the US labor market knocked T-note yields lower and bolstered the outlook for the Fed to keep cutting interest rates.  The 10-year T-note yield fell -2 bp to 4.12% after ADP reported that US employers shed 2,500 jobs per week on average in the four weeks ended November 1.

Dovish comments from Richmond Fed President Barkin also supported stocks, as he said recent layoff announcements by large companies, such as Amazon, Verizon, and Target, "give additional cause for caution" about the labor market.  He added that "inflation remains somewhat elevated but isn't likely to increase much."

US weekly initial unemployment claims were 232,000 for the week ended October 18.  Weekly continuing claims rose +10,000 to a 2-month high of 1.957 million.

The US Nov NAHB housing market index unexpectedly rose +1 to a 7-month high of 38, stronger than expectations of no change at 37.

US Aug factory orders rose +1.4% m/m, right on expectations.

The markets are looking ahead to Nvidia’s earnings report after Wednesday’s close for further information on the AI outlook.  Also, earnings reports from Target on Wednesday and from Walmart on Thursday will provide insight into the health of consumer spending. 

This week’s US economic schedule is very heavy as a deluge of delayed economic reports will be released.  Wednesday brings MBA weekly mortgage applications, Aug trade balance, and the Oct FOMC meeting minutes.  Thursday brings weekly unemployment claims, the Sep unemployment report, the Philadelphia Fed report, Oct existing home sales, and the Kansas City Fed manufacturing survey.  Friday brings real earnings, the S&P US manufacturing and services PMI reports, the University of Michigan’s US consumer sentiment index, and the Kansas City Fed’s services activity report.  Other delayed US economic reports are also expected to be released in the coming days, but have not yet been scheduled.

The markets are discounting a 48% 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 as 460 of the 500 S&P companies have released results.  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 settled lower on Tuesday.  The Euro Stoxx 50 fell to a 1-month low and closed down -1.88%.  China’s Shanghai Composite slid to a 1.5-week low and closed down -0.81%.  Japan’s Nikkei Stock 225 plunged to a 3-1/2 week low and closed down sharply by -3.22%.

Interest Rates

December 10-year T-notes (ZNZ5) on Tuesday closed up by +4.5 ticks.  The 10-year T-note yield fell -1.8 bp to 4.121%.  T-note prices rose Tuesday as weakness in stocks boosted safe-haven demand for government debt.  Also, signs of labor market weakness were supportive of T-notes after ADP reported that US employers shed an average of 2,500 jobs per week in the four weeks ended November 1.  In addition, easing inflation expectations are bullish for T-note prices, as the 10-year breakeven inflation rate fell to a 3.5-week low of 2.272% on Tuesday.  T-notes fell back from their best level after the Nov NAHB housing market index unexpectedly rose to a 7-month high.

European government bond yields were mixed on Tuesday.  The 10-year German bund yield fell -0.6 bp to 2.706%. The 10-year UK gilt yield rose +1.9 bp to 4.554%.

Swaps are discounting a 3% chance for a -25 bp rate cut by the ECB at its next policy meeting on December 18.

US Stock Movers

Magnificent Seven stocks were weaker on Tuesday, a negative factor for the overall market.  Amazon.com (AMZN) closed down more than -4% and Microsoft (MSFT) closed down more than -2% after Rothschild & Co Redburn downgraded the stocks to neutral from buy.  Also, Nvidia (NVDA) closed down more than -2% and Tesla (TSLA) closed down more than -1%.  In addition, Meta Platforms (META) closed down -0.72%, Alphabet (GOOGL) closed down -0.26%, and Apple (AAPL) closed down -0.01%.. 

Chip stocks retreated on Tuesday, weighing on the broader market.  Marvell Technology (MRVL) and Micron Technology (MU) closed down by more than -5%, and Advanced Micro Devices (AMD) closed down by more than -3%. Also, ARM Holdings Plc (ARM) and Lam Research (LRCX) closed down more than -2%.  In addition, Microchip Technology (MCHP), Applied Materials (AMAT), and ASML Holding NV (ASML) closed down more than -1%. 

Home Depot (HD) closed down more than -6% to lead losers in the Dow Jones Industrials index after reporting Q3 comparable sales rose +0.2%, weaker than the consensus of +1.36%, and cutting its full-year operating margin estimate to 12.6% from a previous estimate of 13.0%, below the consensus of 13.3%. 

Helmerich & Payne (HP) closed down more than -4% after reporting a Q4 operating loss in its International Solutions segment of -$75 million, a much larger loss than the consensus of -$38 million.

Nuvalent (NUVL) closed down more than -3% after announcing it has commenced an underwritten public offering of $500 million of Class A common stock. 

Cloudflare (NET) closed down more than -2% after it said it is facing global network issues, with Downdetector reporting nearly 5,000 outages worldwide. 

Honeywell International (HON) closed down more than -2% after Bank of America Global Research double-downgraded the stock to underperform from buy.   

Amer Sports (AS) closed up more than 8% after reporting Q3 revenue of $1.76 billion, beating the consensus of $1.72 billion, and raising its full-year revenue forecast to +23% to +24% from a previous forecast of +20% to +21%.

Medtronic Plc (MDT) closed up more than +4% to lead gainers in the S&P 500 after reporting Q2 revenue of $8.96 billion, above the consensus of $8.87 billion.

Warner Bros Discovery (WBD) closed up more than +4 after Variety reported that Paramount Skydance has formed an investment consortium to submit a $71 billion bid for the company. 

Merck & Co. (MRK) closed up more than +3% to lead gainers in the Dow Jones Industrials after saying its Winrevair drug met the primary endpoint in a Phase 2 study for adults with combined post- and precapillary pulmonary hypertension due to heart failure with preserved ejection fraction.

Deckers Outdoor (DECK) closed up more than +3% after Stifel upgraded the stock to buy from hold with a price target of $117.

Freeport-McMoRan (FCX) closed up more than +2% after announcing plans to restore large-scale production at its Grasberg operations in Indonesia.

Earnings Reports(11/19/2025)

Lowe's Cos Inc (LOW), NVIDIA Corp (NVDA), Palo Alto Networks Inc (PANW), Target Corp (TGT), TJX Cos Inc/The (TJX), Valvoline Inc (VVV), Viking Holdings Ltd (VIK), Williams-Sonoma Inc (WSM).