Stocks Rally on Benign Inflation News

The S&P 500 Index ($SPX) (SPY) today is up by +0.32%, the Dow Jones Industrials Index ($DOWI) (DIA) is up by +0.34%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up by +0.48%.  December E-mini S&P futures (ESZ25) are up +0.30%, and December E-mini Nasdaq futures (NQZ25) are up +0.47%.

Stock indexes are rallying today, with the S&P 500 climbing to a 5-week high, the Nasdaq 100 reaching a 1-month high, and the Dow Jones Industrial Average hitting a 3-week high.  Optimism about the economic outlook and the prospects of Fed rate cuts are fueling a stock rally.  Market seasonals are also supportive of stocks, as December is typically a bullish month.  Strength in semiconductor stocks today is another supportive factor for the broader market.  

Stocks added to their gains today on benign inflation news after the Sep core PCE price index rose as expected, and the University of Michigan US December inflation expectations eased to an 11-month low.  Also, the University of Michigan US Dec consumer sentiment index rose more than expected.  Gains in stocks are limited amid rising bond yields, with the 10-year T-note hitting a 2-week high of 4.13% today. 

US Sep personal spending rose +0.3% m/m, right on expectations. Sep personal income rose +0.4% m/m, stronger than expectations of +0.3% m/m.

The US Sep core PCE price index, the Fed's preferred inflation gauge, rose +0.3% m/m and +2.8% y/y, right on expectations.

The University of Michigan US Dec consumer sentiment index rose by +2.3 to 53.3, stronger than expectations of 52.0.

The University of Michigan US Dec 1-year inflation expectations eased to 4.1%, better than expectations of no change at 4.5% and the smallest pace of increase in 11 months.  Dec 5-10 year inflation expectations eased to +3.2%, better than expectations of no change at 3.4% and the smallest pace of increase in 11 months.

President Trump said on Tuesday that he will announce his selection for the new Fed Chair in early 2026.  Bloomberg reported last week that National Economic Council Director Kevin Hassett is seen as the likely choice to succeed Powell.  The Fed’s independence would come into question, as Hassett supports President Trump’s approach to cutting interest rates at the Fed.

The markets are discounting a 95% 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 475 of the 500 S&P companies have released results.  According to Bloomberg Intelligence, 83% 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 mixed today.  The Euro Stoxx 50 rose to a 3-week high and is up +0.40%.  China’s Shanghai Composite closed up +0.70%.  Japan’s Nikkei Stock 225 closed down -1.05%.

Interest Rates

March 10-year T-notes (ZNH6) today are down -3 ticks.  The 10-year T-note yield is up +2.9 bp to 4.127%.  Mar T-note futures fell to a 2-week low today, and the 10-year T-note yield rose to a 2-week high of 4.129%.  Today's strength in stocks has curbed safe-haven demand for T-notes.  Also, rising inflation expectations are bearish for T-notes after the 10-year breakeven inflation rate rose to a 2-week high of 2.284% today.  In addition, T-notes are weighed down by negative carryover from a fall in Japanese 10-year JGB bond prices to an 18-year low today, amid prospects for a BOJ rate hike later this month.

Losses in T-notes are limited today due to favorable inflation news after the Sep core PCE price index rose as expected, and the University of Michigan US December inflation expectations eased to an 11-month low. 

European government bond yields are moving higher today.  The 10-year German bund yield climbed to a 3-month high of 2.796% and is up by +2.3 bp to 2.793%.  The 10-year UK gilt yield is up by +3.4 bp to 4.469%.

Eurozone Q3 GDP was revised up slightly to +0.3% q/q and +1.4% y/y from the previously reported +0.2% q/q and +1.4% y/y.

German Oct factory orders rose +1.5% m/m, stronger than expectations of +0.3% m/m.

Swaps are discounting a 1% chance for a -25 bp rate cut by the ECB at its next policy meeting on December 18.

US Stock Movers

Strength in chip makers today is a bullish factor for the overall market.  GlobalFoundries (GFS) is up more than +5%, and Intel (INTC) and Microchip Technology (MCHP) are up more than +3%.  Also, Micron Technology (MU) and Texas Instruments (TXN) are up more than +2%.  In addition, Broadcom (AVGO), NXP Semiconductors NV (NXPI), Analog Devices (ADI), ON Semiconductor (ON), Advanced Micro Devices (AMD), and Marvell Technology (MRVL) are up more than +1%.

Cryptocurrency-exposed stocks are under pressure today with Bitcoin (^BTCUSD) down by more than -2%.  Riot Platforms (RIOT), MARA Holdings (MARA), and Galaxy Digital Holdings (GLXY) are down more than -4%.  Also, Strategy (MSTR) is down more than -3% to lead losers in the Nasdaq 100. In addition, Coinbase Global (COIN) is down more than -2%. 

Rubrick (RBRK) is up more than +23% after reporting Q3 total revenue of $350.2 million, well above the consensus of $320.5 million, and raising its 2026 revenue forecast to $1.28 billion from a previous forecast of $1.23 billion-$1.24 billion, stronger than the consensus of $1.23 billion.

Ulta Beauty (ULTA) is up more than +14% to lead gainers in the S&P 500 after reporting Q3 net sales of $2.86 billion, stronger than the consensus of $2.71 billion, and raising its full-year net sales forecast to $12.3 billion from a previous forecast of $12.0 billion to $12.1 billion.   

Cooper Cos (COO) is up more than +7% after reporting Q4 adjusted EPS of $1.15, better than the consensus of $1.11, and forecasting 2026 adjusted EPS of $4.45-$4.60, stronger than the consensus of $4.39.   

Albemarle (ALB) is up more than +8% after UBS upgraded the stock to buy from neutral with a price target of $185.

ServiceTitan (TTAN) is up more than +7% after reporting a Q3 loss of -42 cents per share, smaller than the consensus of -45 cents. 

Salesforce (CRM) is up more than +4% to lead gainers in the Dow Jones Industrials, adding to Thursday’s +3% gain after raising its 2026 adjusted EPS forecast.

Warner Bros Discovery (WBD) is up more than +2% after being acquired by Netflix for about $72 billion or $27.75 a share.

Humana (HUM) is up more than +1% after Jeffries upgraded the stock to buy from hold with a price target of $313.

Parsons Corp (PSN) is down more than -25% after the US Federal Aviation Administration and the Department of Transportation awarded the new air traffic control system contract to rival Peraton.

SentinelOne (S) is down more than -12% after forecasting a Q4 adjusted operating margin of 5%, weaker than the consensus of 7.11%. 

SoFi Technologies (SOFI) is down more than -7% after offering 54.5 million shares of its common stock at $27.50 a share, below Thursday’s closing price of $29.60. 

DocuSign (DOCU) is down more than -6% after forecasting Q4 revenue of $825 million to $829 million, the midpoint below the consensus $827.4 million. 

Oklo Inc (OKLO) is down more than -6% after entering into an equity distribution agreement with nine financial institutions to sell up to $1.5 billion of its Class A common stock through an “at the market” equity offering program.

Hewlett Packard Enterprise (HPE) is down more than -1% after reporting Q4 net revenue of $9.68 billion, weaker than the consensus of $9.93 billion.

Earnings Reports(12/5/2025)

National Beverage Corp (FIZZ) and Victoria's Secret & Co (VSCO).