Stocks Tumble on Tech Stock Weakness and Higher Bond Yields

The S&P 500 Index ($SPX) (SPY) today is down by -0.86%, the Dow Jones Industrials Index ($DOWI) (DIA) is down by -0.39%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down by -1.85%.  December E-mini S&P futures (ESZ25) are down -0.85%, and December E-mini Nasdaq futures (NQZ25) are down -1.87%.

Stock indexes are falling today, with the Dow Jones Industrials retreating from a new all-time high and the Nasdaq 100 dropping to a 1.5-week low. Today’s retreat in technology shares is weighing down the broader market.

Broadcom is down more than -10% to lead chip makers and tech stocks lower today after its sales outlook fell short of lofty expectations and the company failed to provide an AI revenue forecast for 2026.  This week’s disappointing outlooks from Oracle and Broadcom have also prompted some investors to rotate out of the tech sector amid lofty valuations and uncertainty over whether vast spending on AI infrastructure will ultimately pay off.  However, investor rotation out of tech stocks into industrial stocks is providing support to the Dow Jones Industrial Average. 

Hawkish Fed comments today have pushed T-note yields higher and are weighing on stocks.  The 10-year T-note yield up about +2 bp after Chicago Fed President Austan Goolsbee, who voted against a Fed rate cut on Wednesday, said, "Given that inflation has been above our target for 4.5 years, further progress on it has been stalled for several months, and almost all the business people and consumers we have spoken to identify prices as a main concern, I felt the more prudent course would have been to wait for more information." Also, Kansas City Fed President Jeff Schmid said he dissented against the FOMC's decision to cut interest rates on Wednesday and prefers to keep policy "modestly restrictive" because inflation remains too high and the economy continues to show momentum.

In addition, Cleveland Fed President Beth Hammack said, "I would prefer for the Fed to be on a slightly more restrictive stance to help continue to put pressure" on the inflation side of its mandate.

On the dovish side, Philadelphia Fed President Anna Paulson said, "On net, I am still a little more concerned about labor market weakness than about upside risks to inflation."

The markets are discounting a 24% chance that the FOMC will cut the fed funds target range by 25 bp at the next FOMC meeting on January 27-28.

Q3 corporate earnings season is virtually over as 496 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 higher today.  The Euro Stoxx 50 rose to a 4-week high and is up +0.05%.  China’s Shanghai Composite recovered from a 2.5-week low and closed up +0.41%.  Japan’s Nikkei Stock 225 rallied to a 4-week high and closed up +1.37%.

Interest Rates

March 10-year T-notes (ZNH6) today are down by -7 ticks.  The 10-year T-note yield is up +2.4 bp to 4.180%.  Hawkish Fed comments today are weighing on T-note prices.  Chicago Fed President Austan Goolsbee said that, given higher inflation, the more prudent course would have been for the Fed to wait for more information before cutting rates.  Also, Kansas City Fed President Jeff Schmid and Cleveland Fed President Beth Hammack said they prefer to keep policy "modestly restrictive" because inflation remains too high and the economy continues to show momentum.  T-note prices have underlying support from safe-haven demand with today’s weakness in stocks.

T-notes are under pressure due to steepening trades, where bond investors buy short-term government debt and sell long -term debt. The yield curve has steepened since Wednesday’s FOMC meeting, when the Fed said it would begin purchasing up to $40 billion of short-term T-bills a month, starting today, to boost liquidity in the financial system.  Longer-term Treasury securities are under pressure from concerns about inflation and the Fed’s independence. 

European government bond yields are moving higher today.  The 10-year German bund yield is up +2.1 bp to 2.864%. The 10-year UK gilt yield is up +3.4 bp to 4.518%.

UK Oct manufacturing production rose +0.5% m/m, weaker than expectations of +1.1% 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

Broadcom (AVGO) is down more than -10% to lead chip stocks lower after its sales outlook fell short of lofty expectations and the company failed to provide an AI revenue forecast for 2026.  Also, Micron Technology (MU) is down more than -5%, and Lam Research (LRCX) is down more than -4%.  In addition, KLA Corp (KLAC), Marvell Technology (MRVL), and Advanced Micro Devices (AMD) are down more than-3%.  Finally, ASML Holding NV (ASML), GlobalFoundries (GFS), ARM Holdings Plc (ARM), and Applied Materials (AMAT) are down more than -2%.

AI-linked power stocks are under pressure today after Broadcom’s sales outlook failed to impress.  Vertiv Holdings (VRT) is down more than -6%, and GE Vernova (GEV) and Amphenol (APH) are down more than -4%.  Also, Eaton Corp Plc (ETN) is down by more than -3%, and Constellation Energy (CEG) is down more than -2%. 

Sandisk (SNDK) is down more than -11% after GF Securities downgraded the stock to hold from buy. 

Netskope (NTSK) is down more than -11% after reporting a Q3 adjusted net loss of -10 cents per share and forecasting a full-year adjusted net loss of -51 cents to -53 cents.  

Ciena Corp (CIEN) is down more than -8% after Northland Securities downgraded the stock to market perform from outperform. 

Roblox (RBLX) is down more than -3% after JPMorgan Chase downgraded the stock to neutral from overweight. 

Veeva Systems (VEEV) is down more than -2% after KeyBanc Capital Markets downgraded the stock to sector weight from overweight. 

Quanex Building Products (NX) is up more than +16% after reporting Q4 adjusted EPS of 83 cents, well above the consensus of 52 cents. 

Lululemon Athletica (LULU) is up more than +8% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q3 EPS of $2.59, stronger than the consensus of $2.22, and raising its 2026 EPS forecast to $12.92-$13.02 from a previous forecast of $12.77-$12.97, above the consensus of $12.89. 

General Electric (GE) is up more than +4% after Citigroup initiated coverage on the stock with a recommendation of buy and a price target of $386.

Phathom Pharmaceuticals (PHAT) is up more than +3% after Raymond James initiated coverage on the stock with a strong buy recommendation and a price target of $28.

Bristol-Myers Squibb (BMY) is up more than +2% after Guggenheim Securities upgraded the stock to buy from neutral with a price target of $62.

Linde Plc (LIN) is up more than +2% after Citigroup said the stock is a new top pick with a buy recommendation and a price target of $520.

Earnings Reports(12/12/2025)

Johnson Outdoors Inc (JOUT), SR Bancorp Inc (SRBK), Value Line Inc (VALU).