Stocks Slightly Lower on US Economic Concerns

The S&P 500 Index ($SPX) (SPY) today is down by -0.14%, the Dow Jones Industrials Index ($DOWI) (DIA) is down by -0.13%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up by +0.03%.  December E-mini S&P futures (ESZ25) are down -0.12%, and December E-mini Nasdaq futures (NQZ25) are up +0.04%.

Stock indexes are mixed today, with the S&P 500 falling to a 2.5-week low.  The broader market is under pressure on US economic concerns after today’s financial reports showed the Nov unemployment rate rose to a 4-year high and Oct retail sales stagnated.  Also, a slump in energy producers today is weighing on the broader market after WTI crude oil fell more than 2% to a 7-month low.

Stocks found some support from today’s Fed-friendly US economic reports on Nov payrolls and Oct retail sales, which bolster expectations that the Fed will continue to ease monetary policy.  Also, wage pressures are easing as Nov hourly earnings posted their smallest year-on-year increase in 4.5 years.

US Nov nonfarm payrolls rose by +64,000, stronger than expectations of +50,000.  Oct nonfarm payrolls fell by -105,000, weaker than expectations of -25,000.  The Nov unemployment rate rose +0.1 to a 4-year high of 4.6%. 

US Nov average hourly earnings rose +0.1% m/m and +3.5% y/y, weaker than expectations of +0.3% m/m and +3.6% y/y, with the +3.5% y/y gain the smallest year-on-year increase in 4.5 years.

US Oct retail sales were unchanged m/m, weaker than expectations of +0.1% m/m.  However, Oct retail sales ex-autos rose +0.4% m/m, stronger than expectations of +0.2% m/m.

This week's market focus will be on US economic news.  On Thursday, weekly initial unemployment claims are expected to fall -11,000 to 225,000.  Also, Nov CPI is expected to be +3.1% y/y, and Nov core CPI is expected to be +3.0% y/y.  On Friday, Nov existing home sales are expected to be up +1.2% m/m to 4.15 million. Also, the University of Michigan Dec consumer sentiment index is expected to be revised upward by +0.2 to 53.5 from the previously reported 53.3.

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.

Overseas stock markets are lower today.  The Euro Stoxx 50 is down -0.38%.  China’s Shanghai Composite fell to a 2-month low and closed down -1.11%.  Japan’s Nikkei Stock 225 slid to a 2-week low and closed down -1.56%.

Interest Rates

March 10-year T-notes (ZNH6) today are down by -3 ticks.  The 10-year T-note yield is up +1.6 bp to 4.188%.  T-notes gave up an early advance today and turned lower after a report on US Oct retail sales ex-autos rose more than expected, a hawkish factor for Fed policy. T-notes initially moved higher today after the Nov employment rate rose to a 4-year high and Nov average hourly earnings posted their smallest year-on-year increase in 4.5 years. Falling inflation expectations are also supportive of T-notes as the 10-year breakeven inflation rate fell to a 1.5-week low today at 2.240%.

The steepening yield curve is bearish for T-note prices. Steepening trades occur when bond investors buy short-term government debt and sell long -term debt.  The yield curve has steepened since last Wednesday’s FOMC meeting, when the Fed said it would begin purchasing up to $40 billion of short-term T-bills a month to boost liquidity in the financial system. Longer-term Treasury securities are also 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 +1.5 bp to 2.868%. The 10-year UK gilt yield rose to a 3-week high of 4.561% and is up +5.9 bp to 4.554%.

The Eurozone Dec S&P manufacturing PMI unexpectedly fell -0.4 to 49.2, weaker than expectations of an increase to 49.9 and the steepest pace of contraction in 8 months.

The German Dec ZEW survey expectations of economic growth unexpectedly rose +7.3 to a 5-month high of 45.8, stronger than expectations of a decline to 38.4.

The UK Dec S&P manufacturing PMI rose +1.0 to 51.2, stronger than expectations of 50.3 and the fastest pace of expansion in 15 months.

Swaps are discounting a 0% chance for a -25 bp rate cut by the ECB at its next policy meeting on Thursday.

US Stock Movers

Energy producers and energy service providers are falling today, weighing on the broader market, as WTI crude oil is down more than 2% at a 7-month low.  Diamondback Energy (FANG), APA Corp (APA), and Occidental Petroleum (OXY) are down more than -2%.  Also, Devon Energy (DVN), ConocoPhillips (COP), Baker Hughes (BKR), Phillips 66 (PSX), Halliburton (HAL), Exxon Mobil (XOM), and Valero Energy (VLO) are down more than -1%. 

Booz Allen Hamilton Holding Corp (BAH) is down more than -6% after it announced that CFO Calderone will resign from the company effective February 1.

Humana (HUM) is down more than -2% after forecasting full-year adjusted EPS of $17.000, below the consensus of $17.06.

Pfizer Inc (PFE) is down more than -2% after forecasting 2026 revenue of $59.5 billion to $62.5 billion, the midpoint below the consensus of $61.63 billion.

Illinois Tool Works (ITW) is down more than -1% after Goldman Sachs downgraded the stock to sell from neutral with a price target of $230.

Gitlab (GTLB) is down more than -1% after KeyBanc Capital Markets downgraded the stock to sector weight from overweight.

Cognex (CGNX) is up more than +4% after Goldman Sachs double-upgraded the stock to buy from sell with a price target of $50. 

Okta Inc (OKTA) is up more than +3% after Jeffries upgraded the stock to buy from hold with a price target of $125.

Southwest Airlines (LUV) is up more than +2% to lead gainers in the S&P 500 after Barclays upgraded the stock to overweight from equal weight with a price target of $56.

Estee Lauder (EL) is up more than +1% after Bank of America named the stock as its top pick for beauty for 2026 with a price target of $130.

Ford Motor (F) is up more than +1% after it said it is cancelling a planned electric F-series truck and shifting production toward gas and hybrid vehicles. 

Earnings Reports(12/16/2025)

CSP Inc (CSPI), Golden Matrix Group Inc (GMGI), Immersion Corp (IMMR), Lennar Corp (LEN), RCI Hospitality Holdings Inc (RICK), Worthington Enterprises Inc (WOR).