Stocks Slip as Bond Yields Rise

The S&P 500 Index ($SPX) (SPY) today is down -0.12%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.25%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.11%.  March E-mini S&P futures (ESH26) are down -0.11%, and March E-mini Nasdaq futures (NQH26) are down -0.10%.

Stock indexes are slightly lower today as the market struggles for direction in thin year-end trading.  Higher bond yields are negative for stocks as the 10-year T-note yield is up +2 bp to 4.13%.  Losses in stocks are limited by some positive carryover from today's rally in European stocks as the Euro Stoxx 50 index climbed to a 1.5-month high. 

Tuesday marks the last trading day of the year for many equity markets, including Germany, Japan, and South Korea. 

US economic news today was better than expected and supportive of stocks.  The Oct S&P Case-Shiller composite-20 home price index rose +0.3% m/m and +1.3% y/y, stronger than expectations of +0.1% m/m and +1.1% y/y.  Also, the Dec MNI Chicago PMI rose +9.2 to 43.5, stronger than expectations of 40.0.

Seasonal factors are bullish for stocks.  According to data from Citadel Securities, since 1928, the S&P 500 has risen 75% of the time in the last two weeks of December, climbing 1.3% on average.

Market attention this holiday-shortened week will focus on US economic news.  Later today, the minutes of the December 9-10 FOMC meeting will be released.  On Wednesday, initial weekly unemployment claims are expected to increase by 1,000 to 215,000.  On Friday, the Dec S&P manufacturing PMI is expected to remain unrevised at 51.8. 

The markets are discounting the odds at 16% for a -25 bp rate cut at the FOMC's next meeting on January 27-28.

Overseas stock markets are mixed today.  The Euro Stoxx 50 climbed to a 1.5-month high and is up by +0.76%.  China's Shanghai Composite closed unchanged.  Japan's Nikkei Stock 225 fell to a 1-week low and closed down -0.37%.

Interest Rates

March 10-year T-notes (ZNH6) today are down -4 ticks.  The 10-year T-note yield is up +2.2 bp to 4.132%.  Mar T-notes are under pressure today amid year-end liquidation by bond funds. Also, overnight comments from President Trump that undermine Fed independence are weighing on T-notes, as he said he "still might" fire Fed Chair Powell.  Today's stock market weakness has boosted safe-haven demand for government debt, limiting losses in T-notes. 

European government bond yields are mixed today.  The 10-year German bund yield is up +2.7 bp at 2.856%. The 10-year UK gilt yield is down -0.3 bp to 4.483%.

Spain Dec CPI (EU harmonized) rose +3.0% y/y, right on expectations.  Dec core CPI rose +2.6% y/y, stronger than expectations of +2.5% y/y.

Swaps are discounting a 1% chance of a +25 bp rate hike by the ECB at its next policy meeting on February 5.

US Stock Movers

Pharmaceutical companies are under pressure today to weigh on the broader market. Insmed Inc (INSM) is down more than -1% to lead losers in the Nasdaq 100.  Also, Gilead Sciences (GILD), Alnylam Pharmaceuticals (ALNY), Regeneron Pharmaceuticals (REGN), and Vertex Pharmaceuticals (VRTX) are down more than -1%.

Energy companies are climbing today as WTI crude oil adds to Monday's 2% gain.  Devon Energy (DVN), Diamondback Energy (FANG), Halliburton (HAL), APA Corp (APA), ConocoPhillips (COP), SLB Ltd (SLB), and Occidental Petroleum (OXY) are up more than +1%.

Citigroup (C) is down more than -1% after it said it expects to post a roughly $1.1 billion after-tax loss on the sale of its remaining business in Russia to Renaissance Capital. 

Ultragenyx Pharmaceutical (RARE) is up more than +9% after Monday’s -42% plunge when Jeffries said the stock could rebound in 2026 ahead of a late-stage update on its osteoporosis drug.

Molina Healthcare (MOH) is up more than +4% to lead gainers in the S&P 500 after money manager Burry highlighted the company's record of strong expense ratios and underwriting results.

Boeing (BA) is up more than +1% after being awarded a US Air Force contract valued at up to $8.58 billion. 

Earnings Reports(12/30/2025)

Bright Minds Biosciences Inc (DRUG), Daily Journal Corp (DJCO), Dakota Gold Corp (DC), Lionsgate Studios Corp (LION), Phoenix Education Partners Inc (PXED), Triller Group Inc (ILLR).