At a Glance
- Major US stock indexes showed mixed performance, with the S&P 500 down 0.62%, the Dow Jones Industrials up 0.42%, and the Nasdaq 100 down 0.47%.
- Divergent earnings reports from tech giants, particularly Meta Platforms’ significant drop and Alphabet’s strong gain, influenced market sentiment.
- Geopolitical factors, including a trade tariff truce between the US and China, offered some support to markets.
- Awaiting earnings from Apple and Amazon, with Q3 typically showing strong results but a slowdown in profit and sales growth compared to recent periods.
- The ongoing US government shutdown continues to cast a shadow, impacting economic data releases and adding to market uncertainty.
Market Movements Amidst Mixed Signals
US stock indexes experienced a mixed trading session today. The S&P 500 Index ($SPX) saw a decline of 0.62%, while the Dow Jones Industrials Index ($DOWI) edged up by 0.42%, and the Nasdaq 100 Index ($IUXX) registered a loss of 0.47%. E-mini futures for the S&P 500 and Nasdaq 100 also reflected downward pressure, trading down 0.50% and 0.51% respectively.
The broader market sentiment was significantly shaped by a confluence of factors, including mixed earnings results from major technology companies. Meta Platforms experienced a substantial drop of over 10%, and Microsoft fell more than 2% following earnings reports that did not meet high investor expectations. Conversely, Alphabet posted strong gains, rising over 4% after exceeding third-quarter earnings estimates.
Fed Caution and Interest Rate Outlook
Adding to market headwinds, Federal Reserve Chair Powell’s recent remarks cautioned against assuming further interest rate cuts in December. This sentiment contributed to a rise in the 10-year T-note yield, which climbed to a 2.5-week high of 4.11%, consequently pressuring stock prices.
💡 The market is currently pricing in approximately a 70% probability of a 25 basis point rate cut at the upcoming FOMC meeting on December 9-10. Further out, projections suggest an overall rate cut of about 81 basis points by the end of 2026, bringing the effective federal funds rate down to 3.07% from the current 3.88%.
Trade Relations and Earnings Season
On a more positive note, stock markets found some support following an agreement between President Trump and President Xi Jinping to extend a tariff truce, ease export controls, and reduce trade barriers. Key aspects of this agreement include a reduction in US tariffs on certain Chinese goods and China’s commitment to resume purchases of US agricultural products. This development offers a degree of stability in ongoing trade negotiations.
This week is a significant one for earnings reports, with 173 S&P 500 companies scheduled to release their results. Investors are particularly focused on upcoming reports from tech giants Apple and Amazon.com after the market close on Thursday. While the overall Q3 earnings season has shown resilience, with 84% of reporting S&P 500 companies beating forecasts according to Bloomberg Intelligence, the pace of profit growth is expected to slow.
Economic Headwinds and Global Markets
Q3 profits are anticipated to have risen by 7.2% year-over-year, marking the smallest increase in two years. Similarly, Q3 sales growth is projected to decelerate to 5.9% year-over-year, down from 6.4% in Q2, indicating a broader trend of moderating economic expansion.
📍 The ongoing US government shutdown, now in its fifth week, continues to weigh on market sentiment and the broader economy. This shutdown is delaying the release of crucial economic data, including employment reports, trade balances, retail sales, and housing starts. Bloomberg Economics estimates that approximately 640,000 federal workers could be furloughed, potentially increasing jobless claims and pushing the unemployment rate higher.
Overseas, stock markets presented a mixed picture. The Euro Stoxx 50 declined by 0.56%, while China’s Shanghai Composite ended trading down 0.73% after previously reaching a 10-year high. In contrast, Japan’s Nikkei Stock 225 reached a new record high, closing up 0.04%.
Interest Rate Dynamics and European Markets
Interest Rates Deep Dive
December 10-year T-notes experienced a decline today, falling by 12 ticks, which pushed the 10-year T-note yield up by 3.1 basis points to 4.107%. T-note prices extended Wednesday’s slide, reaching a 2.5-week low, with the yield hitting a similar high. This bearish sentiment for T-notes is attributed to reduced safe-haven demand following the US-China trade truce and rising inflation expectations, evidenced by the 10-year breakeven inflation rate climbing to a two-week high of 2.312%.
PAgain, Fed Chair Powell’s comments about the December rate cut not being a foregone conclusion continue to exert pressure on the bond market.
However, underlying support for T-notes remains due to the persistent US government shutdown, which poses risks to job growth, consumer spending, and overall economic health, potentially reinforcing the case for future Fed rate cuts.
European government bond yields moved higher today. The 10-year German bund yield rose to a 2.5-week high of 2.661%, up 3.7 basis points to 2.658%, while the 10-year UK gilt yield increased by 5.2 basis points to 4.444%.
Economic data from the Eurozone showed resilience, with Q3 GDP rising 0.2% quarter-over-quarter and 1.3% year-over-year, surpassing economists’ expectations. The Eurozone’s October economic sentiment indicator also improved, reaching a 2.5-year high of 96.8. German inflation data for October indicated a slight increase in consumer prices.
📊 As anticipated, the European Central Bank (ECB) maintained its deposit facility rate at 2.00%. Market participants are pricing in a low probability of a rate cut at the ECB’s next policy meeting in December.
Notable US Stock Movers
Chipmakers Face Pressure
The semiconductor sector experienced a downturn today, with Nvidia (NVDA) leading the decline, falling by 2%. This was partly influenced by reports that President Trump did not discuss approving sales of Nvidia’s AI processors with Chinese President Xi Jinping. Advanced Micro Devices (AMD), Broadcom (AVGO), Micron Technology (MU), and ARM Holdings (ARM) also saw significant drops of over 2%. Intel (INTC) and Marvell Technology (MRVL) were down more than 1%.
Individual Stock Performance
Meta Platforms (META) was a prominent loser, dropping over 10% after revised its full-year total expense forecast upwards. FMC Corp (FMC) saw a sharp decline of more than 38% after significantly cutting its full-year adjusted EPS forecast.
Sprouts Farmers Market (SFM) fell over 24% following weaker-than-expected Q3 net sales and a lowered comparable sales forecast. Chipotle Mexican Grill (CMG) was down more than 18% after its third downward revision of its full-year sales forecast this year.
Other notable decliners included eBay (EBAY), down over 15% after forecasting full-year adjusted EPS below consensus, and Carvana (CVNA), which fell more than 12% due to a below-consensus adjusted EBITDA margin in Q3.
International Paper (IP) dropped over 9% after reporting Q3 net sales that missed market expectations. Despite better-than-expected Q1 earnings, Microsoft (MSFT) was down more than 2% amid comments from its CFO about strong demand for Azure cloud services exceeding available capacity.
On the upside, Alphabet (GOOGL) surged over 4% after its Q3 revenue ex-TAC significantly outperformed consensus estimates. Guardant Health (GH) jumped more than 28% following an upward revision to its full-year revenue forecast. Metsera (MTSR) climbed over 22% on news of a potential acquisition offer from Novo Nordisk. C.H. Robinson Worldwide (CHRW) rose more than 19% after reporting strong Q3 adjusted EPS and announcing a significant share repurchase program.
Align Technology (ALGN) gained over 10% after its Q3 net revenue exceeded expectations. Huntington Ingalls Industries (HII) was up more than 9% on stronger-than-expected Q3 revenue. Estee Lauder (EL) and Eli Lilly & Co. (LLY) also posted gains, driven by better-than-expected sales and an increased full-year revenue forecast, respectively.
Final Thoughts
Today’s market exhibited a mixed performance, influenced by a combination of corporate earnings, central bank commentary, and geopolitical developments. Investors are closely watching the ongoing earnings season, particularly the results from major tech companies.
The interplay between trade relations, inflation expectations, and Federal Reserve policy continues to shape market dynamics. The US government shutdown remains a persistent concern, adding a layer of uncertainty to the economic outlook.