At a Glance
- Stocks experienced a mixed close on Friday, recovering from earlier losses as political negotiations for a government shutdown showed signs of progress.
- Negative economic indicators, including rising job cut announcements and a decline in consumer sentiment, pressured the market earlier in the session.
- Federal Reserve Vice Chair Philip Jefferson’s comments suggested a cautious approach to interest rate cuts, leaning towards a hawkish outlook.
- A significant earnings beat from Globus Medical and Expedia Group contributed to positive stock movements for individual companies.
- Weakness in the semiconductor sector, particularly Microchip Technology, weighed down other tech stocks.
Market Performance Mixed Amid Government Shutdown Talks
Major US stock indexes closed mixed on Friday, demonstrating resilience after initially falling. The S&P 500 Index rose by +0.13%, while the Dow Jones Industrials Index saw a gain of +0.16%. Conversely, the Nasdaq 100 Index ended the day down -0.28%. E-mini S&P futures (ESZ25) increased by +0.14%, but E-mini Nasdaq futures (NQZ25) declined by -0.22%.
The market’s recovery was attributed to de-escalating demands from Senate Democrats regarding the government shutdown. Their proposal for a one-year extension of healthcare subsidies, though rejected by Republicans, was seen as a positive development, signaling potential progress toward ending the shutdown.
Economic Concerns and Sector Weakness Impact Early Trading
Earlier in the trading session, US stock indexes retreated, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 reaching fresh two-week lows. The semiconductor sector’s performance was a notable drag on the broader market.
Economic anxieties also contributed to the downturn. A report from Challenger, Gray & Christmas revealed that October saw the most job cuts announced by US companies in over two decades. Adding to this sentiment, the University of Michigan’s US Consumer Sentiment Index for November fell more than anticipated, hitting a nearly 3.5-year low.
Federal Reserve Stance and Inflation Data
Federal Reserve Vice Chair Philip Jefferson’s remarks on Friday were perceived as slightly hawkish. He indicated that interest rates continue to exert a somewhat restrictive influence on the economy and advocated for a gradual approach to rate cuts as they near the neutral rate.
Data on inflation expectations presented a mixed picture. The University of Michigan’s 1-year inflation expectation for November unexpectedly rose to 4.7%, exceeding the forecast of 4.6%. However, the 5-10 year inflation expectation eased to 3.6%, falling short of the projected 3.8% year-over-year.
💡 US consumer credit in September rose by $13.093 billion, surpassing the expected $10.230 billion.
Global Economic Cues and Government Shutdown
Weaker-than-expected Chinese trade data negatively impacted global growth prospects. China’s exports in October unexpectedly decreased by 1.1% year-over-year, contrary to expectations of a 2.9% rise and marking the largest decline in eight months. Imports also rose by a mere 1.0% year-over-year, falling short of the anticipated 2.7% increase.
The prolonged US government shutdown, now in its sixth week, continues to be the longest in history, adversely affecting market sentiment and the US economy. This extends to the delay of crucial government reports, further impacting economic activity.
📊 The market is currently pricing in a 66% probability of a 25 basis point rate cut at the upcoming FOMC meeting on December 9-10.
Supreme Court Weighs on Tariffs and Corporate Earnings Season Continues
The US Supreme Court expressed skepticism regarding the legality of President Trump’s reciprocal tariffs. Concerns were raised about using emergency powers for tariff imposition, with Chief Justice Roberts noting it as a core congressional power. A ruling is expected by late this year or early 2026. If the tariffs are struck down, the US government may need to refund over $80 billion collected, potentially limiting the President’s future tariff authority.
The third-quarter corporate earnings season maintained a strong pace. Out of 136 S&P 500 companies that reported, 81% exceeded earnings forecasts, aligning with the best quarterly performance since 2021. However, Q3 profit growth is projected at +7.2% year-over-year, the slowest in two years, with sales growth expected to slow to +5.9% from +6.4% in Q2.
Global Markets Face Pressure
Overseas stock markets ended Friday on a lower note. The Euro Stoxx 50 index dropped to a three-week low, closing down 0.80%. China’s Shanghai Composite fell from a one-week high, ending the day 0.25% lower. Japan’s Nikkei Stock 225 experienced a decline of 1.19%.
Interest Rates and Bond Market Movements
Treasury Notes Show Modest Gains Amid Uncertainty
December 10-year T-notes (ZNZ5) closed slightly higher on Friday, with a gain of +1 tick. The yield on the 10-year T-note rose by 0.4 basis points to 4.087%. T-notes experienced some safe-haven demand earlier due to stock market weakness and the disappointing consumer sentiment data.
However, gains were tempered by hawkish commentary from Fed Vice Chair Philip Jefferson, emphasizing a slow approach to interest rate cuts. Lingering concerns about the government shutdown and its potential economic impact continue to provide underlying support for T-notes.
European Bond Yields Rise
European government bond yields moved higher on Friday. The 10-year German bund yield reached a four-week high of 2.681%, closing up 1.6 basis points at 2.666%. The 10-year UK gilt yield also climbed to a 2.5-week high of 4.490%, finishing up 3.2 basis points at 4.466%.
📊 German trade data for September showed stronger-than-expected performance, with exports rising by 1.4% month-over-month and imports increasing by 3.1% month-over-month.
⚡ ECB Executive Board member Elderson noted that some downside risks to the Eurozone economy observed earlier in the year have diminished.
📍 Market expectations indicate only a 4% chance of a 25 basis point rate cut by the ECB at its next policy meeting on December 18.
US Stock Movers: Top Gainers and Losers
Notable Gainers
Globus Medical (GMED) surged over +35% after exceeding Q3 net sales expectations and raising its full-year forecast.
Expedia Group (EXPE) led S&P 500 gainers, climbing more than +17% on the back of strong Q3 adjusted EPS results.
Akamai Technologies (AKAM) advanced over +15% after providing a Q4 revenue forecast that surpassed consensus estimates.
Affirm Holdings (AFRM) rose more than +11% after increasing its 2026 gross merchandise volume forecast.
Solventum (SOLV) gained over +7% following a Q3 adjusted EPS report that beat analyst expectations.
News Corp (NWSA) closed up more than +6% after reporting Q1 revenue that exceeded consensus.
Monster Beverage (MNST) jumped over +5% after its Q3 net sales came in stronger than anticipated.
Notable Losers
Microchip Technology (MCHP) fell more than -5%, leading semiconductor stocks lower after issuing a weaker-than-expected Q3 net sales forecast. Other semiconductor companies like ARM Holdings Plc (ARM), Marvell Technology (MRVL), Advanced Micro Devices (AMD), ON Semiconductor (ON), Analog Devices (ADI), Applied Materials (AMAT), KLA Corp (KLAC), Broadcom (AVGO), Lam Research (LRCX), and Qualcomm (QCOM) also closed lower.
Intellia Therapeutics (NTLA) dropped over -25% after reporting a patient death following treatment with its gene editing therapy.
Take-Two Interactive Software (TTWO) was the largest loser in the S&P 500 and Nasdaq 100, falling more than -8% due to a six-month delay in the release of Grand Theft Auto VI.
Universal Display (OLED) declined over -8% after its Q3 revenue significantly missed consensus expectations.
Block (XYZ) closed down more than -7% after reporting Q3 net revenue below consensus.
CNH Industrial NV (CNH) fell over -6% after reporting weaker-than-expected Q3 adjusted EPS and lowering its full-year forecast.
Franklin Resources (BEN) dropped more than -4% after its Q4 operating margin came in well below expectations.
Final Thoughts
Friday’s market performance reflected a complex interplay of geopolitical developments, economic data, and corporate earnings. While initial pessimism stemmed from economic concerns and a hawkish Fed outlook, positive shifts in government shutdown negotiations offered a late-day reprieve for the broader market. The mixed performance underscores the current uncertainty investors are navigating.