Main Highlights
- Major US stock indices, including the S&P 500, Dow Jones Industrials, and Nasdaq 100, posted gains on Friday, with the S&P 500 and Nasdaq 100 reaching record highs.
- A cooler-than-expected US Consumer Price Index (CPI) report suggested potential for the Federal Reserve to consider interest rate cuts.
- Positive manufacturing and services Purchasing Managers’ Index (PMI) data provided market support, though a decline in consumer sentiment contrasted this.
- Resurfacing trade tensions emerged from President Trump’s temporary termination of talks with Canada, though a path to resuming discussions appeared open.
- The prolonged US government shutdown continued to impact economic data releases and investor sentiment.
Market Performance Fueled by Economic Data
On Friday, the S&P 500 Index concluded the trading session with a gain of +0.79%, the Dow Jones Industrials Index advanced by +1.01%, and the Nasdaq 100 Index saw a significant increase of +1.04%. Trading in December E-mini S&P futures reflected this positive sentiment with a +0.74% rise, while E-mini Nasdaq futures climbed +1.00%.
Both the S&P 500 and Nasdaq 100 indices achieved new record closing highs on Friday. This surge was partly attributed to a US CPI report for September that indicated a slightly slower pace of inflation than anticipated. The monthly CPI rose by 0.3% and the annual rate was 3.0%, both falling short of the expected 0.4% and 3.1% respectively. The core CPI, which excludes food and energy prices, also showed a milder-than-expected increase of 0.2% month-over-month and 3.0% year-over-year, below the forecast of 0.3% and 3.1%.
💡 While initial market reactions were positive, it’s noteworthy that the year-over-year CPI inflation rate of 3.0% matched a 16-month high. The core CPI rate at 3.0% also remains considerably above the Federal Reserve’s 2.0% target.
Further bolstering the stock market were positive manufacturing and services sector reports. The S&P US manufacturing PMI for October rose to 52.2, surpassing the expected figure of 52.0. Simultaneously, the S&P US services PMI for October showed a stronger-than-expected improvement, reaching 55.2 compared to a projected decline.
📍 In contrast, the final reading of the University of Michigan US consumer sentiment index for October showed a decrease of 1.4 points, settling at 53.6, which was a weaker outcome than anticipated.
Trade Relations and Policy Developments
US-Canada Trade Negotiations
Stock markets experienced a downturn late Thursday following President Trump’s announcement to halt trade negotiations with Canada. This decision was reportedly prompted by an advertisement from the Ontario provincial government that criticized tariffs. The advertisement referenced a 1987 speech by former President Reagan advocating for free trade and argued that tariffs hinder innovation, pricing, and American jobs.
President Trump described the advertisement as deceptive, suggesting it was an attempt to influence the US Supreme Court’s upcoming decision on November 5 regarding the legality of his reciprocal tariffs. Previous lower court rulings had already found these tariffs to be unlawful, citing an unsubstantiated claim of emergency authority. A Supreme Court ruling in favor of these challenges could require the refund of collected tariffs and limit the President’s authority to impose tariffs under current US trade law.
Following these developments, Ontario announced its intention to pause the controversial advertisement campaign. Canadian Prime Minister Trudeau indicated that Canada remains open to resuming trade talks when the US is ready.
⚡ Attention remains focused on broader US-China trade discussions. President Trump has reiterated his threat to increase tariffs on Chinese goods if a trade agreement is not reached by November 1. A meeting between President Trump and Chinese President Xi Jinping is scheduled for next Thursday on the sidelines of the Asia-Pacific Economic Cooperation conference in South Korea.
Impact of the US Government Shutdown
The ongoing US government shutdown, now in its fourth week, continues to cast a shadow over market sentiment and is causing delays in the release of vital economic data. Key reports, including the weekly initial unemployment claims for the past four weeks and the September payroll report, are currently unavailable. Bloomberg Economics estimates that the shutdown could lead to 640,000 federal workers being furloughed, potentially increasing jobless claims and raising the unemployment rate to an estimated 4.7%.
Corporate Earnings and Global Market Trends
Third-Quarter Earnings Season
The current third-quarter earnings season is largely providing a positive backdrop for equities, with corporate earnings expectations holding firm. Data from Bloomberg Intelligence indicates that 85% of S&P 500 companies that have reported earnings to date have surpassed analyst forecasts, representing the strongest performance observed since 2021. However, projected year-over-year profit growth for Q3 stands at 7.2%, which is the smallest increase in two years. Furthermore, Q3 sales growth is expected to moderate to 5.9% year-over-year, down from 6.4% in the second quarter.
International Market Performance
Stock markets in other major international economies also closed higher on Friday. The Euro Stoxx 50 index saw a gain of +0.11%, China’s Shanghai Composite increased by +0.71%, and Japan’s Nikkei Stock 225 rose by +1.35%.
Interest Rate Outlook and Bond Markets
US Treasury Market Movements
December 10-year T-notes experienced a modest decline of -1 tick, and the 10-year T-note yield decreased by -0.4 basis points to 3.997%. T-notes found some support and recovered from earlier losses following the release of the slightly weaker-than-expected US CPI report. The 10-year breakeven inflation expectations rate also declined, falling by -0.6 basis points to 2.298%.
✅ Treasury notes are receiving support from the continuing US government shutdown, which may contribute to increased job losses, reduced consumer spending, and a general economic slowdown, potentially encouraging the Federal Reserve to sustain its policy of interest rate cuts.
📊 Market participants are pricing in a high probability of a 25 basis point rate cut at the upcoming FOMC meeting scheduled for October 28-29, with a 97% probability assigned to this outcome.
European Bond Market Performance
Yields on European government bonds increased. The 10-year German bund yield rose by +4.3 basis points to 2.626%, and the 10-year UK gilt yield saw an increase of +0.8 basis points, closing at 4.432%.
📊 Swaps markets currently indicate a 1% probability of a 25 basis point rate cut by the European Central Bank (ECB) at its upcoming policy meeting on October 30.
Notable US Stock Movers
Performance of Major Technology Stocks
Most of the Magnificent Seven stocks closed higher on Friday, with the notable exception of Tesla (TSLA), which experienced a decline of -3.4%. Alphabet (GOOG) and Nvidia (NVDA) both recorded gains exceeding +2%.
⚡ Semiconductor stocks also showed significant gains on Friday, contributing to the upward trend in technology shares and the broader market. Advanced Micro Devices (AMD) rallied over +7%, and Micron Technology (MU) surged more than +5%. Broadcom (AVGO), Arm Holdings (ARM), and Lam Research (LRCX) all experienced increases of over +2%. Intel (INTC) closed up +0.3% following the release of a favorable earnings report and strong revenue guidance.
Cryptocurrency and Automotive Sector Highlights
Crypto-related stocks experienced a boost on Friday, aligning with a general increase in cryptocurrency values. Bitcoin was up +1% and Ethereum rose +2.7%. Coinbase (COIN) rallied more than +9% after JPMorgan upgraded the stock to overweight from neutral, citing reduced risk and expanding monetization opportunities. Riot Platforms (RIOT) gained +4.5%, and MARA Holdings (MARA) rose +1.7%.
Ford (F) saw a significant rally of over +12% after reporting earnings that surpassed analyst expectations and expressing optimism about overcoming supply chain disruptions, including those caused by a fire at a key supplier.
Materials and Consumer Discretionary Sector Moves
Newmont (NEM) experienced a decline of more than -6% after issuing guidance suggesting that its gold production in 2026 may not surpass 2025 levels. Deckers Outdoor (DECK) saw a notable drop of over -15% following the announcement of disappointing net sales projections for 2026.
Expert Summary
Friday concluded with major US stock indices trading higher, as the S&P 500 and Nasdaq 100 reached new record highs, partly influenced by a slightly softer-than-expected CPI report. Despite ongoing concerns regarding trade tensions and the US government shutdown, positive manufacturing data and a generally favorable earnings season outlook provided underlying support to the market.