Market Update

The S&P 500 Index saw a decline of -0.79% today, while the Dow Jones Industrial Average decreased by -0.46%, and the Nasdaq 100 Index dropped by -1.13%. December E-mini S&P futures fell by -0.75%, and the December E-mini Nasdaq futures dropped by -1.20%.

U.S. stock indexes continued to lose ground this week, hitting two-week lows for the S&P 500, Dow, and Nasdaq. There’s notable weakness among major tech stocks and semiconductor firms, which is dragging the broader market down. Economic worries are also surfacing, especially following a report from Challenger, Gray & Christmas indicating that U.S. companies have announced their largest layoffs in over 20 years this October.

Comments from Fed Vice Chairman Philip Jefferson today seemed somewhat hawkish, suggesting that interest rates are still having a “somewhat limiting” effect on the economy. He advised a cautious approach to rate cuts as we move closer to neutral rates.

On the trade front, news from China came in weaker than anticipated, raising concerns for global growth. China’s exports unexpectedly fell by -1.1% year-on-year in October, missing forecasts of a +2.9% increase. Imports, while rising by 1.0%, also came in below expectations of +2.7%.

The ongoing U.S. government shutdown, which has now extended into its sixth week, has set a new record and is impacting market sentiment negatively. Many government reports have been delayed, further straining the economy.

Currently, the market anticipates a 66% likelihood of another 25 basis point rate cut during the next FOMC meeting scheduled for December 9-10.

This Wednesday, the U.S. Supreme Court expressed skepticism regarding the legality of President Trump’s reciprocal tariffs. Chief Justice Roberts, alongside Justices Gorsuch and Coney, questioned whether the President’s use of the Emergency Powers Act to impose tariffs was constitutional. Roberts noted that tariffs essentially serve as taxes on Americans, which has traditionally been Congress’s domain. A ruling from the Supreme Court is expected by late this year or early 2026. Previous lower court decisions have deemed these tariffs illegal, which, if upheld, could force the government to repay over $80 billion in collected duties.

In corporate earnings news, the third-quarter season is off to a strong start, with 136 S&P 500 companies reporting results this week. According to Bloomberg Intelligence, about 81% of the companies that have reported thus far have surpassed expectations, marking potentially the best quarter since 2021. However, year-over-year profits are only expected to rise by +7.2%, the smallest growth seen in two years. Additionally, sales growth is projected to slow to +5.9% year-on-year compared to +6.4% in the previous quarter.

International stock markets are also down today, with the Euro Stoxx 50 dipping to a three-week low, down -0.77%. The Shanghai Composite Index in China fell by -0.25%, while Japan’s Nikkei Stock Average dropped by -1.19%.

The yield on the December 10-year T-note decreased by -3 ticks today, while the yield itself rose by +2.1 basis points to 4.104%. This decline followed hawkish remarks from Fed Vice Chairman Jefferson regarding the need for careful pace in rate cuts as interest rates near neutral.

Initially, T-notes saw a rise as safe-haven demand increased due to falling stock prices. A decline in inflation expectations also supported T-notes, as the 10-year breakeven inflation rate dropped to 2.273%, the lowest level in two weeks.

Also supporting T-notes is the ongoing government shutdown, which could potentially lead to job losses and reduced consumer spending, possibly granting the Fed more room to lower interest rates.

In Europe, government bond yields are rising, with Germany’s 10-year federal bond yield reaching a four-week high of 2.681%. Meanwhile, the UK’s 10-year annuity yield increased to 4.490%.

In good news for Germany, exports increased by +1.4% month-on-month in September, surpassing forecasts of +0.5%. Imports also grew by 3.1% month-on-month, which was higher than anticipated.

The swaps market suggests a 5% chance that the ECB will cut interest rates by -25 basis points during their next policy meeting on December 18th.

On the corporate front, Microchip Technology (MCHP) fell more than -6% after its disappointing earnings forecast, predicting third-quarter net sales lower than industry expectations. Advanced Micro Devices (AMD) and several others in the semiconductor sector also experienced declines of more than -3%.

The tech stocks, particularly those known as the Magnificent Seven, are under pressure today. Companies like Tesla (TSLA) and Nvidia (NVDA) both fell more than -3%, while major players like Amazon.com and Alphabet experienced drops over -1%.

Intellia Therapeutics (NTLA) witnessed a significant plunge of more than -22% after news surfaced of a patient death related to their gene editing treatment.

CNH Industrial NV (CNH) dropped over -12% after missing earnings expectations and lowering its full-year forecasts as well.

Block (XYZ) was another major decliner, with a loss of more than -11% following its net revenue falling short of expectations. Universal Display (OLED) also saw significant losses after reporting quarterly revenue below consensus.

Take-Two Interactive Software (TTWO) fell over -5% after delaying the release of Grand Theft Auto VI once again, pushing it back to November 2026.

In more positive news, Globus Medical (GMED) reported stronger net sales than expected and raised their sales forecast for the year. Expedia Group (EXPE) also saw a large increase of over +17%, thanks to strong Q3 earnings that exceeded expectations, while Akamai Technologies (AKAM) and Monster Beverage (MNST) enjoyed notable gains as well.

A strong performance from Affirm Holdings (AFRM) helped push its stock up by more than 8% after revising up its total volume forecast for 2026.

Solventum (SOLV) and Fluor Corp (FLR) both reported results better than expected, contributing positively to their stock prices.

Upcoming earnings reports to watch include Constellation Energy Corp, Duke Energy Corp, Franklin Resources Inc, and KKR & Co Inc.