Market Updates

The S&P 500 Index, along with the Dow Jones Industrial Average and the Nasdaq 100 Index, all saw declines today. The Dow dropped by 1.10%, while the Dow Jones fell by 0.68%. The Nasdaq 100 faced the most significant fall, down by 1.55%. In the futures market, December E-mini S&P futures slipped by 1.05% and December E-mini NASDAQ futures fell by 1.50%.

Much of the initial optimism surrounding the reopening of the U.S. government seems to be factored into stock prices already. The slump in semiconductor stocks and declines in some major tech companies are adding to the negative sentiment in the market.

A rise in U.S. Treasury yields is contributing to the downturn, with the 10-year T-note yield increasing by 3 basis points to 4.10%. This uptick followed comments from the Fed that indicated a more hawkish stance, resulting in a decrease in expectations for a rate cut at the upcoming FOMC meeting. Boston Fed President Susan Collins highlighted the need to maintain current policy rates amid inflation and employment concerns.

President Trump signed a bill last night that officially ended the longest government shutdown in U.S. history. The legislation ensures funding for various departments until January 30 and will provide back pay for furloughed workers, along with reinitiating federal payments to state and local governments.

The Congressional Budget Office (CBO) has projected that the recent six-week government shutdown will lead to a 1.5 percentage point reduction in GDP growth for this quarter. However, they also noted that a good portion of these losses could be recouped early next year as federal operations return to normal.

Additionally, the White House has indicated that the monthly jobs report and consumer price index for October are unlikely to be published due to the ongoing shutdown. The Bureau of Labor Statistics is expected to publish an updated schedule for the release of delayed economic data soon.

Market expectations are showing a 53% chance of a further 25 basis point rate cut in the next FOMC meeting scheduled for December 9-10.

As the third-quarter corporate earnings season comes to a close, we see that 456 companies in the S&P 500 have reported their earnings, with around 82% exceeding expectations. Their profits have risen by 14.6%, significantly outpacing last year’s estimate of 7.2%.

Internationally, stock markets are mixed today. The Euro Stoxx 50 has dipped by 0.38% from its all-time high, whereas China’s Shanghai Composite has closed up 0.73%, reaching a 10-year high. Japan’s Nikkei also saw a modest increase, up 0.43%.

Turning to U.S. Treasury bonds, the December 10-year T-note saw a decline of 7.5 ticks today, with yields rising by 3.4 basis points. Demand for T-Notes as a safe haven is being pressured as government operations resume. The recent hawkish comments from the Fed, alongside supply pressure from upcoming Treasury auctions, are contributing factors to the downward trend in T-note prices.

In Europe, government bond yields are on the rise as well, with Germany’s 10-year Bund yield increasing by 3.9 basis points to 2.682% after reaching a one-week low. Similarly, the UK 10-year bond yield has risen by 3.1 basis points to 4.429%.

The Eurozone saw a month-on-month industrial production increase of 0.2% in September, though this fell short of expectations of 0.7%. In contrast, the UK experienced a drop of 2.0% in industrial production for the same month, which is the most significant decline in over four years.

Regarding the UK’s GDP for Q3, a growth rate of 0.1% QoQ and 1.3% YoY was reported, which was below the expected 0.2% and 1.4%, respectively. The market is now pricing in a diminished likelihood of a rate cut from the ECB at their December 18th meeting.

On the corporate front, several semiconductor stocks are dropping today, impacting market performance. Companies like ARM Holdings and Broadcom fell by over 5% and 4%, respectively. Other tech giants such as Intel and Micron Technology also faced declines. Most of the Magnificent Seven tech stocks are underperforming, with Tesla down more than 5% and Nvidia slipping by over 3%.

In other notable declines, Ardent Health fell over 34% after lowering its revenue forecast, while Webtoon Entertainment saw a decline of more than 24% due to disappointing revenue expectations. Ibotta’s stock also fell by over 19% after weaker revenue guidance.

Walt Disney Co. led the S&P 500 and Dow with a drop exceeding 8% after reporting revenues that fell short of expectations. Other stocks like Dlocal Ltd and Dollar Tree also experienced significant drops following their earnings reports.

Conversely, Dillard’s Inc. saw a robust increase of over 19% following a better-than-expected earnings report. Sealed Air Corporation rose more than 18% after acquisition rumors, and Firefly Aerospace’s stock rose significantly after reporting stronger-than-expected earnings and operational plans.

Albemarle is currently one of the top performers in the S&P 500, rising over 6% after a positive price target adjustment from Mizuho Securities. Cisco Systems also gained more than 3% after bumping up its revenue forecast, while companies like AutoZone and Nike showed modest gains based on recent upgrades.

Earnings reports are anticipated, with several major companies lined up for their next updates.