Market Overview

The S&P 500 Index closed lower on Thursday, with the Dow Jones Industrial Average dropping by 0.99%. Meanwhile, the Nasdaq 100 Index ended down 1.47%. In the futures market, December E-mini S&P futures saw a decline of 0.95%, and December E-mini NASDAQ futures fell by 1.37%.

US stock indices faced downward pressure largely due to the inconsistent performance of major technology firms. MetaPlatforms saw a significant drop of over 11%, while Microsoft fell more than 2%. On the flip side, Alphabet managed to increase by over 2% after surpassing third-quarter profit expectations.

The negative sentiment had some roots in comments from Fed Chairman Jerome Powell earlier in the week, suggesting that further interest rate cuts might not happen as anticipated in December. On Thursday, the yield on the 10-year Treasury note rose to 4.11%, marking its highest point in two and a half weeks, which further affected stock prices.

Currently, the market anticipates a 72% chance of a 25 basis points rate cut in the upcoming FOMC meeting scheduled for December 9-10. In addition, expectations are for an overall reduction of 82 basis points by the end of 2026, lowering the current federal funds rate from 3.88% to 3.06%.

Some positive developments emerged when President Trump and President Xi Jinping agreed to extend a tariff ceasefire. This included reducing fentanyl-related tariffs on Chinese goods and halting some reciprocal tariffs for another year, while China will resume buying U.S. agricultural products. Additionally, the agreement involves suspending regulations on rare earth magnets from China in exchange for the U.S. lifting certain regulations on Chinese firms.

This week, earnings reports are coming out from 173 companies in the S&P 500. Apple and Amazon announced their earnings after market close on Thursday. So far, third-quarter earnings have been robust. According to Bloomberg Intelligence, 84% of the companies reporting have exceeded expectations, potentially marking the best quarter since 2021. However, profits are only projected to grow by 7.2% year-on-year, which is the smallest increase in two years. Sales growth is also expected to moderate, from 6.4% last quarter to 5.9% this quarter.

There’s still attention on Trump’s reciprocal tariffs, especially with oral arguments set for the Supreme Court on November 5. Previous lower court decisions ruled that these tariffs were based on emergency powers and deemed illegal. If the Supreme Court confirms this, it may result in the return of tariffs already collected, thus constraining Trump’s ability to use tariffs effectively.

The ongoing U.S. government shutdown, now into its fifth week, is negatively impacting market sentiment and the broader economy. This shutdown has delayed the release of essential government reports, including unemployment claims and trade balances, leading to an estimated furlough of 640,000 federal workers. Consequently, this has raised unemployment claims and is projected to increase the unemployment rate to 4.7%.

International markets had mixed responses on Thursday. The Euro Stoxx 50 closed slightly down by 0.12%, while China’s Shanghai Composite dropped from a decade high, closing down 0.73%. In contrast, Japan’s Nikkei 225 managed to close at a new high, up 0.04%.

Interest Rates

On Thursday, the December 10-year T-note closed lower by 6.5 ticks as the yield rose by 1.9 basis points to 4.095%. The demand for safe-haven assets reduced following the news of extended trade agreements, causing T-note prices to decline. Expectations of rising inflation also negatively impacted T-notes, with the 10-year breakeven inflation rate reaching a two-week high.

The ongoing government shutdown provides continued support for T-notes by raising potential job losses, which could lead to more interest rate cuts from the Fed.

In Europe, government bond yields increased. The 10-year German federal bond yield rose to 2.661%, and the UK’s 10-year bond yield climbed to 4.424%.

Eurozone GDP for Q3 showed a quarter-on-quarter increase of 0.2% and a year-on-year rise of 1.3%, both beating expectations. Additionally, the Euro area business confidence index reached its highest level in two and a half years.

In a recent statement, ECB President Lagarde noted that the trade deal with the U.S., the ceasefire in the Middle East, and progress in U.S.-China relations have lessened growth risks. Moreover, there is a reduced likelihood of a rate cut in the upcoming ECB meeting.

Tech Sector Performance

Most tech stocks, especially in the Magnificent Seven, experienced substantial declines. MetaPlatforms dropped by over 11%, while several others like Tesla, Amazon, and Microsoft also saw losses. Specifically, Meta’s forecasted total spending raised its stock’s volatility significantly.

FMC Corp reduced its full-year earnings predictions, resulting in a drop of over 45%. Sprouts Farmers Market reported net sales that met expectations but still saw their stock decline. Chipotle saw a sharp drop of over 18% after reducing its sales forecast for the third time this year.

Cigna Group also faced challenges, closing down more than 17% due to anticipated margin pressure. Meanwhile, EBAY’s earnings guidance fell short of consensus expectations.

Boeing led the Dow Industrial Average with a significant drop after being downgraded by Deutsche Bank. Microsoft, despite reporting better-than-expected profits, also closed over 2% down, indicating mixed reactions from investors. Alphabet, however, managed to outperform, while Guardant Health raised its revenue guidance significantly.

Notably, CH Robinson Worldwide was one of the major gainers, seeing a rise of more than 19% after reporting positive earnings.

Ametek Co., Huntington Ingalls Industries, and others saw solid gains as well, while Eli Lilly raised its sales forecast.

Upcoming Financial Reports

Look ahead for announcements from AbbVie, AGCO, Aon, and several other major companies.