S&P 500 Index Update

The S&P 500 Index, alongside major U.S. stock markets, experienced a notable downturn on Thursday. The Dow Jones Industrial Average ended the day down by 1.66%, while the Dow itself saw a drop of 1.65%. The Nasdaq 100 Index faced a larger decline, dropping 2.05%. In futures, December E-mini S&P and NASDAQ futures fell 1.64% and 2.02%, respectively.

This sharp sell-off can largely be attributed to mounting concerns about an upcoming economic report, which many fear could reveal weaknesses. The report’s release had been delayed due to a government shutdown, and worries about its impact on future Federal Reserve interest rate cuts contributed to the market’s decline. Additionally, struggles within the semiconductor sector and a drop in stock prices for major tech companies collectively influenced the broader market.

On Thursday, rising yields on government bonds put additional pressure on stocks, as the 10-year Treasury yield climbed by four basis points to 4.11%. This uptick follows recent hawkish comments from the Fed, leading to a decrease in expectations for a rate cut at next month’s FOMC meeting, with probabilities dropping from 70% to 51%. Key messages from various Fed presidents indicated a reluctance to further ease monetary policy without clear signs of economic stabilization.

In political news, President Trump signed legislation Wednesday night that ended the record-setting government shutdown. This new law promises year-round funding for several government departments, back pay for furloughed workers, and a restart of federal payments to state and local entities. The Congressional Budget Office predicted the recent shutdown would slash GDP growth by 1.5 percentage points this quarter, although much of that loss may be recouped in early 2024 as government operations resume.

Moreover, it was announced that October’s jobs report and consumer price index are also expected to be delayed due to the shutdown. In the coming days, updates on the scheduling of this economic data will be released.

The market anticipates about a 51% chance of a further 25 basis point rate reduction during the next FOMC meeting slated for December 9-10. The earnings reports for the third quarter are winding down, with around 456 companies from the S&P 500 having reported. Notably, 82% exceeded expectations, suggesting this could be the strongest quarter since 2021, with an impressive profit increase of 14.6%.

International markets presented a mixed picture on Thursday. The Euro Stoxx 50 saw a drop of 0.77%, while China’s Shanghai Composite reached a ten-year high with a gain of 0.73%. Japan’s Nikkei index ended slightly up by 0.43%.

Looking specifically at bond markets, December 10-year Treasury notes fell by 7.5 ticks as safe haven demand waned with the reopening of the economy. Meanwhile, bond yields in Europe increased, with Germany’s 10-year Bunds rising by 4.4 basis points and the UK’s 10-year bond yield climbing by 3.9 basis points.

In terms of industrial performance, Eurozone industrial production for September reported a 0.2% increase year-over-year, falling short of expectations. The UK experienced a far more significant drop, with industrial production down by 2.0%, marking its steepest decline in over four years.

The UK’s third-quarter GDP showed modest growth at 0.1% QoQ and 1.3% YoY, which was underwhelming compared to predictions of 0.2% and 1.4%, respectively. Meanwhile, concerns are growing that the European Central Bank may cut interest rates at its next meeting slated for December 18.

Shifting focus to the tech sector, semiconductor stocks faced a significant sell-off, impacting the overall market sentiment. ARM Holdings and Intel both dropped over 5%, while other major players like Lam Research and Broadcom also faced noteworthy declines. Many technology stocks in the so-called “Magnificent Seven” witnessed drops, with Tesla down over 6% and Nvidia falling more than 3%. In contrast, Meta Platforms managed to close slightly up.

Ardent Health lowered its annual earnings forecast significantly, leading to a steep drop of over 34% in its stock price. Similarly, Webtoon Entertainment and Ibotta Inc saw declines of 25% and 23% after releasing disappointing revenue forecasts.

On the brighter side, Sealed Air Corporation gained over 17% on news of potential acquisition interest. Firefly Aerospace also had a strong showing, rising more than 17% due to better-than-expected revenue reports and plans for future launches. Dillard’s posted impressive Q3 earnings that beat expectations, resulting in a stock increase of over 9%. Meanwhile, Cisco Systems raised its revenue forecasts for 2026, contributing to a jump of more than 4%, leading the Dow and the Nasdaq higher.

Overall, the market exhibited a blend of declines and gains, reflecting a mix of uncertainties and positive outlooks for various sectors.