The S&P 500 Index ($SPX) (SPY) closed Tuesday down -0.24%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.62%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.26%. E-mini S&P December futures (ESZ25) fell -0.25% and E-mini Nasdaq December futures (NQZ25) rose +0.25%.
Stock indexes closed mixed on Tuesday, with the S&P 500 falling to a three-week low. The broader market came under pressure on Tuesday as US financial reports pointed to a sluggish economy. November’s unemployment rate rose to a four-year high, October retail sales stagnated and U.S. manufacturing activity slowed to a five-month low. Additionally, a drop from energy producers on Tuesday weighed on the broader market after WTI crude oil fell more than -2% to a 4.75-year low. However, the strength of the Magnificent Seven technology stocks on Tuesday was positive for the broader market, lifting the Nasdaq 100 from a three-week low into positive territory.
Stocks also found some support from Federal Reserve-friendly US economic reports on November payrolls and October retail sales, which reinforce expectations that the Federal Reserve will continue to ease monetary policy. Additionally, wage pressures are easing, with hourly earnings in November recording their smallest year-on-year increase in 4.5 years. The 10-year Treasury yield fell -2 bps to 4.15%.
US November Nonfarm Payrolls increased by +64,000, higher than expectations of +50,000. October Nonfarm Payrolls fell by -105,000, less than expectations of -25,000. The November unemployment rate increased +0.1 to a 4-year high of 4.6%.
US November average hourly earnings increased +0.1% MoM and +3.5% YoY, below expectations of +0.3% MoM and +3.6% YoY, with the +3.5% YoY increase the smallest YoY increase in 4.5 years.
US October Retail Sales were unchanged MoM, below expectations of +0.1% MoM. However, October retail sales excluding automobiles rose +0.4% mom, better than expectations of +0.2% mom.
US December S&P Manufacturing PMI fell -0.4 to a 5-month low of 51.8, weaker than expectations of 52.1.
Tuesday’s comments from Atlanta Fed President Raphael Bostic were hawkish and negative for stocks when he said, “After wrestling with all considerations, today I continue to view price stability as the clearest and most pressing risk despite changes in the labor market.” He added that he “sees little sign of price pressures dissipating before mid-to-late 2026 at the earliest, and expects inflation to remain above 2.5% even into late 2026.”
This week’s market focus will be on US economic news. On Thursday, weekly initial jobless claims are expected to fall by -11,000 to 225,000. Additionally, November CPI is expected to be +3.1% YoY and November Core CPI is expected to be +3.0% YoY. Existing home sales on Friday in November are expected to increase +1.2% month-on-month to 4.15 million. Additionally, the University of Michigan’s December Consumer Confidence Index is expected to be revised upward by +0.2 to 53.5 from the previously reported 53.3.
Markets are pricing in a 24% chance that the FOMC will reduce the fed funds target range by 25 bps at the next FOMC meeting on January 27-28.
Foreign stock markets closed lower on Wednesday. The Euro Stoxx 50 closed with a drop of -0.60%. China’s Shanghai Composite fell to a two-month low and closed down -1.11%. Japan’s Nikkei Stock 225 fell to a two-week low and closed down -1.56%.
Interest rates
March 10-year Treasuries (ZNH6) closed up +7.5 ticks on Tuesday. The 10-year Treasury yield fell -2.7 bps to 4.145%. Treasuries rose on Tuesday after the US November employment rate rose to a 4-year high and November average hourly earnings posted their smallest year-over-year increase in 4.5 years. Additionally, October retail sales rose less than expected and the December S&P manufacturing PMI fell to a five-month low, factors that are dovish for Fed policy. Additionally, falling inflation expectations supported Treasuries, as the 10-year breakeven inflation rate fell to a two-week low on Tuesday at 2.231%.
Gains in Treasuries were limited on Tuesday after a report on October U.S. retail sales excluding autos rose more than expected, a hawkish factor for Federal Reserve policy. Additionally, hawkish comments from Atlanta Federal Reserve President Raphael Bostic were bearish for Treasuries when he said elevated price pressures are expected to persist for most of next year.
The steepening yield curve is bearish for Treasury bond prices. Trading intensifies as bond investors buy short-term government debt and sell long-term debt. The yield curve has steepened since last Wednesday’s FOMC meeting, when the Federal Reserve said it would begin buying up to $40 billion in short-term Treasury bills a month to boost liquidity in the financial system. Longer-dated Treasuries are also under pressure on concerns about inflation and the independence of the Federal Reserve.
European government bond yields are mixed today. The 10-year German bond yield fell -0.8 bp to 2.845%. The 10-year UK bond yield rose to a three-week high of 4.561% and ended up +2.3 bps at 4.518%.
Eurozone December S&P Manufacturing PMI unexpectedly fell -0.4 to 49.2, weaker than expectations for an increase to 49.9 and the sharpest pace of contraction in 8 months.
Economic growth expectations from the German ZEW survey for December unexpectedly rose by +7.3 to a five-month high of 45.8, stronger than expectations for a drop to 38.4.
The UK December S&P Manufacturing PMI rose +1.0 to 51.2, stronger than expectations of 50.3 and the fastest pace of expansion in 15 months.
The swaps price in a 0% chance that the ECB will cut rates by -25 bps at its next policy meeting on Thursday.
US Stock Engines
Energy producers and energy service providers sold off on Tuesday, weighing on the broader market, after WTI crude oil fell more than 3% to a 4.75-year low. Phillips 66 (PSX) closed down more than -6% to lead losers on the S&P 500, and Baker Hughes (BKR) closed down more than -3% to lead losers on the Nasdaq 100. Additionally, APA Corp (APA) closed down more than -5%, and Marathon Petroleum (MPC) and Halliburton (HAL) closed down more than -4%. Additionally, Occidental Petroleum (OXY), ConocoPhillips (COP), Diamondback Energy (FANG), and Valero Energy (VLO) closed with losses of more than -3%. Finally, Devon Energy (DVN), Exxon Mobil (XOM) and Chevron (CVX) closed with losses of more than -2%.
The strength of the Magnificent Seven tech stocks on Tuesday was a supportive factor for the broader market. Tesla (TSLA) closed up more than +3% and Meta Platforms (META) closed up more than +1%. Additionally, Nvidia (NVDA) closed up +0.81%, Microsoft (MSFT) closed up +0.33%, Apple (AAPL) closed up +0.18%, and Amazon.com (AMZN) closed up +0.01%. Bucking the trend, Alphabet (GOOGL) closed down -0.54%.
Booz Allen Hamilton Holding Corp (BAH) closed down more than -7% after announcing that CFO Calderone will resign from the company effective February 1.
Humana (HUM) closed down more than -6% after forecasting full-year adjusted EPS of $17,000, below the consensus of $17.06.
Pfizer Inc (PFE) closed down more than -3% after forecasting 2026 revenue between $59.5 billion and $62.5 billion, the midpoint below the consensus of $61.63 billion.
Illinois Tool Works (ITW) closed down more than -3% after Goldman Sachs downgraded the stock to sell from neutral with a $230 price target.
Archer-Daniels-Midland (ADM) closed down more than -3% after Morgan Stanley downgraded the stock to underweight from equal weight with a $50 price target.
Comcast (CMCSA) closed up more than +5% to lead gains in the S&P 500 and Nasdaq 100 after CNBC commented on trading activity in the swaps market that may suggest the involvement of activist investors.
Cognex (CGNX) closed up more than +5% after Goldman Sachs twice upgraded its buy or sell rating with a $50 price target.
Estee Lauder (EL) closed up more than +3% after Bank of America named the stock its top beauty pick for 2026, with a $130 price target.
Robinhood Markets (HOOD) closed with a gain of more than +3% after Trust Securities initiated coverage of the stock with a Buy rating and a $155 price target.
Okta Inc (OKTA) closed up more than +2% after Jeffries upgraded the stock to buy from hold with a $125 price target.
Southwest Airlines (LUV) closed up more than +1% after Barclays upgraded the stock to overweight from equal weight with a $56 price target.
Earnings Reports (12/17/2025)
General Mills Inc (GIS), Jabil Inc (JBL), Micron Technology Inc (MU), Toro Co/The (TTC).
On the date of publication, Rich Asplund had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
