The S&P 500 Index ($SPX) (SPY) on Friday closed up +0.26%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.09% and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.48%. December E-mini S&P Futures (ESZ25) rose +0.27% and December E-mini Nasdaq Futures (NQZ25) rose +0.44%.
US stock indices closed higher on Friday amid positive corporate earnings. Amazon.com closed up more than +9% to lead mega-cap tech stocks after reporting spectacular earnings and offering an upbeat outlook. Additionally, Western Digital closed up more than +8% after reporting first-quarter net income above consensus. As of Friday, third-quarter earnings results had been reported for more than 60% of S&P 500 companies, and more than 80% beat estimates, a bullish factor for the broader market.
Friday’s minor US economic news supported stocks after the October Chicago MNI PMI rose +3.2 to 43.8, stronger than expectations of 42.3.
The Fed’s hawkish comments on Friday were negative for stocks. Kansas City Fed President Jeff Schmid said he voted against the Fed’s 25 basis point interest rate cut on Wednesday because “the labor market is largely in balance, the economy is showing continued momentum and inflation remains too high.” Additionally, Dallas Fed President Lorie Logan said, “I didn’t see the need to cut rates this week, and I would find it difficult to cut rates again in December unless there is clear evidence that inflation will fall faster than expected or that the labor market will cool more quickly.” Additionally, Cleveland Fed President Beth Hammack said she “would have preferred to keep interest rates steady at Wednesday’s FOMC meeting, as we need to maintain some amount of tightening to help bring inflation back down to target.”
Markets are pricing in a 64% chance of another -25bp rate cut at the next FOMC meeting on December 9-10. Markets are pricing in an 82bp across-the-board interest rate cut by the end of 2026 to 3.06% from the current effective federal funds rate of 3.88%.
The stock has support after President Trump and President Xi Jinping agreed on Thursday to extend a tariff truce, roll back export controls and reduce other trade barriers. The United States will reduce fentanyl-related tariffs on Chinese goods from 20% to 10% and extend a pause on some reciprocal tariffs for an additional year as China resumes purchases of American soybeans, sorghum and other agricultural products. The deal also includes China suspending controls on rare earth magnets in exchange for the United States easing an expansion of restrictions on Chinese companies.
Third-quarter corporate earnings results have been strong so far. According to Bloomberg Intelligence, 80% of S&P 500 companies that have reported so far have beaten estimates, on track for the best quarter since 2021. However, third-quarter earnings are expected to have increased +7.2% year-over-year, the smallest increase in two years. Additionally, third quarter sales growth is expected to slow to +5.9% year-on-year from +6.4% in the second quarter.
As for President Trump’s reciprocal tariffs, markets await oral arguments at the Supreme Court scheduled for November 5 on whether the tariffs are legal. Lower courts have already ruled that Trump’s reciprocal tariffs are illegal, finding them based on a misleading claim of emergency authority. If the US Supreme Court upholds those rulings and removes the tariffs, then the US government will have to refund reciprocal tariffs already collected, and Trump’s power to impose tariffs will be limited to well-founded sections of US trade law. Observers expect the US Supreme Court to announce its final ruling on reciprocal tariffs in late 2025 or early 2026.
The US government shutdown continues into its fifth week, weighing on market confidence and the US economy. The government shutdown is delaying the release of government reports, including all recent weekly jobless claims reports, September unemployment and payroll report, August trade balance, September retail sales, September PPI, September housing starts, September industrial production, September leading indicators, and others. Bloomberg Economics estimates that 640,000 federal workers will be laid off during the shutdown, which would expand jobless claims and push the unemployment rate to 4.7%.
Foreign stock markets closed mixed on Friday. The Euro Stoxx 50 closed down -0.65%. China’s Shanghai Composite closed down -0.81%. Japan’s Nikkei Stock 225 hit a new all-time high and closed sharply up +2.12%.
Interest rates
The December 10-year Treasury bond (ZNZ5) closed down -1 tick on Friday. The 10-year Treasury yield fell -0.2 bp to 4.095%. Treasury bond prices closed little changed on Friday. The strength in stock markets on Friday dampened demand for safe-haven Treasuries. Additionally, the Fed’s hawkish comments on Friday weighed on Treasuries after Kansas City Fed President Jeff Schmid, Dallas Fed President Lorie Logan and Cleveland Fed President Beth Hammack cited reasons for opposing the Fed’s rate cuts. Additionally, rising inflation expectations were bearish for Treasuries after the 10-year breakeven inflation rate hit a two-week high of the 2.312% on Friday.
The T-notes recovered most of their losses on Friday due to a surge in safe haven demand after the Miami Herald reported that the United States decided to attack military facilities in Venezuela and could act at any time.
Treasury bond prices have continued to receive underlying support from the ongoing US government shutdown, which could lead to additional job losses, reduced consumer spending and a weakened US economy, potentially allowing the Federal Reserve to continue cutting interest rates.
European government bond yields fell on Friday. The German 10-year bond yield fell -1.0 bp to 2.633%. The 10-year UK bond yield fell -1.4bp to 4.409%.
Eurozone October CPI fell to +2.1% year-on-year from +2.2% year-on-year in September, right in line with expectations. October Core CPI was unchanged from September at +2.4% YoY, stronger than expectations of +2.3% YoY.
September German Retail Sales rose +0.2% MoM and +2.8% YoY, slightly stronger than expectations of +0.2% MoM and +2.7% YoY.
The swaps price in a 4% chance that the ECB will cut rates by -25 bps at its next policy meeting on December 18.
US Stock Engines
Amazon.com (AMZN) closed up more than +9% to lead gains in the Dow Jones Industrials and Nasdaq 100 after reporting third-quarter net sales of $180.17 billion, stronger than the consensus of $177.82 billion, and forecasting fourth-quarter net sales of $206 billion to $213 billion, the midpoint above the consensus of $208.45 billion.
Brighthouse Financial (BHF) closed up more than +25% after the Financial Times reported that Aquarian Holdings is in advanced talks to acquire the company.
Twilio (TWLO) closed up more than +20% after forecasting Q4 revenue between $1.31 and $1.32 billion, stronger than the consensus of $1.29 billion.
Cloudflare (NET) closed up more than +14% after raising its full-year revenue forecast to $2.14 billion from a previous forecast of $2.11 billion to $2.12 billion, above the consensus of $2.12 billion.
Western Digital (WDC) closed up more than +8% after reporting first-quarter net income of $2.82 billion, ahead of the consensus of $2.73 billion.
Reddit (RDDT) closed up more than +8% after reporting 116 million daily active users in the third quarter, above the consensus of 114.16 million.
Coinbase Global (COIN) closed up more than +5% after reporting total third-quarter revenue of $1.87 billion, above the consensus of $1.8 billion.
GoDaddy (GDDY) closed up more than +5% after reporting third-quarter revenue of $1.30 billion, above the consensus of $1.23 billion, and raising its full-year revenue forecast to $4.93 billion-$4.95 billion from a previous forecast of $4.89 billion-$4.94 billion.
Dexcom (DXCM) closed down more than -14% to lead losers in the S&P 500 and Nasdaq 100 after cutting its full-year adjusted gross margin estimate to 61% from a previous estimate of 62%, below the consensus of 61.8%.
Motorola Solutions (MSI) closed down more than -5% after forecasting fourth-quarter adjusted earnings per share between $4.30 and $4.36, the midpoint below the consensus of $4.35.
Arthur J. Gallagher & Co. (AJG) closed down more than -4% after reporting third-quarter revenue of $3.33 billion, below the consensus of $3.49 billion.
Ingersoll Rand (IR) closed down more than -3% after cutting its full-year adjusted EPS estimate to $3.25-$3.31 from a previous estimate of $3.34-$3.46.
Baxter International (BAX) closed down more than -3% after Argus Research downgraded the stock to hold from buy.
FMC Corp (FMC) closed down more than -2% after Wells Fargo Securities downgraded the stock to equal weight from overweight.
Earnings Reports (11/3/2025)
Clorox Co/The (CLX), Coterra Energy Inc (CTRA), Diamondback Energy Inc (FANG), Eastman Chemical Co (EMN), Hologic Inc (HOLX), IDEXX Laboratories Inc (IDXX), Loews Corp (L), ON Semiconductor Corp (ON), Palantir Technologies Inc (PLTR), Pinnacle West Capital Corp (PNW), Public Service Enterprise Group (PEG), Realty Income Corp (O), SBA Communications Corp (SBAC), Simon Property Group Inc (SPG), Vertex Pharmaceuticals Inc (VRTX), Williams Cos Inc/The (WMB).
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
