The S&P 500 Index ($SPX) (SPY) on Wednesday closed down by -1.16%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down by -0.47%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down by -1.93%.  December E-mini S&P futures (ESZ25) fell -1.02%, and December E-mini Nasdaq futures (NQZ25) fell -1.71%.

Stock indexes retreated on Wednesday, with the S&P 500 and Nasdaq 100 posting 3-week lows.  The rout in AI-infrastructure stocks and chip makers on Wednesday weighed on the broader market and sparked risk-off in asset markets.  Also, a -2% fall in Bitcoin (^BTCUSD) weighed on cryptocurrency-exposed stocks. 

On the positive side, energy producers moved higher, as WTI crude oil rose more than 1% after President Trump announced an oil blockade on tankers entering and leaving Venezuela.  Mining stocks are also moving higher as tensions in Venezuela escalate, boosting safe-haven demand for precious metals, with silver soaring to a new all-time high. 

Dovish comments today from Fed Governor Christopher Waller were supportive of stocks and bonds, as he said the US labor market is "pretty soft," with close to zero job growth, and that inflation is "pretty well anchored" around 2%.  He added that interest rates are still 50-100 basis points above neutral, and the Fed can steadily lower them with no rush.

Comments from Atlanta Fed President Raphael Bostic were slightly hawkish, with him saying that US GDP growth is solid and that he sees it continuing in 2026.  He added that in a close call, inflation is more worrying than the labor market.

US MBA weekly mortgage applications fell -3.8% in the week ended December 12, with the purchase mortgage sub-index down -2.8% and the refinancing mortgage sub-index down -3.6%.  The average 30-year fixed rate mortgage rose +5 bp to 6.38% from 6.33% in the prior week.

This week's market focus will be on US economic news.  On Thursday, weekly initial unemployment claims are expected to fall -11,000 to 225,000.  Also, Nov CPI is expected to be +3.1% y/y, and Nov core CPI is expected to be +3.0% y/y.  On Friday, Nov existing home sales are expected to be up +1.2% m/m to 4.15 million. Also, the University of Michigan Dec consumer sentiment index is expected to be revised upward by +0.2 to 53.5 from the previously reported 53.3.

The markets are discounting a 24% chance that the FOMC will cut the fed funds target range by 25 bp at the next FOMC meeting on January 27-28.

Overseas stock markets settled mixed on Wednesday.  The Euro Stoxx 50 fell to a 2-week low and closed down -0.63%.  China’s Shanghai Composite closed up +1.19%.  Japan’s Nikkei Stock 225 recovered from a 2-week low and closed up +0.26%.

Interest Rates

March 10-year T-notes (ZNH6) on Wednesday fell by -0.5 of a tick.  The 10-year T-note yield rose +0.6 bp to 4.151%. 

T-notes were little changed on Wednesday.  T-note prices had a negative carryover from a plunge in Japanese 10-year bonds to an 18-year low.  Also, hawkish comments from Atlanta Fed President Raphael Bostic weighed on T-notes, as he said US GDP growth is solid and that he sees it continuing in 2026. 

T-notes found support on Wednesday from dovish comments from Fed Governor Waller, who said the Fed can keep cutting rates as interest rates are still 50-100 bp above neutral.  Also, solid demand for the Treasury’s $13 billion auction of 20-year T-bonds was supportive for T-notes as the auction had a bid-to-cover ratio of 2.67, above the 10-auction average of 2.62.

The steepening yield curve is bearish for T-note prices. Steepening trades occur when 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 Fed said it would begin purchasing up to $40 billion of short-term T-bills a month to boost liquidity in the financial system. Longer-term Treasury securities are also under pressure from concerns about inflation and the Fed’s independence. 

European government bond yields were mixed on Wednesday.  The 10-year German bund yield rebounded from a 1-week low of 2.826% and finished up +1.9 bp to 2.864%.  The 10-year UK gilt yield fell to a 1.5-week low of 4.446% and finished down -4.3 bp to 4.475%.

Eurozone Nov CPI was revised downward to +2.1% y/y from the previously reported +2.2% y/y.

Eurozone Q3 labor costs eased to +3.3% y/y from +3.9% y/y in Q2, the smallest pace of increase in three years.

The German Dec IFO business conditions survey unexpectedly fell -0.4 to a 7-month low of 87.6 versus expectations of an increase to 88.2.

UK Nov CPI eased to +3.2% y/y from +3.6% y/y in Oct, better than expectations of +3.5% y/y and the slowest pace of increase in eight months.  Nov core CPI rose +3.2% y/y, weaker than expectations of +3.4% y/y and the slowest pace of increase in 11 months.

Swaps are discounting a 0% chance for a -25 bp rate cut by the ECB at its next policy meeting on Thursday.

US Stock Movers

AI-infrastructure stocks and chip makers sold off on Wednesday and weighed on market sentiment.  GE Vernova (GEV) closed down more than -10% to lead losers in the S&P 500, and Constellation Energy (CEG) closed down more than -6% to lead losers in the Nasdaq 100.  Also, ASML Holding NV (ASML), Palantir Technologies (PLTR), ARM Holdings Plc (ARM), Lam Research (LRCX), and Advanced Micro Devices (AMD) closed down more than -5%.  In addition, KLA Corp (KLAC), Broadcom (AVGO), and Applied Materials (AMAT) closed down more than -4%, and Nvidia (NVDA), Microchip Technology (MCHP), Intel (INTC), and Micron Technology (MU) closed down more than -3%. 

Cryptocurrency-exposed stocks tumbled on Wednesday as Bitcoin (^BTCUSD) fell more than -2%.  Mara Holdings (MARA) and Galaxy Digital Holdings (GLXY) closed down more than -6%.  Also, Strategy (MSTR) closed down more than -4%, and Riot Platforms (RIOT) and Coinbase Global (COIN) closed down more than -3%.

Homebuilding stocks retreated on Wednesday, led by a -4% fall in Lennar (LEN) after it forecast Q1 new orders of 18,000 to 19,000, below the consensus of 20,297.  Also, DR Horton (DHI) and PulteGroup (PHM) closed down more than -1%.

Energy producers and energy service providers moved higher on Wednesday after WTI crude oil rose more than 1%.  Devon Energy (DVN) closed up more than +5%, and ConocoPhillips (COP) and Occidental Petroleum (OXY) closed up more than +4%.  Also, Diamondback Energy (FANG) closed up more than +3% to lead gainers in the Nasdaq 100.  In addition, APA Corp (APA), Halliburton (HAL) and Exxon Mobil (XOM) closed up more than +2%.  Finally, Chevron (CVX) closed up more than +1% to lead gainers in the Dow Jones Industrials. 

Oracle (ORCL) closed down more than -5% after the Financial Times reported that Blue Owl Capital will not back a $10 billion deal for Oracle’s next data center. 

Brown-Forman Corp (BF.B) closed down more than -5% after Citigroup downgraded the stock to sell from neutral with a price target of $27.

Paramount Skydance (PSKY) closed down more than -5% as Warner Bros. Discovery plans to reject Paramount Skydance’s takeover bid due to concerns about financing and other terms. 

Fortinet (FTNT) closed down more than -3% after JPMorgan Chase downgraded the stock to underweight from neutral with a price target of $75.

Bally’s Corp (BALY) closed down more than -3% after Barclays downgraded the stock to underweight from equal weight with a price target of $11.

Worthington Enterprises (WOR) closed down more than -2% after reporting Q2 adjusted EPS of 65 cents, weaker than the consensus of 70 cents. 

Progressive Corp (PGR) closed down more than -1% after reporting that November net premiums written fell 12% m/m.

Texas Pacific Land Corp (TPL) closed up more than +7% to lead gainers in the S&P 500 after announcing a strategic agreement with Bolt Data & Energy to develop large-scale data center campuses across TPL’s West Texas land holdings. 

General Mills (GIS) closed up more than +3% after reporting Q2 net sales of $4.86 billion, above the consensus of $4.79 billion.

Albemarle (ALB) closed up more than +2% to lead lithium producers higher as lithium prices continue to rise with expected demand growth.

Lumentum Holdings (LITE) closed up more than +1% after Morgan Stanley raised its price target on the stock to $304 from $190. 

Salesforce (CRM) closed up more than +1% after BTIG initiated coverage on the stock with a recommendation of buy and a price target of $335.

Earnings Reports(12/18/2025)

Accenture PLC (ACN), Birkenstock Holding Plc (BIRK), CarMax Inc (KMX), Cintas Corp (CTAS), Darden Restaurants Inc (DRI), FactSet Research Systems Inc (FDS), FedEx Corp (FDX), HEICO Corp (HEI), NIKE Inc (NKE).