The S&P 500 Index ($SPX) (SPY) on Monday closed down by -0.16%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down by -0.09%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down by -0.51%.  December E-mini S&P futures (ESZ25) fell -0.14%, and December E-mini Nasdaq futures (NQZ25) fell -0.51%.

Stock indexes erased early gains on Monday and turned lower, with the S&P 500 falling to a 2-week low and the Nasdaq 100 sliding to a 2.5-week low.  Stocks settled lower on Monday ahead of Tuesday’s important November payrolls report. Also, energy stocks retreated after crude prices dropped to a 1.75-month low, and cryptocurrency-exposed stocks slumped after Bitcoin fell more than -4% to a 2-week low.

Stocks extended last Friday’s losses on Monday on concerns over artificial intelligence spending.  Broadcom closed down more than -5%, and Oracle fell more than -2% to lead AI-infrastructure stocks lower as last week’s disappointing outlooks from Oracle and Broadcom have prompted some investors to rotate out of the tech sector amid lofty valuations and uncertainty over whether vast spending on AI infrastructure will ultimately pay off. 

Dovish Fed comments on Monday were supportive for stocks.  Fed Governor Stephen Miran said the Fed's policy stance is unnecessarily restrictive for the economy, citing a benign inflation outlook and labor-market warning signs.  Also, NY Fed President John Williams said, "The FOMC has moved the modestly restrictive stance of monetary policy toward neutral," amid increased employment risks and somewhat reduced inflation risks.

Monday’s US economic news was mixed for stocks.  The Dec Empire manufacturing survey of general business conditions unexpectedly contracted -22.6 points to -3.9, weaker than expectations of 10.0.  Also, the Dec NAHB housing market index rose +1 to an 8-month high of 39, right on expectations.

Weaker-than-expected Chinese economic news is negative for global growth prospects.  China's Nov industrial production unexpectedly eased to +4.8% y/y from +4.9% y/y in Oct, versus expectations of an increase to +5.0% y/y.  Also, China's Nov retail sales rose +1.3% y/y, weaker than expectations of +2.9% y/y and the smallest pace of increase in 2.75 years. In addition, China's new home prices fell 0.39% m/m, marking the 30th consecutive month of declines.

This week's market focus will be on US economic news.  On Tuesday, Nov nonfarm payrolls are expected to increase by +50,000, and the Nov unemployment rate is expected to be at 4.5%. Meanwhile, Nov average hourly earnings are expected to rise by +0.3% m/m and +3.6% y/y.  Also, on Tuesday, Oct retail sales are expected to be up +0.1% m/m, and Oct retail sales ex-autos are expected to be up +0.2% m/m.  Finally, on Tuesday, the Dec S&P manufacturing PMI is expected to decline by -0.2 to 52.0.  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 22% 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 Monday.  The Euro Stoxx 50 closed up +0.56%.  China’s Shanghai Composite closed down -0.55%.  Japan’s Nikkei Stock 225 closed down -1.31%.

Interest Rates

March 10-year T-notes (ZNH6) on Monday closed up by +3.5 ticks.  The 10-year T-note yield fell -0.4 bp to 4.180%.  T-notes rose on Monday after the Dec Empire manufacturing survey of general business conditions unexpectedly contracted, a dovish factor for Fed policy.  T-notes also have support from dovish comments by Fed Governor Stephen Miran, who said the Fed's policy stance is unnecessarily restrictive for the economy.   T-notes fell back from their best level after the Dec NAHB housing market index rose to an 8-month high.

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, starting today, 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 moved lower on Monday.  The 10-year German bund yield fell -0.4 bp to 2.853%. The 10-year UK gilt yield fell -2.1 bp to 4.496%.

Eurozone Oct industrial production rose +0.8% m/m, right on expectations and the biggest increase in 5 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

Cryptocurrency-exposed stocks tumbled on Monday as Bitcoin (^BTCUSD) fell more than -4% to a 2-week low. Riot Platforms (RIOT) is down more than -7%, and Galaxy Digital Holdings (GLXY) is down more than -6%.  Also, Strategy (MSTR) and Mara Holdings (MARA) are down more than -5%, and Coinbase Global (COIN) is down more than -3%.

Energy producers and energy service providers retreated on Monday as WTI crude oil fell more than -1% to a 1.75-month low.  Devon Energy (DVN) closed down more than -3%.  Also, APA Corp (APA) and Occidental Petroleum (OXY) closed down more than -2%.  In addition, ConocoPhillips (COP) and Diamondback Energy (FANG) closed down more than -1%. 

ServiceNow (NOW) closed down more than -10% to lead losers in the S&P 500 after KeyBanc Capital Markets downgraded the stock to underweight from sector weight with a price target of $775.

ARM Holdings Plc (ARM) closed down more than -5% after Goldman Sachs downgraded the stock to sell from neutral with a price target of $120.

Builders FirstSource (BLDR) closed down more than -3% after Jeffries downgraded the stock to hold from buy.

LyondellBasell Industries NV (LYB) closed down more than -2% after BMO Capital Markets downgraded the stock to underperform from market perform with a price target of $36.

Entegris Inc. (ENTG) closed down more than -2% after Goldman Sachs downgraded the stock to sell from neutral with a price target of $75.

Adobe (ADBE) closed down more than -2% after KeyBanc Capital Markets downgraded the stock to underweight from sector weight with a price target of $310.

Immunome (IMNM) closed up more than +13% after announcing positive results from a Phase 3 trial of its Varegacestat in patients with desmoid tumors. 

ZIM Integrated Shipping Services (ZIM) closed up more than +8% after Calcalist reported that MSC has submitted a bid to purchase the company. 

Bristol-Myers Squibb (BMY) closed up more than +3% after Bank of America Global Research upgraded the stock to buy from neutral with a price target of $61.

Hershey Co. (HSY) closed up more than +3% after Morgan Stanley upgraded the stock to overweight from equal weight, with a price target of $211.

Corebridge Financial (CRBG) closed up more than +2% after S&P Dow Jones Indices said the stock will replace Allete Inc in the S&P MidCap 400 effective before the open of trading on Wednesday, December 17. 

KLA Corp (KLAC) closed up more than +2% after Jeffries upgraded the stock to buy from hold with a price target of $1,500. 

Charles River Laboratories (CRL) closed up more than +2% after JPMorgan Chase raised its price target on the stock to $190 from $165.   

Earnings Reports(12/16/2025)

CSP Inc (CSPI), Golden Matrix Group Inc (GMGI), Immersion Corp (IMMR), Lennar Corp (LEN), RCI Hospitality Holdings Inc (RICK), Worthington Enterprises Inc (WOR). 

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