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 indexes settled higher on Friday amid positive corporate earnings.  Amazon.com closed up more than +9% to lead megacap technology stocks higher after reporting blowout earnings and giving an optimistic forecast.  Also, Western Digital closed up more than +8% after reporting Q1 net revenue above consensus.  As of Friday, Q3 earnings results from more than 60% of the companies in the S&P 500 have been reported, with more than 80% beating estimates —a bullish factor for the overall market. 

Friday's minor US economic news was supportive for stocks after the Oct MNI Chicago PMI rose +3.2 to 43.8, stronger than expectations of 42.3.

Hawkish Fed comments on Friday were negative for stocks.  Kansas City Fed President Jeff Schmid said he voted against the Fed's 25 bp interest rate cut on Wednesday because "the labor market is largely in balance, the economy shows continued momentum, and inflation remains too high."  Also, Dallas Fed President Lorie Logan said, "I did not see a need to cut rates this week, and I'd 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 rapidly."  In addition, Cleveland Fed President Beth Hammack said she "would have preferred to have held interest rate steady at Wednesday's FOMC meeting as we need to maintain some amount of restriction to help get inflation back down to target."

The markets are discounting a 64% chance of another -25 bp rate cut at the next FOMC meeting on December 9-10.  The markets are discounting an overall 82 bp rate cut by the end of 2026 to 3.06% from the current effective federal funds rate of 3.88%.

Stocks have support after President Trump and President Xi Jinping on Thursday agreed to extend a tariff truce, roll back export controls, and reduce other trade barriers.  The US will cut fentanyl-related tariffs on Chinese goods to 10% from 20% and extend a pause on some reciprocal tariffs for an additional year, while China resumes purchases of US soybeans, sorghum, and other farm products.  The agreement also includes China pausing controls on rare-earth magnets in exchange for the US rolling back an expansion of restrictions on Chinese companies.

Q3 corporate earnings results have been running strong so far. According to Bloomberg Intelligence, 80% of the S&P 500 companies that have reported so far have beaten forecasts, on course for the best quarter since 2021.  However, Q3 profits are expected to have risen by +7.2% y/y, the smallest increase in two years.  Also, Q3 sales growth is projected to slow to +5.9% y/y from +6.4% in Q2.

Regarding President Trump's reciprocal tariffs, markets are looking ahead to oral arguments at the Supreme Court scheduled for November 5 on whether the tariffs are legal.  Lower courts have already ruled that Mr. Trump's reciprocal tariffs are illegal, finding they are based on a specious claim of emergency authority.  If the US Supreme Court upholds those rulings and strikes down the tariffs, then the US government will have to refund the reciprocal tariffs already collected, and Mr. 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 the reciprocal tariffs by late 2025 or early 2026.

The US government shutdown continues into its fifth week, weighing on market sentiment and the US economy.  The government shutdown is delaying the release of government reports, including all the recent weekly unemployment claims reports, the September unemployment and payroll report, Aug trade balance, Sep retail sales, Sep PPI, Sep housing starts, Sep industrial production, Sep leading indicators, and others. Bloomberg Economics estimates that 640,000 federal workers will be furloughed during the shutdown, which would expand jobless claims and push the unemployment rate up to 4.7%.

Overseas stock markets settled mixed on Friday.  The Euro Stoxx 50 closed down -0.65%.  China's Shanghai Composite closed down -0.81%.  Japan's Nikkei Stock 225 rose to a new record high and closed up sharply by +2.12%.

Interest Rates

December 10-year T-notes (ZNZ5) on Friday closed down -1 tick.  The 10-year T-note yield fell -0.2 bp to 4.095%.  T-note prices settled little changed on Friday.  Strength in equity markets on Friday curbed safe-haven demand for T-notes.  Also, hawkish Fed comments on Friday weighed on T-notes after Kansas City Fed President Jeff Schmid, Dallas Fed President Lorie Logan, and Cleveland Fed President Beth Hammack cited reasons for opposing Fed rate cuts.  In addition, rising inflation expectations were bearish for T-notes after the 10-year breakeven inflation rate rose to a 2-week high of 2.312% on Friday.

T-notes recovered most of their losses on Friday due to an increase in safe-haven demand after the Miami Herald reported that the US has decided to attack military fixtures in Venezuela and could act at any time.

T-note 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 Fed to continue cutting interest rates. 

European government bond yields moved lower on Friday.  The 10-year German bund yield fell -1.0 bp to 2.633%. The 10-year UK gilt yield fell -1.4 bp to 4.409%.

The Eurozone Oct CPI eased to +2.1% y/y from +2.2% y/y in Sep, right on expectations.  Oct core CPI remained unchanged from Sep at +2.4% y/y, stronger than expectations of +2.3% y/y.

German Sep retail sales rose +0.2% m/m and +2.8% y/y, slightly stronger than expectations of +0.2% m/m and +2.7% y/y.

Swaps are discounting a 4% chance for a -25 bp rate cut by the ECB at its next policy meeting on December 18.

US Stock Movers

Amazon.com (AMZN) closed up more than +9% to lead gainers in Dow Jones Industrials and Nasdaq 100 after reporting Q3 net sales of $180.17 billion, stronger than the consensus of $177.82 billion, and forecasting Q4 net sales of $206 billion-$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 of $1.31 billion to $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-$2.12 billion, above the consensus of $2.12 billion. 

Western Digital (WDC) closed up more than +8% after reporting Q1 net revenue of $2.82 billion, stronger than the consensus of $2.73 billion. 

Reddit (RDDT) closed up more than +8% after reporting 116 million daily active users in Q3, above the consensus of 114.16 million. 

Coinbase Global (COIN) closed up more than +5% after reporting Q3 total revenue of $1.87 billion, above the consensus of $1.80 billion. 

GoDaddy (GDDY) closed up more than +5% after reporting Q3 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 Q4 adjusted EPS of $4.30 to $4.36, the midpoint below the consensus of $4.35.

Arthur J Gallagher & Co. (AJG) closed down more than -4% after reporting Q3 revenue of $3.33 billion, weaker than 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).

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