The S&P 500 Index ($SPX) (SPY) on Friday closed down by -1.07%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down by -0.51%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down by -1.91%.  December E-mini S&P futures (ESZ25) fell -1.07%, and December E-mini Nasdaq futures (NQZ25) fell -1.94%.

Stock indexes sold off sharply on Friday, with the S&P 500 posting a 1.5-week low, the Nasdaq 100 a 2-week low, and the Dow Jones Industrial Average retreating from a new all-time high.  Friday’s slump in technology shares weighed on the broader market.

Broadcom plunged more than -11% to lead chip makers and tech stocks lower Friday after its sales outlook fell short of lofty expectations and the company failed to provide an AI revenue forecast for 2026.  This week’s disappointing outlooks from Oracle and Broadcom have also 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.  However, investor rotation out of tech stocks into industrial stocks is providing support to the Dow Jones Industrial Average. 

Hawkish Fed comments on Friday pushed T-note yields higher and undercut stocks.  The 10-year T-note yield rose about +3 bp after Chicago Fed President Austan Goolsbee, who voted against a Fed rate cut on Wednesday, said, "Given that inflation has been above our target for 4.5 years, further progress on it has been stalled for several months, and almost all the business people and consumers we have spoken to identify prices as a main concern, I felt the more prudent course would have been to wait for more information." Also, Kansas City Fed President Jeff Schmid said he dissented against the FOMC's decision to cut interest rates on Wednesday and prefers to keep policy "modestly restrictive" because inflation remains too high and the economy continues to show momentum.

In addition, Cleveland Fed President Beth Hammack said, "I would prefer for the Fed to be on a slightly more restrictive stance to help continue to put pressure" on the inflation side of its mandate.

On the dovish side, Philadelphia Fed President Anna Paulson said, "On net, I am still a little more concerned about labor market weakness than about upside risks to inflation."

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.

Q3 corporate earnings season is virtually over as 497 of the 500 S&P companies have released results.  According to Bloomberg Intelligence, 83% of reporting S&P 500 companies exceeded forecasts, on course for the best quarter since 2021.  Q3 earnings rose +14.6%, more than doubling expectations of +7.2% y/y. 

Overseas stock markets settled mixed on Friday.  The Euro Stoxx 50 fell from a 4-week high and closed down -0.58%.  China’s Shanghai Composite recovered from a 2.5-week low and closed up +0.41%.  Japan’s Nikkei Stock 225 rallied to a 4-week high and closed up +1.37%.

Interest Rates

March 10-year T-notes (ZNH6) on Friday closed down by -9 ticks.  The 10-year T-note yield rose +3.5 bp to 4.192%.  Hawkish Fed comments on Friday weighed on T-note prices.  Chicago Fed President Austan Goolsbee said that, given higher inflation, the more prudent course would have been for the Fed to wait for more information before cutting rates.  Also, Kansas City Fed President Jeff Schmid and Cleveland Fed President Beth Hammack said they prefer to keep policy "modestly restrictive" because inflation remains too high and the economy continues to show momentum.  T-note prices had underlying support from safe-haven demand amid Friday’s stock weakness.

T-notes are also under pressure due to steepening trades, where bond investors buy short-term government debt and sell long -term debt. The yield curve has steepened since 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 higher on Friday.  The 10-year German bund yield rose +1.4 bp to 2.857%. The 10-year UK gilt yield rose +3.3 bp to 4.517%.

UK Oct manufacturing production rose +0.5% m/m, weaker than expectations of +1.1% m/m.

Swaps are discounting a 0% chance for a -25 bp rate cut by the ECB at its next policy meeting on December 18.

US Stock Movers

Broadcom (AVGO) sank more than -11% to lead chip stocks lower after its sales outlook fell short of lofty expectations and the company failed to provide an AI revenue forecast for 2026.  Also, Micron Technology (MU) closed down by more than -6%, and Marvell Technology (MRVL) and Lam Research (LRCX) closed down by more than -5%.  In addition, KLA Corp (KLAC), Advanced Micro Devices (AMD), and Applied Materials (AMAT) closed down more than -4%.  Finally, Intel (INTC), Nvidia (NVDA), ASML Holding NV (ASML), GlobalFoundries (GFS), and ARM Holdings Plc (ARM) closed down more than -3%. 

AI-linked power stocks retreated on Friday after Broadcom’s sales outlook failed to impress.  Vertiv Holdings (VRT) closed down more than -9%, and Amphenol (APH) and Constellation Energy (CEG) closed down more than -7%.  Also, Eaton Corp Plc (ETN) closed down by more than -5%, and GE Vernova (GEV) closed down by more than -4%. 

Cryptocurrency-exposed stocks were under pressure Friday as Bitcoin (^BTCUSD) fell more than -3%.  Galaxy Digital Holdings (GLXY) closed down more than -10%, and Strategy (MSTR) closed down more than +3%.  Also, Riot Platforms (RIOT) and MARA Holdings (MARA) closed down more than -2%, and Coinbase Global (COIN) closed down -0.58%. 

Sandisk (SNDK) closed down more than -14% to lead losers in the S&P 500 after GF Securities downgraded the stock to hold from buy. 

Netskope (NTSK) closed down more than -11% after reporting a Q3 adjusted net loss of -10 cents per share and forecasting a full-year adjusted net loss of -51 cents to -53 cents.   

Ciena Corp (CIEN) closed down more than -9% after Northland Securities downgraded the stock to market perform from outperform. 

Roblox (RBLX) closed down more than -6% after JPMorgan Chase downgraded the stock to neutral from overweight. 

Veeva Systems (VEEV) closed down more than -2% after KeyBanc Capital Markets downgraded the stock to sector weight from overweight. 

Lululemon Athletica (LULU) closed up more than +9% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q3 EPS of $2.59, stronger than the consensus of $2.22, and raising its 2026 EPS forecast to $12.92-$13.02 from a previous forecast of $12.77-$12.97, above the consensus of $12.89. 

Quanex Building Products (NX) closed up more than +9% after reporting Q4 adjusted EPS of 83 cents, well above the consensus of 52 cents. 

General Electric (GE) closed up more than +3% after Citigroup initiated coverage on the stock with a recommendation of buy and a price target of $386.

Linde Plc (LIN) closed up more than +3% after Citigroup said the stock is a new top pick with a buy recommendation and a price target of $520.

Bristol-Myers Squibb (BMY) closed up more than +2% after Guggenheim Securities upgraded the stock to buy from neutral with a price target of $62.

Allegiant Travel (ALGT) closed up more than +1% after Deutsche Bank upgraded the stock to buy from hold with a price target of $105.

Earnings Reports(12/15/2025)

Dakota Gold Corp (DC), Lifezone Metals Ltd (LZM), Lionsgate Studios Corp (LION), Triller Group Inc (ILLR).