Market Performance Overview
On Friday, the S&P 500 Index ($SPX) rose by +0.79%, while the Dow Jones Industrials Index ($DOWI) increased by +1.01%. The Nasdaq 100 Index ($IUXX) saw a rise of +1.04%. Additionally, December E-mini S&P futures (ESZ25) were up +0.74%, and December E-mini Nasdaq futures (NQZ25) rose by +1.00%.
Inflation Impact on Stocks
Both the S&P 500 and Nasdaq 100 indexes reached all-time highs on Friday, buoyed by a somewhat softer-than-anticipated US Consumer Price Index (CPI) report. This provided the Federal Reserve with more flexibility regarding interest rate cuts. The September CPI report showed a rise of +0.3% month-over-month and +3.0% year-over-year, both slightly below market forecasts of +0.4% and +3.1%, respectively. The core CPI also fell short of expectations with a reported +0.2% m/m and +3.0% y/y.
Manufacturing and Consumer Sentiment
Stocks benefitted from the October S&P US manufacturing PMI report, which increased by +0.2 to 52.2, exceeding expectations of no change at 52.0. The October US services PMI also improved by +1.0 to 55.2, better than the anticipated dip to 53.5. However, the final October University of Michigan US consumer sentiment index declined by -1.4 points to 53.6, which was below the expected drop of -0.5 points to 54.5.
Trade Negotiations and Market Reactions
Market sentiment was shaken after President Trump announced the termination of trade negotiations with Canada, prompted by a provocative anti-tariff advertisement from Ontario. Trump criticized the ad, suggesting it misled viewers regarding the effects of tariffs on innovation and worker welfare. The ongoing US government shutdown is also causing market uncertainty, with job reports delayed and an expected rise in unemployment due to furloughed federal workers.
Earnings Season Insights
Attention is focused on corporate earnings as the Q3 earnings season progresses. Positive earnings forecasts are generally boosting market sentiment, with 85% of S&P 500 companies reporting so far surpassing expectations. Nevertheless, Q3 profits are projected to increase by only +7.2% year-over-year, marking the smallest growth in two years, while Q3 sales growth is expected to slow to +5.9% from the previous quarter’s 6.4%.
Global Market Trends
International stock markets closed positively on Friday, with the Euro Stoxx 50 up +0.11%, China’s Shanghai Composite rising +0.71%, and Japan’s Nikkei Stock 225 increasing by +1.35%. In the bond market, December 10-year T-notes fell slightly, with the yield declining to 3.997% amid the uncertain economic climate.
Notable US Stock Movements
The so-called ‘Magnificent Seven’ stocks saw gains on Friday, aside from Tesla’s notable -3.4% decrease. Semiconductor stocks like Advanced Micro Devices and Micron Technology had significant increases of over +7% and +5%, respectively. Ford echoed favorable news with a rise exceeding +12% post-earnings, while Newmont and Deckers Outdoor faced declines in share value.
