On Wednesday, the S&P 500 Index ($SPX) (SPY) closed +0.37% higher, the Dow Jones Industrials Index ($DOWI) (DIA) closed +0.48% higher, and the Nasdaq 100 Index ($IUXX) (QQQ) closed +0.72% higher. December E-mini S&P futures (ESZ25) rose +0.36%, and December E-mini Nasdaq futures (NQZ25) rose +0.60%.
US stock indexes recovered from early losses on Wednesday as signs of strength in the US economy boosted optimism about the economic outlook. The monthly US ADP employment report showed that private sector employers added more jobs than expected, and activity in the US services sector increased by the most in 8 months. Additionally, strength among chipmakers on Wednesday helped lift the broader market.
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Stock indexes initially moved lower on Wednesday, with the S&P 500 and Nasdaq 100 hitting 1.5-week lows. The correction in AI-infrastructure stocks continued on Wednesday, with Super Micro Computer falling more than -10% after reporting lower-than-expected net sales in the first quarter, leading the sector into decline.
Higher T-note yields were also negative for stocks after better-than-expected US economic news on ADP employment and ISM services activity pushed the 10-year T-note yield to a 4-week high of 4.159% on Wednesday.
The US Treasury today announced $125 billion in sales of T-notes and T-bonds in next week’s quarterly refund, in line with expectations. The Treasury also said it is not considering boosting sales of notes and bonds until next year and will rely increasingly on short-term T-bills to finance the budget deficit.
US MBA mortgage applications fell -1.9% in the week ending October 31, the purchase mortgage sub-index fell -0.6% and the refinance sub-index fell -2.8%. The average 30-year fixed rate mortgage increased +1 bp to 6.31% from 6.30% last week.
US October ADP employment change rose to +42,000, stronger than expectations of +30,000.
The US October ISM services index rose +2.4 to 52.4, stronger than expected from 50.8 and the fastest pace of expansion in 8 months. However, price pressures in the services sector intensified after the October ISM services prices paid sub-index unexpectedly rose by +0.6 to a 3-year high of 70.0, while a decline to 68.0 was expected.
Markets are ruling out a 62% chance of a -25 bp rate cut at the next FOMC meeting on December 9-10.
The U.S. Supreme Court appeared skeptical Wednesday about whether President Trump’s reciprocating tariffs are legal. Chief Justice Roberts and Justices Gorsuch and Cooney questioned President Trump’s use of emergency-powers legislation to collect tariffs, with Roberts saying that tariffs were “an imposition of taxes on Americans, and that has always been the core power of Congress.” It is expected that the Supreme Court will give its decision by the end of this year or early 2026. Lower courts have already ruled that Mr. Trump’s reciprocating tariffs are illegal, finding that they are based on a specific claim of emergency authority under the International Emergency Economic Powers Act of 1977. If the U.S. Supreme Court upholds those rulings and strikes down the tariffs, the U.S. government may have to return reciprocal and fentanyl-linked tariffs already collected, totaling more than $80 billion, and Mr. Trump’s power to impose tariffs could be limited to well-established sections of U.S. trade law, such as Sections 232, 301 and 201.
Q3 corporate earnings season continues at a strong clip this week, with 136 of the S&P 500 companies reporting earnings this week. According to Bloomberg Intelligence, 80% of S&P 500 companies reported so far have beaten forecasts for their best quarter since 2021. However, Q3 profits are expected to increase by +7.2% year-on-year, the smallest increase in two years. Furthermore, Q3 sales growth is projected to slow to +5.9% y/y from +6.4% in Q2.
The US government shutdown, now in its sixth week, is the longest in history, which is weighing on market sentiment and the US economy. The government shutdown is causing delays in many government reports and having an adverse impact on the US economy.
There was a mixed trend in foreign stock markets on Wednesday. Euro Stoxx 50 closed +0.16% higher. China’s Shanghai Composite recovered from a 1.5-week low to close +0.23% higher. Japan’s Nikkei Stock 225 fell to a 1.5-week low and closed down -2.50%.
interest rates
December 10-year T-notes (ZNZ5) closed at -14.5 ticks on Wednesday. The 10-year T-note yield rose +7.0 bp to 4.155%. December T-notes gave up overnight gains and fell to a 4-week low, and the 10-year T-note yield hit a 4-week high of 4.159%. T-notes retreated on Wednesday after the October ADP employment change, private sector employers added more jobs than expected last month and the October ISM service sector expanded at its fastest pace in eight months, were dangerous factors for Fed policy. Furthermore, price pressures in the services sector are negative for T-notes after the October ISM Services Prices Payment sub-index unexpectedly hit a 3-year high. T-notes pared their losses as inflation expectations rose, with the 10-year breakeven inflation rate hitting a 3.5-week high of 2.327% on Wednesday.
T-note prices have underlying support from the ongoing US government shutdown, which is now the longest in history and could lead to additional job losses, reduce consumer spending and weaken the US economy, allowing the Fed to continue cutting interest rates.
European government bond yields rose on Wednesday. The 10-year German Bund yield hit a 3.5-week high of 2.678% and ended +1.9bp at 2.673%. 10-year UK gilt yields hit a 2-week high of 4.473% and ended +3.7bp at 4.463%.
The Eurozone October S&P Composite PMI was revised down +0.3 to 52.5 from 52.2 previously reported, the strongest pace of expansion in nearly 2.5 years.
Eurozone September PPI fell -0.1% per month and -0.2% year-on-year, slightly weaker than expected with no change year-on-year.
German September factory orders increased +1.1% m/m, stronger than expected by +0.9% m/m and the largest increase in 5 months.
The swaps are discounting a -4% chance of a -25 bp rate cut by the ECB at its next policy meeting on December 18.
US Stock Movers
Chip makers rallied on Wednesday, providing support to the overall market. Seagate Technology Holdings PLC (STX) closed up more than +11% to lead the S&P 500, and Micron Technology (MU) closed up more than +9%. Additionally, Marvell Technology (MRVL) closed up more than +7%, and Lam Research (LRCX) and Western Digital Corp (WDC) closed up more than +6%. Additionally, ON Semiconductor (ON), Qualcomm (QCOM), Applied Materials (AMAT) closed up more than +4%, and KLA Corp (KLAC), GlobalFoundries (GFS), NXP Semiconductors NV (NXPI), Analog Devices (ADI), and Intel (INTC) closed up more than +3%.
Lumentum Holdings (LITE) closed up more than +23% after reporting Q1 adjusted EPS of $1.10, stronger than the $1.03 consensus, and Q2 adjusted EPS of $1.30 to $1.50, stronger than the $1.17 consensus.
Unity Software (U) closed up more than +18% after reporting third-quarter revenue of $470.6 million, better than the consensus of $452.6 million, and estimating fourth-quarter revenue of $480 million to $490 million, better than the consensus of $477 million.
Toast (TOST) closed up more than +10% after reporting Q3 revenue of $1.63 billion, better than the consensus of $1.59 billion.
Johnson Controls International (JCI) closed up more than +8% after reporting fourth-quarter net sales of $6.44 billion, better than the consensus of $6.33 billion.
Amgen (AMGN) closed up more than +7% on the Dow Jones Industrials after reporting third quarter product sales of $9.14 billion, stronger than the consensus estimate of $8.57 billion.
AES Corp (AES) closed up more than +6% after reporting Q3 revenue of $3.35 billion, stronger than the $3.19 billion consensus.
Caterpillar ( CAT ) closed up more than +4% after it saw a record backlog in orders for gas turbines and plans to double its capacity to produce turbines to meet demand from natural gas plants to power data centers and artificial intelligence.
Zimmer Biomet Holdings (ZBH) closed down more than -15% after reporting third-quarter net sales of $2.00 billion, weaker than the $2.01 billion consensus, leading the losers in the S&P 500.
Exxon Enterprise (EXXON) closed the Nasdaq 100 lower by more than -9% after reporting third-quarter adjusted EPS of $1.17, well short of the $1.51 consensus.
Pinterest (PINS) closed down more than -21% after estimating Q4 revenue of $1.31 billion to $1.34 billion, falling short of the $1.34 billion consensus.
Kratos Defense & Security Solutions (KTOS) closed down more than -14% after estimating fourth-quarter revenue of $320 million to $330 million, falling short of the consensus of $333.5 million.
Super Micro Computer (SMCI) closed down more than -11% after reporting Q1 net sales of $5.02 billion, well below the consensus estimate of $6.09 billion.
Arista Networks (ANET) closed down more than -8% after estimating fourth-quarter adjusted gross margin of 62% to 63%, which is below the consensus of 63.2%.
Humana (HUM) closed down more than -5% after cutting its full-year EPS forecast to $12.26 from the previous forecast of $13.77, well below the consensus of $14.69.
Income Report(11/6/2025)
Air Products & Chemicals Inc. (APD), Airbnb Inc. (ABNB), Akamai Technologies Inc. (AKAM), Alliant Energy Corp. (LNT), AstraZeneca PLC (AZN), Becton Dickinson & Co. (BDX), Block Inc. (XYZ), Camden Property Trust (CPT), ConocoPhillips (COP), Consolidated Edison Inc. (ED), Cummins Inc. (CMI), Datadog Inc. (DDOG), DuPont de Nemours Inc. (DD), EOG Resources Inc. (EOG), EPAM Systems Inc. (EPAM), Evergy Inc. (EVRG), Expedia Group Inc. (XPE), Gen Digital Inc. (GEN), Insulet Corp. (PODD), Mettler-Toledo International I (MTD), Microchip Technology Inc. (MCHP), Moderna Inc. (MRNA), Monster Beverage Corp. (MNST), News Corp (NWSA), NRG Energy Inc (NRG), Parker-Hannifin Corp (PH), Ralph Lauren Corp (RL), Rockwell Automation Inc (ROK), Solstice Advanced Materials In (SOLS), Solventum Corp (SOLV), Take-Two Interactive Software (TTWO), Tapestry Inc (TPR), Trade Desk Inc/The (TTD), Viatris Inc. (VTRS), Vistra Corp. (VST), Warner Bros. Discovery Inc. (WBD), Wynn Resorts Ltd. (WYNN).
On the date of publication, Rich Asplund did not have (directly or indirectly) any positions in any securities mentioned in this article. All information and data in this article is for informational purposes only. Please see the Barchart Disclosure Policy here for more information.
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