The S&P 500 Index ($SPX) (SPY) on Thursday closed up by +0.79%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up by +0.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up by +1.51%.  December E-mini S&P futures (ESZ25) rose +0.74%, and December E-mini Nasdaq futures (NQZ25) rose +1.41%.

Stock indexes finished higher on Thursday, led by a rebound in chip stocks following Wednesday’s rout.  Micron Technology, the largest US memory-chip maker, closed up more than +10% to lead chip stocks higher after giving an upbeat forecast for the current quarter, citing surging demand and supply shortages that are allowing the company to charge more for its products.  Strength in the Magnificent Seven technology stocks on Thursday also provided support to the overall market.

Gains in stock indexes accelerated Thursday after US weekly jobless claims fell as expected and a benign US inflation report showed that November consumer prices ex-food and energy rose at the slowest pace in 4.5 years.  The easing price pressures also knocked bond yields lower and bolstered the outlook for additional Fed rate cuts.  The 10-year T-note yield fell to a 1.5-week low of 4.10%. 

US weekly initial unemployment claims fell -13,000 to 224,000, close to expectations of 225,000.

US Nov CPI rose +2.7% y/y, weaker than expectations of +3.1% y/y. Nov core CPI rose +2.6% y/y, weaker than expectations of +3.0% y/y and the smallest pace of increase in 4.5 years.

The US Dec Philadelphia Fed business outlook survey unexpectedly fell by -8.5 to -10.2, weaker than expectations of an increase to 2.3.

This week's market focus will be on US economic news.  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 27% 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 Thursday.  The Euro Stoxx 50 closed up +1.06%.  China’s Shanghai Composite closed up +0.16%.  Japan’s Nikkei Stock 225 fell to a 3-week low and closed down -1.03%.

Interest Rates

March 10-year T-notes (ZNH6) on Thursday closed up by +8 ticks.  The 10-year T-note yield fell -3.9 bp to 4.114%.  Mar T-notes climbed to a 1.5-week high today, and the 10-year T-note yield fell to a 1.5-week low of 4.10%.

T-notes rallied on Thursday due to some Fed-friendly US economic reports.  US Nov CPI rose less than expected, and the Dec Philadelphia Fed business outlook survey unexpectedly contracted, dovish factors for Fed policy.  T-notes added to their gains on Thursday as inflation expectations declined after the 10-year breakeven inflation rate fell to an 8-month low of 2.208%.  Strength in stocks on Thursday limited the upside in T-notes. 

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 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 are mixed today.  The 10-year German bund yield fell from an 8-month high of 2.897% and finished down -1.4 bp to 2.850%.  The 10-year UK gilt yield rebounded from a 1.5-week low of 4.439% and finished up +0.6 bp to 4.481%.

The ECB, as expected, kept the deposit facility rate unchanged at 2.00%.  The ECB raised its 2025 Eurozone GDP forecast to 1.4% from a prior forecast of 1.2% and kept its 2025 inflation ex-food and energy forecast unchanged at 2.4%.

ECB President Lagarde said the Eurozone economy has been "resilient" and the inflation outlook has been more uncertain than usual.

The BOE, as expected, in a 5-4 vote cut its official bank rate by -25 bp to 3.75% and said interest rates are likely to continue on a gradual downward path.

BOE Governor Bailey said, "With every interest rate cut the BOE makes, how much further we go becomes a closer call."

Swaps are discounting a 1% chance for a -25 bp rate cut by the ECB at its next policy meeting on February 5.

US Stock Movers

Micron Technology (MU) rose more than +10% to lead chip makers higher after reporting Q1 revenue of $13.64 billion, stronger than the consensus of $12.95 billion, and forecasting Q2 revenue of $18.3 billion to $19.1 billion, well above the consensus of $14.38 billion.  Also, Sandisk (SNDK), Western Digital (WDC), and Lam Research (LRCX) closed up more than +6%, and Seagate Technology Holdings (STX) closed up more than +5%.  In addition, KLA Corp (KLAC) closed up more than +4%, and Marvell Technology (MRVL) closed up more than +3%.  Finally, Applied Materials (AMAT), ON Semiconductor (ON), Advanced Micro Devices (AMD), and ASML Holding NV (ASML) closed up more than +2%. 

The Magnificent Seven technology stocks rallied on Thursday, providing support to the overall market.  Tesla (TSLA) closed up more than +3%, and Amazon.com (AMZN) and Meta Platforms (META) closed up more than +2%.  Also, Alphabet (GOOGL), Nvidia (NVDA), and Microsoft (MSFT) closed up more than +1%.  In addition, Apple (AAPL) closed up +0.13%.

Trump Media & Technology Group (DJT) closed up more than +44% after it agreed to merge with TAE Technologies in an all-stock transaction valued at more than $6 billion.

Rivian Automotive (RIVN) closed up more than +14% after Baird upgraded the stock to outperform from neutral with a price target of $25.

GE Vernova (GEV) closed up more than +4% after Jeffries upgraded the stock to buy from hold with a price target of $815.

Cytokinetics (CYTK) closed up more than +4% after Goldman Sachs upgraded the stock to buy from neutral with a price target of $95. 

Lululemon Athletica (LULU) closed up more than +3% after the Wall Street Journal reported that Elliot Investment Management has built a stake of more than $1 billion in the company. 

Merck & Co (MRK) is up more than +1% after BMO Capital Markets upgraded the stock to outperform from market perform with a price target of $130. 

Insmed (INSM) closed down more than -15% after saying a mid-stage trial of its experimental therapy for inflammation of the nasal passages and sinuses failed to meet primary or secondary efficacy goals, prompting discontinuation of the program. 

Birkenstock Holding Plc (BIRK) closed down more than -11% after forecasting 2026 adjusted Ebitda of 700 million euros, well below the consensus of 757.8 million euros. 

FactSet Research Systems (FDS) closed down more than -7% to lead losers in the S&P 500 after forecasting full-year revenue of $2.42 billion to $2.45 billion, the midpoint below the consensus of $2.44 billion. 

Cinemark Holdings (CNK) closed down more than -6% after Morgan Stanley downgraded the stock to equal weight from overweight.

Lennar (LEN) closed down more than -3% after RBC Capital Markets downgraded the stock to underperform from sector perform with a price target of $95.

Maplebear Inc. (CART) closed down more than -1% after Reuters reported the FTC is probing the company’s Eversight AI pricing tool. 

Earnings Reports(12/19/2025)

Carnival Corp (CCL), Conagra Brands Inc (CAG), Lamb Weston Holdings Inc (LW), Paychex Inc (PAYX).

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