The S&P 500 Index (SPY) closed down -0.63% on Thursday, while the Dow Jones Industrials Index (DIA) fell -0.65%. The Nasdaq 100 Index (QQQ) also saw a decline of -0.36%. In the futures market, December E-mini S&P futures (ESZ25) dropped -0.68%, while December E-mini Nasdaq futures (NQZ25) fell -0.41%.
Stock indexes initially gained ground on Thursday, buoyed by strong technology earnings. However, the momentum shifted as regional bank stocks plummeted due to concerns over credit quality, leading to long liquidation and a risk-off sentiment in the market. Notably, Zions Bancorp saw a decline of over 13%, and Western Alliance Bancorp dropped more than 10% after revealing issues related to loans and allegations of fraud.
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Despite the downturn, stocks initially rallied on the back of optimistic technology earnings. The rise in AI spending, particularly after Taiwan Semiconductor Manufacturing Co. raised its 2025 revenue growth projections for the second time this year, contributed to this positive sentiment.
Dovish comments from the Federal Reserve also played a role in supporting stocks. The 10-year T-note yield fell to a 6.25-month low of 3.97% after Fed Governor Christopher Waller indicated that the Fed could continue to lower interest rates in quarter-percentage-point increments to bolster a weakening labor market. Richmond Fed President Tom Barkin noted improvements in US productivity growth, which may help mitigate inflationary pressures from trade tariffs.
Economic data released on Thursday presented a mixed picture. The October Philadelphia Fed business outlook survey fell to a 6-month low of -12.8, significantly below expectations of 10.0. Conversely, the October NAHB housing market index rose by 5 points to a 6-month high of 37, surpassing expectations of 33.
Amid escalating trade tensions between the US and China, along with the ongoing government shutdown, precious metals have seen a surge as investors seek safe havens. Gold and silver reached new all-time highs during this period.
The government shutdown continues to impact market sentiment, delaying the release of key economic reports. This includes the last three weeks of weekly initial unemployment claims and the August US trade report. The Bureau of Labor Statistics (BLS) announced that the September consumer price report, initially scheduled for release on Wednesday, will now be published on October 24. The White House has warned that prolonged shutdowns could lead to widespread layoffs in government programs not aligned with President Trump’s priorities, with estimates suggesting that 640,000 federal workers may be furloughed.
This week, the focus will shift to earnings results as the Q3 earnings season kicks off. Rising corporate earnings expectations provide a bullish backdrop for stocks. According to Bloomberg Intelligence, 78% of S&P 500 companies that have reported thus far have exceeded forecasts. Additionally, over 22% of companies in the S&P 500 that provided guidance for Q3 earnings are expected to surpass analysts’ expectations, marking the highest rate in a year. However, Q3 profits are anticipated to rise by only 7.2% year-over-year, the smallest increase in two years, with sales growth projected to slow to 5.9% year-over-year from 6.4% in Q2.
Markets are currently pricing in a 100% chance of a 25 basis point rate cut at the upcoming FOMC meeting on October 28-29.
International markets also saw positive movement on Thursday, with the Euro Stoxx 50 closing up 0.84%. China’s Shanghai Composite rose by 0.10%, and Japan’s Nikkei Stock 225 increased by 1.27%.
Interest Rates
December 10-year T-notes (ZNZ5) closed up 16.5 ticks on Thursday, with the 10-year T-note yield falling by 5.2 basis points to 3.976%. T-notes rallied to a 5-week high, supported by dovish Fed comments and a decline in inflation expectations.
European government bond yields were mostly lower, with the 10-year German bund yield remaining unchanged at 2.570%. The 10-year UK gilt yield dropped to a 3.25-month low of 4.496%.
In the UK, August manufacturing production rose by 0.7% month-over-month, exceeding expectations of 0.2%.
Swaps are currently discounting a 2% chance of a 25 basis point rate cut by the ECB at its next policy meeting on October 30.
US Stock Movers
Regional bank stocks faced significant declines on Thursday, led by a 13% drop in Zions Bancorp (ZION) and a 10% slide in Western Alliance Bancorp (WAL) due to loan-related fraud allegations. Other notable declines included Citizens Financial Group (CFG) down over 6%, and Regions Financial (RF) down more than 5%.
Kenvue Inc (KVUE) led the S&P 500 losers with a decline of over 13% following news of a significant lawsuit related to baby powder. Hewlett Packard Enterprise (HPE) also fell more than 10% after projecting weaker-than-expected earnings for 2026.
Conversely, chipmakers and AI infrastructure stocks saw gains, with Micron Technology (MU) and ON Semiconductor (ON) both closing up over 5% after positive projections from Taiwan Semiconductor Manufacturing Co.
Gold mining stocks also rallied as COMEX gold prices reached record highs, benefiting companies like Kinross Gold (KGC) and Barrick Mining (B).
Earnings Reports (10/17/2025)
Upcoming earnings reports include Ally Financial Inc (ALLY), American Express Co (AXP), Comerica Inc (CMA), Fifth Third Bancorp (FITB), Huntington Bancshares Inc/OH (HBAN), Regions Financial Corp (RF), SLB Ltd (SLB), State Street Corp (STT), Truist Financial Corp (TFC), and Webster Financial Corp (WBS).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.
For more information please view the Barchart Disclosure Policy here.
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