The S&P 500 Index ($SPX) (SPY) closed up +0.67% on Wednesday, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.05% and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.42%. E-mini S&P December futures (ESZ25) rose +0.66% and E-mini Nasdaq December futures (NQZ25) rose +0.44%.
Stock indexes overcame their initial weakness on Wednesday and stabilized higher, with the S&P 500 posting a 6-week high, the Nasdaq 100 a 5-week high and the Dow Jones Industrial Average a 3.5-week high. Stocks rebounded Wednesday after the Fed cut interest rates by 25 basis points and Fed Chairman Powell struck a less hawkish tone than expected. Stocks also found support after the Fed raised its 2025 U.S. GDP forecast and lowered its PCE core price forecast. Additionally, the Fed increased market liquidity by announcing that it would purchase $40 billion worth of Treasuries per month to replenish its reserves.
Stocks found some support today amid signs of easing wage pressures, which are accommodative to Fed policy, after the third-quarter US employment cost index rose +0.8% q/q, slightly weaker than the +0.9% q/q expected.
U.S. MBA mortgage applications increased +4.8% in the week ended December 5, with the purchase mortgage subindex down -2.4% and the refinance mortgage subindex up +14.3%. The average 30-year fixed rate mortgage increased by +1 bps to 6.33% from 6.32% the previous week.
The FOMC, as expected, reduced the federal funds target range by 25 bps to 3.50%-3.75% in a 9-3 vote and said it would review the “magnitude and timing of additional adjustments” to interest rates. The FOMC noted that “job gains have slowed this year” and that “downside risks to employment have increased in recent months.” Additionally, “inflation has increased since the start of the year and remains somewhat elevated.”
The Fed’s dot plot of interest rate projections shows the median forecast for the federal funds rate is 3.375% for the end of 2026, implying a 25 basis point rate cut next year, unchanged from September.
The FOMC raised its 2025 GDP estimate to 1.7% from 1.6% in September and raised its 2026 GDP estimate to 2.3% from 1.8% in September. The FOMC lowered its 2025 PCE base price estimate to 3.0% from 3.1% in September and reduced its 2026 PCE base price estimate to 2.5% from 2.6% in September.
The Fed said it would begin buying $40 billion worth of Treasuries per month starting Dec. 12 to replenish the financial system’s reserves, which have declined as it tightened its balance sheet.
Fed Chairman Powell signaled that the Fed may now pause its interest rate reduction campaign when he said the Fed was now “within a range of plausible estimates of neutral and leaves us in a good position to determine the size and timing of further adjustments” in rates. He added that he doesn’t think a rate hike is the base case for the Fed’s next policy decision.
This week, markets will focus on Thursday’s first weekly jobless claims, which are expected to increase by +29,000 to 220,000.
Markets are pricing in a 22% chance that the FOMC will reduce the federal funds target range by 25 bps at the January 27-28 FOMC meeting.
The third quarter corporate earnings season is coming to an end as 495 of the S&P 500 companies have released their results. According to Bloomberg Intelligence, 83% of S&P 500 companies beat forecasts, marking the best quarter since 2021. Third-quarter earnings rose +14.6%, more than double expectations of +7.2% year over year.
Foreign stock markets stabilized lower on Wednesday. The Euro Stoxx 50 closed down -0.18%. China’s Shanghai Composite index closed down -0.23%. Japan’s Nikkei Stock 225 Index fell from a 3.5-week high and closed down -0.10%.
Interest rate
March 10-year Treasuries (ZNH6) closed +4 ticks higher on Wednesday. The yield on the 10-year T-note fell -4.1 bps to 4.147%. March Treasury futures rebounded from a three-month low Wednesday and rose, and the 10-year Treasury yield fell from a three-month high of 4.207%. Treasuries found support after the third-quarter U.S. employment index rose less than expected, a dovish factor for Fed policy. Treasuries extended gains after the FOMC cut its estimates for the U.S. core PCE price for 2025 and 2026 and after Fed Chairman Powell said he did not think a rate hike was the base case for the Fed’s next policy decision.
Treasuries were initially under pressure Wednesday morning on concerns that a divided FOMC would signal a hawkish -25bp rate cut, but then signal that policy will remain unchanged for an extended period. Treasuries also took a hit following hawkish comments from the ECB on Wednesday, which pushed the yield on the 10-year German Bund to a high of 8.75 months.
European government bond yields are rising today. The 10-year German Bund yield climbed to an 8.75-month high of 2.895% and ended up +0.1 bps at 2.851%. The UK 10-year gilt yield hit a 2.5-week high at 4.554% and is up +0.1bp at 4.506%.
ECB President Lagarde said the ECB would likely raise its economic growth forecast at next week’s policy meeting, reflecting a more optimistic outlook.
Simkus, a member of the ECB Governing Council, said: “We have an inflation rate that is more or less close to the 2% target in the medium term, which suggests that there is no need to change interest rates, not only at the next ECB meeting in December, but also at subsequent meetings. »
Swaps estimate there is a 1% chance that the ECB will cut rates by -25 basis points at its next policy meeting on December 18.
Stock movers in the United States
Chipmakers rallied on Wednesday, helping to boost the broader market. Micron Technology (MU) and Marvell Technology (MRVL) closed up over +4%, and Applied Materials (AMAT) and Qualcomm (QCOM) closed up over +3%. Additionally, Analog Devices (ADI), Broadcom (AVGO), GlobalFoundries (GFS), Lam Research (LRCX), Microchip Technology (MCHP), NXP Semiconductors NV (NXPI), KLA Corp (KLAC), and Texas Instruments (TXN) closed up over +1%.
Mobile grocery delivery service companies fell Wednesday after Amazon.com said it had expanded same-day delivery of perishable goods to more than 2,300 cities and towns, with more planned next year. Maplebear (CART) closed down more than -6% and Uber Technologies (UBER) closed down more than -5% to lead the S&P 500 losers. Additionally, DoorDash (DASH) closed down more than -4%.
Photronics (PLAB) closed up more than +45% after reporting adjusted EPS of 60 cents for the fourth quarter, well above the consensus of 45 cents, and forecasting adjusted EPS of 51 cents to 59 cents for the first quarter, better than the consensus of 46 cents.
GE Vernova (GEV) closed more than 15% higher to lead S&P 500 gainers after increasing its share buyback program to $10 billion and doubling its quarterly dividend to 50 cents.
EchoStar (SATS) closed up over +10% after Morgan Stanley upgraded the stock from overweight to equal weight with a $110 price target.
Middleby Corp. (MIDD) closed up over +9% after Jeffries upgraded the stock to Buy with a $175 price target.
American International Group (AIG) closed up more than +6% after Insurance Inside reported that Chubb had made an informal buyout offer for the company.
PepsiCo (PEP) closed up over +3% after JPMorgan Chase upgraded the stock from neutral to overweight with a price target of $164.
Waters Corp. (WAT) closed up over +2% after Wolfe Research upgraded the stock to outperform its peers with a price target of $480.
AeroVironment (AVAV) closed 13% lower after reducing its 2026 adjusted EPS forecast to $3.40-3.55 from a previous forecast of $3.60-3.70, below the consensus of $3.63.
Netflix (NFLX) closed down more than -4% after Paramount said in a letter to Warner Bros. holders. Discovery that its offer of $30 per share was higher than Netflix’s.
GameStop (GME) closed down more than -4% after reporting a decline in third-quarter net sales of -4.6% year-over-year to $821.0 million.
Noble Corp Plc (NE) closed down more than -2% after JPMorgan Chase lowered the stock’s rating from overweight to neutral.
T Rowe Price Group (TROW) closed down more than 1% after reporting that assets under management in November fell -0.2% m/m to $1.79 trillion.
Income Reports (12/11/2025)
Broadcom Inc (AVGO), Ciena Corp (CIEN), Costco Wholesale Corp (COST), Lululemon Athletica Inc (LULU), RH (RH).
As of the date of publication, Rich Asplund did not hold (either directly or indirectly) any positions in any of the securities mentioned in this article. All information and data contained in this article are for informational purposes only. This article was originally published on Barchart.com
