The S&P 500 Index ($SPX) (SPY) on Monday closed up +0.36%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.14%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.78%.  December E-mini S&P futures (ESZ25) rose +0.37%, and December E-mini Nasdaq futures (NQZ25) rose +0.75%.

Stock indexes mainly settled higher on Monday, with the Nasdaq 100 posting a new all-time high.  Advanced Micro Devices surged more than 23% to lead chipmakers higher after its deal with OpenAI on AI infrastructure, worth tens of billions of dollars, added fuel to the AI frenzy.  Recent optimism that growth in the AI sector and spending on artificial intelligence will translate into corporate profits is a major bullish factor for stocks.  Stocks are also underpinned by hopes that a resilient US economy and additional Fed easing will continue to support the economy. 

Higher bond yields on Monday limited gains in stocks, with the 10-year T-note yield climbing +4 bp to 4.16%.  Also, Verizon Communications fell more than -5% to weigh on the Dow Jones Industrials.  In addition, the shutdown of the US government has now entered a second week, weighing on market sentiment and delaying key economic reports.

The government shutdown means delays in the release of government reports, including last Friday's monthly payroll report.  A prolonged shutdown could also delay the government's inflation data, scheduled for release on October 15.  The White House has warned that if the government shutdown lingered, it would trigger widespread dismissals of employees in government programs that don't align with President Trump's priorities.  Bloomberg Economics estimates that 640,000 federal workers will be furloughed during a shutdown, which would expand jobless claims and push the unemployment rate up to 4.7%.

The ongoing US government shutdown, expectations of additional Fed easing, and political uncertainty in France and Japan are also driving investors to haven assets, such as gold and Bitcoin.  French Prime Minister Lecornu resigned after President Macron named a new cabinet, raising uncertainty about the Eurozone's second-largest economy.  Meanwhile, Sanae Takaichi, a proponent of easy fiscal and monetary policy, won Saturday's election to become Japan's new leader of the ruling LDP party and potential prime minister.  Gold and Bitcoin both jumped to new record highs on Monday, adding momentum to the so-called "debasement trade" as investors flee fiat currencies.

Market focus this week will be on any new developments regarding tariffs, trade, or attempts by lawmakers to end the ongoing US government shutdown.  On Wednesday, the minutes of the September 16-17 FOMC meeting will be released.  On Thursday, Fed Chair Powell will give welcoming remarks at a Fed Community Bank Conference.  On Friday, the University of Michigan Oct consumer sentiment index is expected to fall -1.1 to 54.0.

Rising corporate earnings expectations are a bullish backdrop for stocks.  According to Bloomberg Intelligence, more than 22% of companies in the S&P 500 provided guidance for their Q3 earnings results that are expected to beat analysts' expectations, the highest in a year.  However, Q3 profits are expected to have risen by +7.2%, the smallest increase in two years.  Also, Q3 sales growth is projected to slow to 5.9% from 6.4% in Q2. 

The markets are pricing in a 95% chance of a -25 bp rate cut at the next FOMC meeting on Oct 28-29. 

Overseas stock markets today are mixed.  The Euro Stoxx 50 is down -0.35%.  China's Shanghai Composite did not trade and is closed for the week-long Lunar New Year holiday.  Japan's Nikkei Stock 225 surged to a record high and closed up +4.75%.

Interest Rates

December 10-year T-notes (ZNZ5) on Monday closed down by -9 ticks.  The 10-year T-note yield rose +4.5 bp to 4.164%.  T-note prices were under pressure on Monday from strength in stocks.  Also, supply pressures are undercutting T-note prices as the Treasury will auction $119 billion of T-notes and T-bonds this week, beginning with Tuesday's $58 billion auction of 3-year T-notes.  Losses in T-notes are limited as a protracted US government shutdown could weaken the economy, a supportive factor for T-notes. 

European government bond yields moved higher on Monday.  The 10-year German bund yield rose +2.1 bp at 2.719%. The 10-year UK gilt yield climbed to a 1-week high of 4.751% and finished up +4.6 bp to 4.736%.

Eurozone Aug retail sales rose +0.1% m/m, right on expectations.

The Eurozone Oct Sentix investor confidence index rose +3.8 to -5.4, stronger than expectations of -7.7.

ECB President Lagarde said, "Inflation in the Eurozone remains close to our 2% target," and she expects the economy to pick up in 2026.

Swaps are discounting a 1% chance for a -25 bp rate cut by the ECB at its next policy meeting on October 30.

US Stock Movers

Advanced Micro Devices (AMD) closed up more than +23% to lead chipmakers and AI-infrastructure stocks higher and gainers in the S&P 500 and Nasdaq 100 after the company signed a deal with OpenAI to deploy 6 gigawatts of AMD GPUs over multiple years and gave OpenAI a warrant for up to 160 million shares of AMD stock.  Also, Super Micro Computer (SMCI) closed up more than +5%, and Palantir Technologies (PLTR), KLA Corp (KLAC), ARM Holdings Plc (ARM), and Applied Materials (AMAT) closed up more than +3%.  In addition, Lam Research (LRCX) and Marvell Technology (MRVL) are up more than +2%.   

Cryptocurrency-exposed stocks rallied on Monday after the price of Bitcoin rose more than +2% to a record high above $126,000.  Coinbase Global (COIN), Galaxy Digital (GLXY), MARA Holdings (MARA), Strategy (MSTR), and Riot Platforms (RIOT) closed up more than +1%.

Critical Metals Corp (CRML) closed up more than +46% after Reuters reported that the Trump administration has discussed taking a stake in the company. 

Comerica (CMA) closed up more than +13% after Fifth Third Bancorp agreed to buy the company for about $10.9 billion in stock. 

Firefly Aerospace (FLY) closed up more than +6% after it said it entered into a definitive agreement to acquire SciTec for about $855 million in cash and stock. 

Salesforce (CRM) closed up more than +2% to lead gainers in the Dow Jones Industrials after the company was mentioned at a ChatGPT annual developers event on firms whose apps are being incorporated into ChatGPT.

Intellia Therapeutics (NTLA) closed up more than +2% after Citizens JMP Securities LLC upgraded the stock to market outperform from market perform, with a price target of $33.

Micron Technology (MU) closed up more than +1% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $220.

AppLovin (APP) closed down more than -14% to lead the losers in the S&P 500 and Nasdaq 100 on a report that stated the SEC was investigating the company's data-collection practices. 

Abercrombie & Fitch (ANF) closed down more than -7% after JPMorgan Chase downgraded the stock to neutral from overweight. 

Verizon Communications (VZ) closed down more than -5% to lead losers in the Dow Jones Industrials after announcing that Dan Schulman is replacing Hans Vestberg as CEO, effective immediately.

AT&T (T) closed down more than -4% after Scotiabank downgraded the stock to sector perform from sector outperform.

International Paper (IP) closed down more than -2% after Seaport Global Securities downgraded the stock to neutral from buy.

Dollar Tree (DLTR) closed down more than -2% after Bernstein cut its price target on the stock to $100 from $109.

Nvidia (NVDA) closed down more than -1% after competitor Advanced Micro Devices announced a multibillion-dollar deal with OpenAI, which could challenge Nvidia's dominance in AI chips.

Earnings Reports(10/7/2025)

McCormick & Co Inc/MD (MKC), Penguin Solutions Inc (PENG), TuHURA Biosciences Inc (HURA).