Stocks recover on easing trade tensions and strong third quarter results

The S&P 500 Index ($SPX) (SPY) closed Monday up +1.07%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.12%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.30%. December E-mini S&P futures (ESZ25) rose +1.12% and December E-mini Nasdaq futures (NQZ25) rose +1.32%.

Stock index futures rallied Monday and added to last Friday’s gains, with the S&P 500 and Nasdaq 100 posting a one-week high, and the Dow Jones Industrials posting a 1.5-week high. Market sentiment improved as trade tensions between the United States and China eased after President Trump said on Sunday, “I think everything will be fine with China.” Stocks are also getting support from optimism that third-quarter results will continue to surprise to the upside. Support from European and Japanese stocks rallying to record highs on Monday also buoyed U.S. stocks. Additionally, falling bond yields are supporting stocks, with the 10-year Treasury yield falling -3 basis points on Monday to 3.98%.

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Treasury Secretary Bessent said the United States and China will hold discussions this week in Malaysia to prepare for President Trump’s meeting with Chinese President Xi Jinping later this month on the sidelines of the Asia-Pacific Economic Cooperation Conference in South Korea.

Better-than-expected Chinese economic news supports global growth prospects. China’s third-quarter GDP grew +1.1% q/q and +4.8% y/y, stronger than expectations of +0.8% q/q and +4.7% y/y. Additionally, China’s September industrial production increased +6.5% year-on-year, higher than expectations of +5.0% year-on-year. Furthermore, China’s unemployment rate unexpectedly fell from -0.1 to 5.2% in September, showing a stronger labor market than expectations of stagnation at 5.3%.

The U.S. government shutdown continues into its fourth week, weighing on market sentiment and delaying key economic reports. The government shutdown is causing delays in the release of government reports, including the last three weeks of weekly initial unemployment claims and the September payrolls report. The Bureau of Labor Statistics (BLS) announced that the September consumer price report, originally scheduled to be released last Wednesday, will be released this Friday. The White House has warned that if the government shutdown continues, it would lead to mass layoffs of employees working in government programs that do not align with President Trump’s priorities. Bloomberg Economics estimates that 640,000 federal workers will be furloughed during the shutdown, which would increase jobless claims and send the unemployment rate up to 4.7%.

US-China trade tensions, the ongoing US government shutdown and fears over US credit quality have sparked a safe-haven precious metals buying frenzy, with gold and silver hitting new all-time highs last Friday.

This week, markets will focus on earnings as the third quarter earnings season continues. Rising expectations for corporate earnings provide a bullish backdrop for stocks. According to Bloomberg Intelligence, 85% of S&P 500 companies that have reported results so far have beaten forecasts. Additionally, more than 22% of S&P 500 companies that provided third-quarter earnings guidance are expected to beat analysts’ expectations, the highest level in a year. However, third-quarter profits are expected to have increased by +7.2% year-over-year, the smallest increase in two years. Additionally, third-quarter sales growth is expected to slow to +5.9% year-over-year, compared to 6.4% in the second quarter.

Markets are pricing in a 99% chance of a -25 basis point rate cut at the next FOMC meeting on October 28-29.

Foreign stock markets are rising today. The Euro Stoxx 50 reached a new record and closed up +1.31%. The Chinese Shanghai Composite index closed up +0.63%. The Japanese Nikkei Stock 225 reached a new record and closed sharply up +3.37%.

Interest rate

December 10-year Treasury bonds (ZNZ5) closed +4 ticks higher on Monday. The yield on the 10-year T-note fell -2.5 bps to 3.984%. Treasuries recovered from initial losses and rose Monday on lower inflation expectations after the 10-year breakeven inflation rate fell to a 4.25-month low of 2.262%. Treasuries are also receiving support due to the current U.S. government shutdown, which could lead to additional job losses, reduced consumer spending and a weakening of the U.S. economy, potentially allowing the Fed to continue cutting interest rates.

Strength in stocks Monday dampened safe-haven demand for government debt securities and limited gains in Treasury prices. Additionally, easing U.S.-China trade tensions dampened safe-haven demand for government debt securities and led to lower Treasury prices after President Trump said everything would be “fine” with China.

European government bond yields fell on Monday. The yield on the 10-year German Bund fell -0.3 bp to 2.577%. The yield on 10-year UK Gilts fell -2.6 bps to 4.505%.

Germany’s September PPI fell -0.1% m/m and -1.7% y/y, weaker than expectations of +0.1% m/m and -1.5% y/y.

Last Friday, S&P Global Ratings lowered France’s sovereign debt credit rating from AA- to A+, citing the country’s fiscal uncertainty as “high” despite presenting a proposed 2025 budget.

Swaps predict a 2% probability that the ECB will cut rates by -25 basis points at its next policy meeting on October 30.

Stock movers in the United States

Most of Magnificent Seven’s tech stocks rallied on Monday and supported the broader market. Apple (AAPL) closed up over +3% and Meta Platforms (META) closed up over +2%. Additionally, Alphabet (GOOGL), Amazon.com (AMZN), and Tesla (TSLA) closed up more than +1%. Furthermore, Microsoft (MSFT) closed up +0.63%.

Stocks of chipmakers and AI infrastructure rose Monday to support gains in the broader market. Super Micro Computer (SMCI) closed up over +5%, and ON Semiconductor (ON) and KLA Corp (KLAC) closed up over +4%. Additionally, Advanced Micro Devices (AMD), ARM Holdings Plc (ARM), and Microchip Technology (MCHP) closed up over +3%. Additionally, NXP Semiconductors NV (NXPI), Micron Technology (MU), Lam Research (LRCX), GlobalFoundries (GFS), and Intel (INTC) closed up over +2%.

Stocks exposed to cryptocurrencies rose on Monday after the price of Bitcoin rose more than +3% following last Friday’s fall to a 3.75-month low. As a result, Coinbase Global (COIN), Galaxy Digital (GLXY), MARA Holdings (MARA), Riot Platforms (RIOT), and Strategy (MSTR) are up over +2%.

Celcuity Inc. (CELC) closed more than 35% higher after reporting a “statistically significant” improvement in a trial of its drug gedatolisib in combination with palbociclib and fulvestrant in treating breast cancer patients.

Cleveland-Cliffs (CLF) closed up more than +21% after reporting an adjusted loss per share of -45 cents in the third quarter, below the consensus loss of -47 cents. Additionally, the company said it had reached an agreement with a “major global steel producer.”

Sand Offshore Corp. (SOC) closed up more than +6% after U.S. Energy Secretary Wright supported the company’s efforts to restart one of its California oil projects that is awaiting state approval.

Cooper Cos. (COO) closed up more than +4% after The Wall Street Journal reported that Jana Partners had acquired a stake in the company and planned to promote strategic alternatives.

nCino (NCNO) closed up over +4% after Raymond James upgraded the stock to Strong Buy following Outperform with a $36 price target.

Lululemon Athletica (LULU) closed up over +2% after BNP Paribas Exane reclassified the stock to neutral after underperformance.

Hologic (HOLX) closed up over +2% following the news that Blackstone and TPG Inc. are in advanced negotiations to acquire the company.

AppLovin (APP) closed down more than 5% and led losers on the S&P 500 and Nasdaq 100 after The New York Times reported that several state regulators had contacted short sellers as part of a possible preliminary investigation into the company.

Progressive Corp (PGR) closed down more than -2% after Morgan Stanley lowered the stock’s rating from underweight to equal weight with a price target of $214.

Marvell Technology (MRVL) closed down more than -2% after Barclays downgraded the stock’s rating from overweight to equal weight.

Astera Labs (ALAB) closed down more than -2% after Barclays downgraded the stock from overweight to equal weight.

Lumentum Holdings (LITE) closed down more than -2% after Barclays downgraded the stock from overweight to equal weight.

Income Reports (10/21/2025)

3M Co (MMM), Agree Realty Corp (ADC), Capital One Financial Corp (COF), Chubb Ltd (CB), Coca-Cola Co/The (KO), Danaher Corp (DHR), East West Bancorp Inc (EWBC), Elevance Health Inc (ELV), EQT Corp (EQT), Equifax Inc (EFX), General Electric Co (GE), General Motors Co (GM), Genuine Parts Co (GPC), Halliburton Co (HAL), Intuitive Surgical Inc (ISRG), Lockheed Martin Corp (LMT), Manhattan Associates Inc (MANH), Matador Resources Co (MTDR), Mattel Inc (MAT), Nasdaq Inc (NDAQ), Netflix Inc (NFLX), Northrop Grumman Corp (NOC), Omnicom Group Inc (OMC), PACCAR Inc (PCAR), Pegasystems Inc (PEGA), Pentair PLC (PNR), Philip Morris International Inc (PM), PulteGroup Inc (PHM), Quest Diagnostics Inc (DGX), RTX Corp (RTX), Texas Instruments Inc (TXN), Valmont Industries Inc (VMI), Weatherford International PLC (WFRD), Western Alliance Bancorp (WAL).

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. For more information, please see Barchart’s disclosure policy here.

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