Stocks Settle Mixed as Broader Market Recovers from Chip Stock Rout

The S&P 500 Index ($SPX) (SPY) closed up by +0.33% on Thursday, the Dow Jones Industrial Average ($DOWI) (DIA) closed up by +1.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.05%.  December E-mini S&P futures (ESZ26) rose +0.28%, and December E-mini Nasdaq futures (NQZ26) fell -0.14%.

Stock indexes settled mixed on Thursday, with the Nasdaq 100 dropping to a 3.5-week low.  Stocks recovered from early losses on Thursday to trade mixed as bond yields fell and as investors rotated out of chip stocks into software and pharmaceutical companies. 

The Nasdaq 100 was under pressure on Thursday amid concerns about the sustainability of the artificial intelligence trade.  This week’s rout in chipmakers and AI-infrastructure stocks spread globally, with South Korea’s Kospi Index sinking more than 7% and China’s Shanghai Composite falling to a 14-month low.  Thursday’s drop in chipmakers followed Anthropic PBC's disclosure of $16.8 billion in Q3 growth to prospective investors, figures that suggest growth has slowed even as it remains robust.

Stocks were also pressured on Thursday on rising US producer price pressures after the Sep PPI final demand rose +6.3% y/y, stronger than expectations of +5.4% y/y and the most in 3.75 years.  Also, Sep PPI ex-food and energy rose +5.0% y/y, stronger than expectations of +4.4% y/y and the most in more than 3.5 years.

Other US economic news on Thursday was mixed, with Sep retail sales and the Oct Empire manufacturing survey rising more than expected and weekly jobless claims near expectations.  However, the Oct Philadelphia Fed business outlook survey fell more than expected.

On the positive side, Thursday’s slump in global equity markets sparked a rally in government bond markets, knocking yields lower.  The 10-year German Bund yield fell to a 5-week low on Thursday of 3.35%, and the 10-year T-note yield fell to a 3-week low of 5.04%.

US weekly initial unemployment claims rose by +1,000 to 199,000, close to expectations of 200,000.

US Sep retail sales rose +0.8% m/m, stronger than expectations of +0.3% m/m, and Sep retail sales ex-autos rose+0.9% m/m, stronger than expectations of +0.5% m/m.

The US Oct Philadelphia Fed business outlook survey fell by -16.9 to 20.9, weaker than expectations of 28.0.

The US Oct Empire manufacturing survey of general business conditions rose +17.9 to a 4.75-year high of 25.5, stronger than expectations of 12.0.

Stocks and bonds got some support Thursday after San Francisco Fed President Mary Daly said she thinks rate hikes are likely needed, just not immediately, and that she would hold interest rates steady at the October 27-28 FOMC meeting.

Stocks have support from the prospect of solid quarterly earnings results that began this week.  Goldman Sachs on Monday raised its three-month view on global equity markets to overweight from neutral, saying. “Earnings growth remains supportive for equities and the recent valuation de-rating has improved asymmetry into the third-quarter earnings season.” According to data compiled by Bloomberg Intelligence, Q3 S&P 500 earnings are expected to climb by +25% from a year earlier, up from a July estimate of 22%.  As of Thursday’s close, 38 of the S&P 500 companies have reported results, with 82% beating estimates.

Nov WTI crude oil prices (CLX26) rallied more than +3% on Thursday to a 3-week high.  Crude prices are supported by risks to global oil supplies as Yemen's Houthi rebels continue drone and missile attacks across Saudi Arabia, including energy infrastructure.  Also, Iranian attacks on shipping attempting to transit the Strait of Hormuz have increased in recent weeks, threatening a rebound in energy supplies from the Middle East.  Crude prices raced to their high Thursday after weekly EIA crude inventories unexpectedly fell by -8.56 million bbl.

Markets are discounting a 27% chance of a +25 bp Fed rate hike at the next FOMC meeting on October 27-28.

Overseas stock markets settled lower on Thursday.  The Euro Stoxx 50 closed down -0.36%.  China's Shanghai Composite fell to a 14-month low and closed down -1.59%. Japan's Nikkei-225 Stock Average dropped to a 4-week low and closed down sharply by -4.90%.

Interest Rates

December 10-year T-notes (ZNZ6) closed up by +21 ticks on Thursday.  The 10-year T-note yield fell -10.0 bp to 5.085%.  Dec T-notes rallied to a 3-week high on Thursday, and the 10-year T-note yield fell to a 3-week low of 5.035%.  Lower inflation expectations were supportive of T-notes after the 10-year breakeven inflation rate fell to a 1-week low of 2.320% on Thursday.  Also, dovish comments from San Francisco Fed President Mary Daly were bullish for T-notes when she suggested she would support holding interest rates steady at the October 27-28 FOMC meeting.

Hawkish US economic news on Thursday was bearish for T-notes after US Sep producer prices and Sep retail sales rose more than expected, and the Oct Empire manufacturing survey's general business conditions rose to a 4.75-year high.

European government bond yields moved lower on Thursday.  The 10-year German bund yield fell to a 5-week low of 3.353% and finished down -5.3 bp to 3.413%.  The 10-year UK gilt yield fell to a 1.5-week low of 5.301% and finished down -5.0 bp to 5.374%.

Eurozone Aug industrial production fell -0.5% m/m, weaker than expectations of no change and the biggest decline in 7 months.

ECB Governing Council member Martins Kazaks said the ECB can afford to take its time adjusting interest rates, despite persistent energy price rises that are set to keep consumer price growth elevated, as the recent surge in government bond yields may start to weigh on economic activity.

UK Aug manufacturing production rose +1.2% m/m, stronger than expectations of no change and the largest increase in 9 months.

Markets are discounting a 9% chance of a +25 bp ECB rate hike at the ECB’s next meeting on October 29.

US Stock Movers

Software stocks rallied on Thursday as investors rotate out of chip stocks into software. Intuit (INTU) and ServiceNow (NOW) closed up more than +6%, and Atlassian (TEAM) and Autodesk (ADSK) closed up more than +5%.  Also, Workday (WDAY), Salesforce (CRM), and Adobe Systems (ADBE) closed up more than +4%, Oracle (ORCL) closed up more than +3%, and Thomson Reuters (TRI) closed up more than +2%. 

Pharmaceutical stocks moved higher on Thursday amid stock rotation out of AI stocks.  Alnylam Pharmaceuticals (ALNY) closed up more than +4%, and Eli Lilly (LLY) and Ionis Pharmaceuticals (IONS) closed up more than +3%.  Also, Gilead Sciences (GILD), Vertex Pharmaceuticals (VRTX),  Regeneron Pharmaceuticals (REGN), and Jazz Pharma Plc (JAZZ) closed up more than +2%.  and Amgen (AMGN) and Biogen (BIIB) closed up more than +1%. 

Cryptocurrency-exposed stocks rallied on Thursday after Bitcoin (^BTCUSD) rebounded from a 3.5-week low and moved higher.  Circle Internet Group (CRCL) closed up more than +9%, and Coinbase Global (COIN) closed up more than +6%.  Also, Strategy (MSTR) closed up more than +5%, and Bullish (BLSH) and BitMine Immersion Technologies (BMNR) closed up more than +4%.  In addition, Riot Platforms (RIOT) and Robinhood Markets (HOOD) closed up more than +2%, and MARA Holdings (MARA) and Galaxy Digital Holdings (GLXY) closed up more than +1%. 

Chipmakers and AI-infrastructure stocks fell on Thursday on demand concerns after Anthropic disclosed Q3 revenue growth that likely slowed from the previous quarter.  Applied Materials (APLD), Lam Research (LRCX), and Seagate Technology Holdings Plc (STX) closed down more than -3%, and Intel (INTC), KLA Corp (KLAC) and Western Digital (WDC) closed down more than -2%.  In addition, Nvidia (NVDA), Advanced Micro Devices (AMD), Marvell Technology (MRVL), and SanDisk (SNDK) closed down more than -1%.

Penske Automotive Group (PAG) closed up more than +8% after entering a deal to be taken private for $212 a share in cash by Penske Corporation and Mitsui.

International Paper (IP) closed up more than +6% after the Financial Times reported that private equity firms Lone Star and Atlas Holdings are exploring bids to acquire the company. 

Kimberly-Clark (KMB) closed up more than +4% after reporting preliminary Q3 net sales of $4.13 billion, above the consensus of $4.10 billion.

FMC Corp (FMC) closed down more than -30% after cutting its Q3 adjusted Ebitda forecast to a loss of -$510 million to -$565 million, after previously expecting a profit of$120 million to $140 million.

Hewlett Packard Enterprise (HPE) closed down more than -7% to lead losers in the S&P 500, adding to Wednesday’s -7 decline, and Dell Technologies (DELL) closed down more than -6%, adding to Wednesday’s 10% plunge after Barclays downgraded the stocks to equal weight from overweight.

Rocket Lab (RKLB) closed down more than -6% to lead losers in the Nasdaq 100 after announcing that it will delay the launch of its inaugural Neutron medium-lift rocket until sometime in 2027. 

Earnings Reports (10/16/2026)

Citizens Financial Group Inc (CFG), M&T Bank Corp (MTB), Regions Financial Corp (RF), Travelers Cos Inc/The (TRV), Truist Financial Corp (TFC).

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.