Page One
Briefing.com Summary:
*The S&P 500 and Nasdaq Composite closed below key support at their 50-day moving averages.
*Rothschild & Co. has downgraded Microsoft (MSFT) and Amazon.com (AMZN).
*Home Depot (HD) disappointed with its quarterly results and guidance.
Yesterday was a tough day for the stock market as fundamental and technical forces collided. The fundamental part revolved around concerns pertaining to stretched valuations. The technical part revolved around the 50-day moving averages for the S&P 500 and Nasdaq Composite, which failed to hold up on a closing basis for the first time since the recovery rally began in April.
It is going to get tougher at today's open, largely for the same reasons.
Currently, the S&P 500 futures are down 28 points and are trading 0.4% below fair value, the Nasdaq 100 futures are down 131 points and are trading 0.5% below fair value, and the Dow Jones Industrial Average futures are down 330 points and are trading 0.7% below fair value.
Several elements are in play that have contributed to the follow-through selling pressure:
- The breach of the 50-day moving averages on a closing basis triggers stop-loss orders.
- Rothschild & Co. downgraded Microsoft (MSFT) and Amazon.com (AMZN) to Neutral from Buy, due in part to concerns about capex economics (we're paraphrasing).
- Worries about a discretionary spending slowdown after Home Depot (HD) disappointed with its quarterly results and FY26 guidance.
- BofA Securities double downgraded Dow component Honeywell (HON) to Underperform from Buy
- Risk-off dynamics in global equity markets, highlighted by 3.0%+ declines in Japan's Nikkei 225 and South Korea's Kospi.
- A Bank of America Fund Manager Survey showing low cash levels (3.7%) that are consistent with a sell signal.
- Alphabet (GOOG/GOOGL) CEO Sundar Pichai says the AI boom has elements of irrationality, according to BBC.
We can ascertain that the major indices will open today's session on a lower note. What market watchers are more interested in seeing is how they respond to the early selling pressure. Will there be the same buy-the-dip confidence, or did yesterday's disappointing technical trade dampen buy-the-dip spirits?
It certainly stirred a desire to hedge against further downside action. The CBOE Volatility Index is up 5.5% today to 23.62, leaving it up 19% for the week.
The struggles in the stock market have fostered a safe-haven bid in Treasuries. The 2-yr note yield is down five basis points to 3.56%, and the 10-yr note yield is down four basis points to 4.09%.
Those moves have incorporated the surprise release of initial jobless claims data for the week ending October 18, which snuck out overnight. Jobless claims rose to 232,000 from 219,000. That is clearly higher than the prior report, but it is not high in an absolute sense. Continuing jobless claims for the week ending October 11 rose to 1.947 million from 1.916 million.
Separately, ADP reported, "For the four weeks ending Nov. 1, 2025, private employers shed an average of 2,500 jobs a week as employment losses slowed heading into November."
The probability of a 25-basis point rate cut at the December meeting is a coin toss, sitting at 50.4%, according to the CME FedWatch Tool, although that is up from 42.4% yesterday.
