Stocks Weighed Down by Weakness in Chipmakers and Megacap Tech Stocks

US equities declined today, primarily driven by weakness across chipmakers and most Magnificent Seven technology stocks, coupled with rising T-note yields and hawkish Federal Reserve comments that reduced expectations for a December rate cut to 53%. Despite the US government reopening, its market impact was largely priced in, while Q3 corporate earnings season concluded strongly with 82% of S&P 500 companies beating forecasts and aggregate earnings growth doubling expectations to 14.6%. Individual stock movements saw Disney, Ardent Health, and Webtoon fall on disappointing forecasts, contrasting with gains for Dillard's on strong results and Cisco on an improved revenue outlook.

Analysis

US equity indexes experienced a broad decline today, with the S&P 500 down -1.10%, the Nasdaq 100 down -1.55%, and the Dow Jones Industrials down -0.68%. This weakness was primarily driven by a significant slide in chipmakers, including ARM Holdings Plc (-5%) and Broadcom (-4%), alongside most Magnificent Seven technology stocks such as Tesla (-5%) and Nvidia (-3%). Rising 10-year T-note yields, up +3 bp to 4.10%, also pressured equities, fueled by hawkish comments from Boston Fed President Susan Collins and Cleveland Fed President Beth Hammack, which reduced the probability of a December rate cut to 53% from 70% last week.

The market impact of the US government reopening was largely priced in, offering limited upside. While the Congressional Budget Office (CBO) projected a 1.5 percentage point reduction in Q4 real GDP growth due to the shutdown, over half of this loss is expected to recover early next year. Critical economic data, including the October payrolls report and CPI, are delayed, creating a near-term information vacuum for market participants.

Despite the broader market downturn, the Q3 corporate earnings season concluded strongly, with 82% of S&P 500 companies exceeding forecasts, marking the best quarter since 2021. Aggregate Q3 earnings rose +14.6% year-over-year, significantly more than the +7.2% expectation. However, several companies, including Walt Disney (-8%) and Ardent Health (-34%), saw substantial declines due to disappointing revenue forecasts or missed earnings.

Conversely, Dillard’s Inc. (+19%) surged on strong Q3 EPS, and Cisco Systems (+3%) led gainers in the Dow Jones and Nasdaq 100 after boosting its 2026 revenue forecast. Overseas markets presented a mixed picture, with China’s Shanghai Composite climbing to a 10-year high (+0.73%), while European industrial production and UK Q3 GDP data came in weaker than expected.

Key Decisions for Investors

• Monitor Federal Reserve communications closely for further shifts in monetary policy expectations, as hawkish commentary continues to influence bond yields and equity valuations.
• Evaluate individual company fundamentals and guidance, given the divergence between strong aggregate Q3 earnings and significant negative reactions to specific corporate outlooks and forecasts.
• Consider sector-specific exposure, particularly in technology and chipmakers, which are currently facing headwinds, while identifying potential opportunities in companies demonstrating robust individual performance or positive analyst upgrades.