Market Wrap 2025-11-19

Market Wrap 2025-11-19

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Today's US Market Wrap — Key Points

• Stocks rose amid volatility, awaiting NVIDIA earnings.
• Fed rate cut expectations decreased; FOMC divided.
• US proposed Ukraine/Russia peace plan pressured crude.
• Dollar strengthened; Yen weakened on policy comments.

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Market Summary

• SNAPSHOT: Stocks increased, Treasury yields were little changed, crude oil declined, the Dollar strengthened, and gold rose.
• REAR VIEW: The BLS delayed the release of the October and November US NFP reports until after the December FOMC meeting. FOMC minutes revealed a divided committee. The US is reportedly proposing a peace plan to end the Ukraine/Russia war. The Japanese Finance Minister stated there were no specific discussions on FX with the BoJ Governor. TGT's same-store sales decline was greater than anticipated. GOOGL's Gemini 3 release received positive feedback. UK CPI eased as expected.
• COMING UP: Data releases include German Producer Prices (Oct), EZ Consumer Confidence Flash (Nov), US NFP (Sep), US Jobless Claims (w/e 15 Nov), New Zealand Trade Balance (Oct), Australian Flash PMIs (Nov), and Japanese Nationwide CPI (Oct). Events include the PBoC LPR and SARB Policy Announcement. Speakers include BoJ’s Koeda; Fed’s Cook, Barr, Hammack, Paulson, Miran, Goolsbee; and BoE’s Dhingra, Mann. Supply events include Spain, France, and the US. Earnings reports are expected from Gap, Walmart, ThyssenKrupp, and Investec.

MARKET WRAP

US indices experienced volatility but ultimately closed higher as investors awaited NVIDIA's after-hours earnings, a significant catalyst viewed in the context of AI valuation concerns. Wednesday's trading saw mixed sector performance, with Tech and Communications outperforming, the latter boosted by Alphabet's positive reviews of Gemini 3. Energy underperformed, weighed down by crude oil weakness due to the US proposing a peace plan for the Ukraine/Russia war. The Dollar strengthened, negatively impacting most global currencies, amid hawkish repricing in Fed money markets. This was initially triggered by the BLS's announcement of a new data schedule, delaying the release of the November and October US jobs reports until after the December 10th FOMC meeting, increasing the likelihood of the Fed not cutting rates again. Chair Powell's October analogy of "driving in the fog" highlighted the impact of limited data, suggesting a potential December pause if data remained scarce. The FOMC Minutes, while largely reiterating existing views, leaned hawkish and emphasized the Committee's division ahead of the December meeting. In FX, while all G10 currencies declined, the Pound was pressured by UK CPI, and the Yen weakened after Finance Minister Katayama's comments. Treasury yields decreased across the curve, spot gold traded around USD 4.1k/oz, and Bitcoin reached a new low since late April.

US

FOMC MINUTES: The minutes revealed a committee divided on the appropriate pace of easing, with many favoring a 25bp cut, several preferring to hold rates, and one advocating for a more aggressive 50bp reduction. Supporters of a cut cited increasing downside risks in employment and limited evidence of renewed inflation pressures, while opponents emphasized stalled progress toward 2% inflation and insufficient confidence in its sustainable path. Despite general agreement on a gradual move toward neutral policy, views differed on the restrictiveness of current settings, with participants noting generally supportive financial conditions. Outlooks also varied, with most judging further cuts appropriate, but several deeming a December cut unlikely. Some suggested another cut could be appropriate in December if the economy evolved as expected, but many considered it likely appropriate to maintain rates for the remainder of the year. Inflation commentary reflected ongoing concern, particularly regarding core non-housing services pressures, expected tariff pass-through, and the risk of prolonged overshoots lifting expectations. However, some observed that inflation excluding tariffs was close to target and that productivity gains or a softer labor market could curb price pressures. Labor market conditions were seen as gradually softening, influenced by structural factors including AI-driven investment, while activity remained moderate, concentrated in higher-income households. Most supported concluding balance-sheet runoff on December 1st and favored a larger Treasury bill share to enhance flexibility. Several cautioned that elevated asset valuations, especially in AI-related equities, made markets vulnerable to disorderly corrections. The minutes also touched on asset prices, with several highlighting the possibility of a disorderly stock price decline, particularly in the event of an abrupt reassessment of AI-related prospects. Money market pricing saw further paring of rate cut bets following the minutes, with just 6bps of easing priced, implying a 24% probability of a December rate cut, compared to 7bps before the FOMC Minutes. Rate cut bets had begun to ease beforehand after the BLS delayed the October and November jobs reports to December 16th, after the December 10th FOMC. Pantheon Macroeconomics highlights that December hangs in the balance, but substantial easing probably still lies ahead.

FIXED INCOME

T-NOTE FUTURES (Z5) SETTLED 3 TICKS LOWER AT 112-22

Traders reduced rate cut expectations as the BLS postponed the October and November NFP job reports, and the FOMC minutes leaned hawkish. At settlement, the 2-year yield was +0.8bps at 3.589%, the 3-year yield was +1.0bps at 3.586%, the 5-year yield was +1.1bps at 3.705%, the 7-year yield was +1.3bps at 3.895%, the 10-year yield was +1.0bps at 4.131%, the 20-year yield was +1.1bps at 4.720%, and the 30-year yield was +1.1bps at 4.752%.

INFLATION BREAKEVENS: 1-year BEI -5.3bps at 2.633%, 3-year BEI -1.5bps at 2.443%, 5-year BEI -0.5bps at 2.289%, 10-year BEI -0.3bps at 2.263%, 30-year BEI -0.4bps at 2.227%.

THE DAY: T-Notes were slightly lower across the curve, with yields lower by approximately 1-1.5bps. Despite the small yield changes, there was a notable shift in December market pricing for the Fed. Fed Funds Futures were sold aggressively after the BLS announced that the October and November Nonfarm payrolls report (excluding the October Unemployment rate) would be released on December 16th, after the December 10th FOMC. This data delay extends the Fed's lack of economic visibility, and with Chair Powell's October comment, "when there is fog, you could slow down," it increases the probability of rates being held steady in December as the Fed awaits more clarity. The announcement date for the resumption of CPI data is pending, but October PCE is due November 26th, and November PCE is due December 19th. Meanwhile, the FOMC minutes noted that many judged it likely appropriate to keep rates unchanged for the rest of the year, and largely confirmed the split range of views on the outlook at the Fed. Elsewhere, it is worth noting in UK trade, Gilts were hit on reports left-leaning Labour MPs are looking to oust PM Starmer, albeit USTs saw little follow-through - Gilts had already been pressured following the earlier Gilt auction too, but pre-UK open CPI eased. Back in the US, the 20-year bond auction was soft (more below). Attention turns to the September NFP report on Thursday.

SUPPLY:

Notes

• The US sold USD 16bln of 20-year bonds at a high yield of 4.706%, tailing the when-issued by 0.2bps. The tail indicated weak demand at the auction compared to the prior 1.2bps stop-through and 0.3bps stop-through average. The bid-to-cover was also weak at 2.41x, well below the prior 2.73x and 2.66x average. The breakdown was not as soft, however, with a slight rise in direct demand to 29.2% from 26.3% (above the 22.7% avg) offsetting some of the drop in indirect demand to 59.5% from 63.6% (vs 65.3% avg). This left dealers, forced surplus buyers, with 11.4% of the auction, above the 10.0% previous but below the 11.9% average.
• The US will sell USD 19bln of 10-year TIPS on November 20th, to settle November 28th.

Bills

• The US sold USD 69bln of 17-wk bills at a high rate of 3.750%, with a B/C ratio of 3.15x.
• The US will sell USD 110bln of 4-week bills on November 20th, to settle Nov. 25th.
• The US will sell USD 95bln of 8-week bills on November 20th, to settle Nov. 25th.

STIRS/OPERATIONS

• Market Implied Fed Rate Cut Pricing: December 7bps (prev. 11bps), January 21bps (prev. 21bps), March 31bps (prev. 33bps).
• NY Fed RRP op demand at USD 1.1bln (prev. 0.905bln) across 8 counterparties (prev. 8)
• NY Fed Repo Op demand at USD 0.006bln across two operations today (prev. 0.008bln).
• EFFR at 3.88% (prev. 3.88%), volumes at USD 78bln (prev. 75bln) on November 18th.
• SOFR at 3.94% (prev. 4.00%), volumes at USD 3.278tln (prev. 3.220tln) on November 18th.

CRUDE

WTI (Z5) SETTLED USD 1.30 LOWER AT 59.44/BBL; BRENT (F6) SETTLED USD 1.38 LOWER AT 63.51/BBL

WTI and Brent experienced significant selling pressure due to the US's proposed Ukraine/Russia peace plan. The decline began in the European morning following reports and continued throughout the session. A Politico article indicated that US officials are nearing the unveiling of a major new peace agreement with Russia to end the Ukraine conflict, expected to be agreed upon by all parties by the end of November, possibly as soon as this week. Later, Reuters, citing sources, reported that US proposals to end the war include Ukraine ceding territory and some weapons, alongside reducing the size of its armed forces. The sources added the US has signaled to Zelensky it must accept the framework and its main points, so it remains to be seen if Ukraine are on board with the proposal, and what the consequences could, or would, be.

Russian Deputy PM Novak stated that Russia may reach OPEC+ oil output quota levels by the end of the year and is steadily increasing oil output in November, with growth slightly higher than in October; he added that sanctions against Rosneft and Lukoil have not affected Russia's oil output.

WTI traded between USD 58.66-60.470/bbl and Brent between USD 62.86-64.85/bbl.

EIA: In the weekly EIA data, crude stocks saw a larger-than-expected draw, contrasting with private inventory metrics, which showed an unexpected build. Distillates and Gasoline both saw surprising builds, consistent with the private metrics, while crude production fell 28k W/W to 13.834mln.

EQUITIES

• CLOSES: SPX +0.38% at 6,642, NDX +0.56% at 24,641, DJI +0.10% at 46,139, RUT -0.04% at 2,348
• SECTORS: Technology +0.93%, Communication Services +0.72%, Materials +0.46%, Financials +0.42%, Industrials +0.36%, Consumer Discretionary +0.05%, Health -0.14%, Consumer Staples -0.61%, Real Estate -0.79%, Utilities -0.81%, Energy -1.30%
• EUROPEAN CLOSES: Euro Stoxx 50 +0.13% at 5,541, Dax 40 +0.10% at 23,204, FTSE 100 -0.47% at 9,507, CAC 40 -0.18% at 7,954, FTSE MIB -0.44% at 42,651, IBEX 35 +0.39% at 15,889, PSI -0.57% at 8,073, SMI +0.51% at 12,545, AEX +0.26% at 933.

STOCK SPECIFICS:

• Abbott (ABT) is reportedly close to a deal for Exact Sciences (EXAS).
• Block (XYZ) announced a USD 5bln increase to its share buyback program. Adjusted EPS is expected to grow in the low 30% range annually through 2028 to USD 5.50. Sees 2026 adj. EPS at USD 3.20.
• DoorDash (DASH) was upgraded at Jefferies.
• ON Semiconductor (ON) authorized a new USD 6bln share repurchase program over 3 years starting January 1st.
• Paramount Skydance (PSKY) has reportedly spoken to Middle East funds regarding investing in Warner Bros. Discovery (WBD); PSKY to submit bid of approx. USD 23.50/shr this week.
• Semrush (SEMR) is to be acquired by Adobe for USD 12/shr; SEMR closed Tuesday at USD 6.76/shr.
• Tesla (TSLA) received a permit for a ride-hailing service in Arizona.

EARNINGS:

• Lowe’s Companies (LOW): Profit beat and raised FY25 revenue view.
• Target (TGT): Top line light and SSS declined more than expected; trimmed top end of FY profit range.
• TJX Companies (TJX): EPS, revenue, and comparable sales topped expectations; strong FY guidance.

US FX WRAP

The Dollar experienced buying pressure, negatively impacting all G10 currencies, amid a notable hawkish repricing in Fed money markets, extending earlier gains. Markets now assign only a c. 26% chance of a 25bps cut in December (prev. 48%) after the new BLS data schedule shows the FOMC will not see the Nov. or Oct. US jobs reports before the December 10th meeting. As a result, it increases the chances that the Fed will not cut again, as Chair Powell signalled a willingness to drive slow when there is a lack of visibility. Elsewhere, FOMC Minutes added little new but emphasized how divided the camp is on the Dec. decision, but overall tilted hawkish with "many" expecting no change in December. In the wake of the minutes and BLS update, the Dollar moved to fresh highs. DXY reached a peak of 100.22 against an earlier trough of 99.493 with all eyes on NVIDIA earnings after-hours.

As mentioned, G10 FX saw losses across the board, and while most of it was Dollar-driven, there was some currency-specific newsflow; the Yen saw notable weakness after the Japanese Finance Minister Katayama said she did not have specific discussions on FX with BoJ Governor Ueda. This added to the pressure seen in the overnight APAC session as Kyodo reported that the Chinese government issued a renewed ban on Japanese seafood imports. USD/JPY printed a high of 157.04, and while verbal intervention remains on the lips, ING’s view remains that the MoF prefers to intervene in the FX market after a USD-negative event, like it did in July 2024, and also thinks any line in the sand may be closer to 160, so it could see further upside pressure in the coming days.

Cable traded between 1.3044-3155, with the Pound seeing weakness on UK CPI. Recapping, headline figures were in line with expectations, whilst the services figures were cooler-than-expected. Mixed views following the report, with ING focusing on the “stickiness” of CPI whilst Pantheon Macro thinks it pretty much “nails on” a December cut. On the political footing, and continuing to add to Starmer pressure, a left-leaning group of UK Labour MPs are reportedly preparing a move against the PM; they reportedly have the 80 parliamentarians required to begin a leadership contest. However, they have yet to decide on a candidate to support.

EMFX was lower against the Greenback on known themes, but SocGen notes the recent rally in Brazil and Colombia may face challenges from general elections in Brazil, Colombia, and Mexico next year, adding “the outlook for fiscal and monpol, and by extension, LatAm assets, is closely tied to election outcomes in Brazil and Colombia.”