Wednesday, December 31, 2025

Stocks Modestly Lower into Final Hour on Rising Long-Term Rates, Year-End Positioning, Technical Selling, Tech/Alt Energy Sector Weakness

Economic/Market Gauges:

  • North American Investment Grade CDS Index 50.0 unch.
  • Bloomberg US Securitized MBS/ABS/CMBS Avg. OAS .26 unch.
  • BofA Global Financial Stress Indicator -.28 +1.0 basis point
  • European Financial Sector CDS Index 54.2 -.02%
  • Emerging Market CDS Index 124.3 -.4%
  • Bloomberg Global Trade Policy Uncertainty Index 2.2 -.1
  • Citi US Economic Surprise Index 14.4 +6.1 points
  • Citi Eurozone Economic Surprise Index 32.6 +.1
  • Citi Emerging Markets Economic Surprise Index 30.6 +1.5 points 
  • S&P 500 Current Quarter EPS Growth Rate YoY(16 of 500 reporting) +32.8% unch.
  • S&P 500 Blended Forward 12 Months Mean EPS Estimate 310.36 +.10:  Growth Rate +15.3% +.1 percentage point, P/E 22.2 unch.
  • S&P 500 Current Year Estimated Profit Margin 13.50% unch.
  • NYSE FANG+ Current Quarter EPS Growth Rate YoY(0 of 10 reporting) +n/a +n/a
  • NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 484.65 +.19: Growth Rate +18.0% +.1 percentage point, P/E 32.8 -.1
  • Bloomberg US Financial Conditions Index .77 unch.
  • US Yield Curve 69.0 basis points (2s/10s) +1.75 basis points 
  • Bloomberg Industrial Metal Index 163.4 -.7% 
  • US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 28.8% unch.
  • US Atlanta Fed GDPNow Q4 Forecast +3.0% unch. 
  • US 10-Year T-Note Yield 4.17% +5.0 basis points
  • 1-Year TIPS Spread 2.29 -4.0 basis points
  • Highest target rate probability for March 18th FOMC meeting: 49.9% (+.8 percentage point) chance of 3.5%-3.75%. Highest target rate probability for April 29th meeting: 45.2%(-.1 percentage point) chance of 3.25%-3.5%. (current target rate is 3.5-3.75%)
Overseas Futures:
  • Nikkei 225 Futures: Indicating +450 open in Japan 
  • China A50 Futures: Indicating -19 open in China
  • DAX Futures: Indicating +200 open in Germany
Portfolio:
  • Slightly Lower: On losses in my consumer discretionary/tech/industrial sector longs
  • Disclosed Trades: None
  • Market Exposure: 75% Net Long

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