Stocks Slide on Weakness in Chipmakers

Economic Impact - The US government shutdown is in its fourth week, affecting market sentiment and delaying key economic reports, including unemployment claims and the September payroll report [1] - Bloomberg Economics estimates that 640,000 federal workers will be furloughed, potentially increasing jobless claims and raising the unemployment rate to 4.7% [1] Market Focus - Markets are closely monitoring US-China trade talks, with President Trump threatening to increase tariffs on Chinese goods if no deal is reached by November 1 [2] - The upcoming meeting between President Trump and Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation conference is anticipated [2] Mortgage Applications - US MBA mortgage applications decreased by 0.3% for the week ending October 17, with the purchase mortgage sub-index down 5.2% and refinancing up 4.0% [3] - The average 30-year fixed mortgage rate fell by 5 basis points to 6.37% from 6.42% [3] Stock Market Performance - Stock indexes are under pressure, particularly chipmakers, following Texas Instruments' Q4 revenue forecast below expectations [4] - Netflix shares dropped over 9% after reporting weaker-than-expected Q3 EPS, while Intuitive Surgical shares rose over 16% after increasing its growth forecast [4][15] Earnings Season - The Q3 earnings season shows rising corporate earnings expectations, with 85% of S&P 500 companies that reported so far beating forecasts, indicating the best quarter since 2021 [6] - Q3 profits are expected to rise by 7.2% year-over-year, the smallest increase in two years, while sales growth is projected to slow to 5.9% year-over-year [6] Interest Rates - Markets are pricing in a 97% chance of a 25 basis point rate cut at the next FOMC meeting on October 28-29 [7] - The ongoing government shutdown may lead to additional job losses and reduced consumer spending, potentially allowing the Fed to continue cutting interest rates [8] European Market Insights - European government bond yields are mixed, with the 10-year German bund yield up by 1.6 basis points, while the UK gilt yield dropped to a 6.5-month low [9] - UK September CPI rose by 3.8% year-over-year, unchanged from August and below expectations [9] Corporate Movements - Intuitive Surgical's stock rose over 16% after boosting its growth forecast, while Capital One Financial's stock increased over 3% after reporting better-than-expected Q3 adjusted EPS [16] - Netflix and Texas Instruments faced significant declines in their stock prices due to disappointing earnings reports [11][12]