Stocks Recover on Fed Rate Cut Expectations

Economic Indicators - The US November ISM services index rose unexpectedly by +0.3 to 52.6, surpassing expectations of a decline to 52.0, marking the strongest pace of expansion in 9 months [1] - The US November ADP employment change fell by -32,000, indicating a weaker labor market, with the largest decline in over 2.5 years [1] - US MBA mortgage applications decreased by -1.4% for the week ending November 28, with the purchase mortgage sub-index increasing by +2.5% and the refinancing sub-index declining by -4.4% [2] Stock Market Movements - Stocks initially declined due to labor market weakness but recovered after the ISM services report indicated unexpected expansion [3] - The S&P 500 Index rose by +0.18%, the Dow Jones Industrials Index increased by +0.47%, while the Nasdaq 100 Index fell by -0.06% [6] - Chipmakers showed strength, with Microchip Technology up more than +7% after forecasting stronger-than-expected Q3 adjusted EPS [4][14] Corporate Earnings - Q3 corporate earnings season is nearing completion, with 83% of S&P 500 companies exceeding forecasts, leading to a +14.6% increase in earnings, significantly above the expected +7.2% [9] - American Eagle Outfitters reported Q3 net revenue of $1.36 billion, exceeding the consensus of $1.32 billion, and raised its 2026 comparable sales growth forecast [17] Interest Rates and Economic Policy - The markets are pricing in a 98% chance of a -25 basis point rate cut at the next FOMC meeting on December 9-10, influenced by the weaker-than-expected ADP employment report [9][11] - The 10-year T-note yield decreased by -2 basis points to 4.07%, reflecting expectations of a dovish Fed policy [5][11] Company-Specific News - Microsoft shares fell more than -1% after reports indicated the company is reducing its AI software sales quotas due to consumer resistance [2][22] - Fiserv Inc saw a rise of more than +5% following insider buying by its CFO [18] - Acadia Healthcare's stock dropped more than -14% after cutting its full-year adjusted EPS forecast significantly below consensus [20]