Strong earnings couldn't overcome the pull of rising rates
On a Thursday in early December, American markets held their breath between two competing truths: corporations were earning more than anyone expected, yet the economy's own strength was threatening to delay the relief of lower borrowing costs. The S&P 500, Dow, and Nasdaq each slipped fractionally as rising bond yields — fed by surprisingly resilient labor data and hawkish signals from Tokyo — pressed against an earnings season that was quietly one of the strongest in years. It is the familiar paradox of late-cycle prosperity, where good news carries its own shadow.
- Weekly jobless claims fell to a three-year low of 191,000, rattling bond markets and pushing the 10-year Treasury yield to 4.09% — a reminder that a strong economy can be its own kind of threat to rate-cut hopes.
- The Bank of Japan's signal of an imminent rate hike sent Japanese government bond yields to an 18-year high, amplifying pressure on U.S. Treasuries and dragging semiconductor stocks like Micron down more than 3%.
- Against that headwind, an extraordinary earnings season — 83% of S&P 500 reporters beating forecasts, with profits rising 14.6% against an expected 7.2% — kept the broader selloff from gaining momentum.
- Bright spots emerged in individual names: Dollar General surged 11% on raised guidance, Meta climbed 4% on budget discipline, and UiPath soared 18% on blowout revenue, while Genesco cratered 29% and Snowflake fell 10% on weak outlooks.
- Markets remain in a holding pattern, pricing a 91% chance of a Fed rate cut on December 9-10, but Friday's core PCE inflation data will determine whether that confidence holds or quietly erodes.
Thursday's session opened with a shrug and closed the same way. The S&P 500 fell 0.06%, the Dow 0.04%, and the Nasdaq 100 slipped 0.28% — small numbers that concealed a day of genuine tension between forces pulling in opposite directions.
The pressure came from the bond market. Weekly jobless claims dropped sharply to 191,000, a three-year low that suggested the economy was stronger than the Fed's rate-cut calendar assumed. The 10-year Treasury yield rose to 4.09%. Overseas, the Bank of Japan signaled a rate hike was coming, sending Japanese government bond yields to their highest level in eighteen years and adding to the global squeeze on Treasuries. Semiconductor stocks absorbed the worst of it — Micron fell more than 3%, with Intel and ON Semiconductor following.
Corporate earnings provided the counterweight. With 475 S&P 500 companies having reported, 83% beat forecasts and profits grew 14.6% — more than double the anticipated pace, putting the quarter on track for its best showing since 2021. Dollar General raised its full-year outlook and jumped 11%. Meta climbed 4% after Mark Zuckerberg announced plans to trim the metaverse division's budget by up to 30%, a move markets interpreted as fiscal maturity. UiPath surged 18% on revenue that exceeded expectations; Science Applications International leapt 15% on strong earnings and raised guidance.
Not everyone fared well. Genesco plunged 29% after weak earnings and a 2026 forecast that fell far short of consensus. Snowflake dropped 10% on disappointing margin guidance. Kroger fell 6% on missed sales, and Costco slipped 3% when November comparable sales came in below forecast.
The day ended as it began — unresolved. Investors are waiting for Friday's personal spending and core PCE inflation data, the Fed's preferred gauge of price pressure, before committing to a view on December and beyond. For now, the market remains suspended between the pull of strong profits and the push of rising rates, with neither force yet willing to yield.
The stock market opened Thursday with a shrug. The S&P 500 fell 0.06%, the Dow Jones dropped 0.04%, and the Nasdaq 100 slipped 0.28%—modest moves that masked a day of competing pressures, each pulling in opposite directions.
The weight came from two places. Bond yields climbed as fresh labor data suggested the economy was stronger than expected. Weekly jobless claims fell by 27,000 to hit a three-year low of 191,000, a number that spooked bond traders because it signaled the Federal Reserve might not need to cut rates as aggressively as markets had been pricing in. The 10-year Treasury yield rose three basis points to 4.09%. Overseas, the Bank of Japan signaled it would likely raise rates this month, pushing Japanese government bond yields to an 18-year high and adding to the global pressure on American Treasuries. Semiconductor stocks bore the brunt of the selling, with Micron Technology down more than 3%, joined by Intel and ON Semiconductor, all sliding on the same headwinds that were battering the broader tech sector.
But corporate earnings kept the damage from spreading. The third quarter earnings season was drawing to a close with 475 of the S&P 500's companies having reported, and the results were striking: 83% of them beat forecasts, putting the quarter on track for its best performance since 2021. Earnings themselves rose 14.6%, more than double the expected 7.2% gain. That strength showed up in individual stocks. Dollar General reported better-than-expected sales and raised its full-year forecast, sending the stock up 11%. Meta Platforms climbed 4% after CEO Mark Zuckerberg announced plans to cut the metaverse division's budget by up to 30% next year—a move the market read as fiscal discipline. Hormel Foods beat expectations on fourth-quarter earnings. UiPath surged 18% on revenue that exceeded consensus. Science Applications International jumped 15% after delivering earnings well above forecasts and raising its full-year guidance.
The day's economic data painted a mixed picture. Job cuts announced by companies rose 23.5% year-over-year to 71,321 in November, the highest for that month in three years, though the increase was smaller than some had feared. Factory orders rose just 0.2% month-over-month, slightly weaker than expected. The labor market's apparent strength—those falling jobless claims—was the real market mover, because it raised questions about whether the Fed would actually cut rates by a quarter point at its December 9-10 meeting. Markets were still pricing in a 91% probability of that cut, but the hawkish labor data had narrowed the odds.
On the losing side, the damage was concentrated. Genesco, the apparel retailer, plummeted 29% after reporting weaker-than-expected earnings and issuing a 2026 forecast that fell well short of consensus. Snowflake dropped 10% on guidance for fourth-quarter operating margins below expectations. UniQure fell 10% after the FDA signaled that data from its gene therapy trials for Huntington's disease would likely not support a license application. Kroger, the grocery giant, fell 6% after reporting third-quarter sales that missed the consensus mark. Costco slipped 3% when November comparable sales came in below forecast.
The broader picture remained one of resilience. Overseas markets were mixed—Europe's Euro Stoxx 50 climbed to a 2.5-week high, while Japan's Nikkei rose sharply by 2.33%—but the U.S. market's modest decline reflected genuine uncertainty about what comes next. Investors are waiting for Friday's personal spending and core inflation data, the Fed's preferred measure of price pressures. Those numbers will help shape expectations for the December rate decision and beyond. For now, the market was caught between the pull of strong corporate profits and the push of rising rates, with neither force yet dominant enough to break the stalemate.
Citações Notáveis
CEO Mark Zuckerberg announced plans to cut the metaverse division's budget by up to 30% next year— Meta Platforms
The Eurozone economy has been resilient, risks around inflation seem balanced, and our central scenario seems more and more credible— ECB Executive Board member Cipollone
A Conversa do Hearth Outra perspectiva sobre a história
Why did the market barely move when earnings were so strong?
Because the bond market was moving faster. When jobless claims fell to a three-year low, traders read that as a signal the Fed might not cut rates as much as they'd been betting on. That pushed Treasury yields up, which makes stocks less attractive relative to bonds.
So the labor market strength was actually bad news for stocks?
In this moment, yes. Normally you'd celebrate a strong labor market. But when the Fed is trying to manage inflation and rates are already elevated, a labor market that's too strong can mean the Fed stays restrictive longer. That's what spooked the bond market.
The semiconductor stocks got hit hard. Was that just about the yields, or something else?
Yields hit the whole market, but chip stocks are especially sensitive because they're growth companies. When rates rise, the future earnings of growth companies become less valuable in today's dollars. So they get hit harder than, say, a grocery store.
But some stocks like Dollar General and Meta did really well. What made them different?
They beat expectations and showed discipline. Dollar General raised its sales forecast. Meta announced it was cutting costs in a division that's been a drag. The market rewards that kind of clarity and execution, especially when earnings are strong.
What happens if Friday's inflation data comes in hot?
That would reinforce what the labor market is already suggesting—that the economy is still running warm. It could push yields even higher and make the Fed's December rate cut less certain. That would be another headwind for stocks.
So the real story isn't today's decline. It's what comes next.
Exactly. Today was just the market processing conflicting signals. The real test is whether the economy is cooling enough for the Fed to cut, or whether inflation and labor strength force them to hold. That's what will drive markets for the next few weeks.