Market “Melt-Up” Propels Tech Sector Gains
The market “melt-up” extended into the new month, driving two major indices to fresh record highs. This growth was fueled primarily by a surge in tech shares, with Apple, Tesla, Meta Platforms, Microsoft, Alphabet, and Amazon recording significant gains. The semiconductor sector also experienced robust buying momentum.
This equities rally coincided with a rise in Treasury yields. However, optimism about a potential Federal Reserve rate cut later this month has grown. The probability of a 25-basis-point reduction at the next Fed meeting stands at 75%, up from 67% late last week. This sentiment shift followed remarks from Fed Governor Christopher Waller, who expressed support for a rate cut amid declining inflationary pressures.
Divergent Market Dynamics
Despite gains in mega-cap equities, most other market sectors saw declines on Monday. Rate-sensitive sectors like real estate and utilities faced notable pressure, likely due to concerns over interest rate policies.
Semiconductor stocks drew attention after Intel’s CEO resignation, alongside a more optimistic interpretation of US trade restrictions on semiconductor technology exports to China. However, the broader market faced challenges as declining equities outpaced advancing ones, potentially indicating a slowing rotation away from big tech.
Global Market Updates
Asian and European Markets
Asian equities posted broad gains on Tuesday, led by the tech sector, with Japan’s Nikkei and South Korea’s KOSPI recording significant rises. Conversely, Chinese equities underperformed, with Hong Kong’s Hang Seng and mainland blue chips experiencing modest declines.
In Europe, the Euro STOXX 50 rose by 1% on Monday, driven by strong performances from Novo Nordisk, LVMH, and Hermes International. Political uncertainty in France and a decline in Stellantis shares, following CEO Carlos Tavares’ resignation, tempered investor sentiment.
US Dollar and Oil Markets
The US dollar gained strength on Tuesday, supported by political turmoil in France and ongoing tariff risks. It pushed the euro down to $1.0495. A strong dollar, along with improved US manufacturing data, also contributed to concerns about China’s weakening economy.
Oil prices remained stable during Asian trade as traders awaited US economic data and the OPEC+ meeting later this week. Sentiment was clouded by concerns about weak demand, a strong dollar, and geopolitical tensions, particularly between Russia and Ukraine.
Equities in Focus
Key Stock Movements
- Tesla: Shares declined 1.3% in after-hours trading following a Delaware court ruling that Elon Musk’s $56 billion compensation package was excessive and invalid. Tesla plans to appeal the decision.
- Super Micro Computer: Shares surged by nearly 29% after an independent review confirmed the accuracy of its financial statements, clearing management of misconduct.
- ASML: The company stated that new US export restrictions on China would not impact its 2025 financial outlook, though some lithography system sales may be affected.
- Intel: Shares initially rallied but fell 0.50% after CEO Pat Gelsinger’s retirement, effective Sunday. The company has appointed interim co-CEOs while searching for a replacement.
- SpaceX: The private company is reportedly in talks to sell insider shares at a valuation of around $350 billion, significantly up from $255 billion in November.
Upcoming Data and Events
Today’s focus will be on key economic indicators and market-moving events, including:
- JOLTs Job Openings report
- Speeches by Federal Reserve officials Goolsbee and Kugler
- Updates on US retail sales and economic optimism
Additionally, earnings reports from tech leaders Salesforce and Marvell Technology are expected to provide critical insights into market sentiment.
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