Market Performance Overview
Equity markets ended Wednesday in positive territory after earlier modest losses. The S&P 500 rose by 0.4%, while the Dow Jones Industrial Average gained 0.7%. Real estate and information technology sectors performed well, leading gains, whereas the communication services sector declined due to Alphabet’s earnings. Although Alphabet’s earnings per share surpassed expectations, a lower-than-expected revenue figure caused a significant drop in its share price, pressuring the sector.
Mixed Economic Data and Bond Market Reaction
Economic indicators revealed a mixed outlook:
- ADP employment survey showed stronger-than-expected private sector job growth in January.
- ISM services PMI fell short of expectations, signalling a slowing expansion in the services sector.
Following the weaker ISM data, bond yields declined, reflecting investor sentiment. Markets are now turning their attention to the nonfarm payrolls report for January, which is expected to provide further clues regarding the Federal Reserve’s monetary policy. Many investors anticipate the Fed’s first interest rate cut in June.
The 10-year U.S. Treasury note yield remained at a seven-week low of 4.42% due to soft U.S. data and easing trade concerns.
International Market Update
Asian Markets Gain Ground
Asian equity markets largely mirrored Wall Street’s rally on Thursday, driven by strength in the technology sector. The Shanghai Composite rose by 0.8%, while Japan’s Nikkei 225 gained 0.3%. However, escalating U.S.-China trade tensions have tempered market optimism.
European Market Recovery
European stocks rebounded on Wednesday, closing in positive territory. Strong corporate earnings reports fuelled investor sentiment. Banco Santander led the rally with a 7% surge, while other companies like GSK and Novo Nordisk also reported strong earnings and raised financial outlooks.
U.S. Futures and Corporate Focus
U.S. equity futures saw moderate gains on Thursday, building on the previous day’s momentum. Nvidia rose 5.2%, leading an AI equity recovery following DeepSeek concerns. Major clients like Alphabet, Microsoft, and Meta increased their capital expenditures. Supermicro, an Nvidia partner, announced the full production of AI data center solutions powered by Nvidia’s Blackwell platform. All eyes are on Nvidia’s upcoming earnings report on February 26.
Meanwhile, investors are watching Amazon’s quarterly report and jobless claims data. Semiconductor stocks like Qualcomm and Arm declined in after-hours trading due to weaker-than-expected results.
Commodities and Currency Markets
Oil prices edged up during Thursday’s Asian trading session after recent sharp declines. Traders assessed rising U.S. crude stockpiles and escalating U.S.-China trade tensions. While renewed U.S. policies on Iran may tighten oil supply, demand concerns and increased inventories continue to weigh on the market.
The dollar index fell to around 107.5 as U.S.-China trade fears eased. The euro/USD exchange rate stood at 1.0393, while the dollar weakened against the yen following hawkish remarks from Japanese officials. Markets still expect two Federal Reserve rate cuts this year.
Sector and Stock Highlights
Several companies experienced share price fluctuations due to earnings reports, analyst ratings, and corporate developments:
- Nvidia gained on Wednesday as major clients like Alphabet, Microsoft, and Meta boosted capital expenditure plans.
- Supermicro announced full production of AI data center solutions powered by Nvidia’s Blackwell platform.
- Fiserv shares rose by 7% following better-than-expected Q4 earnings, with EPS at $2.51 and revenue at $5.25 billion.
- Arm Holdings reported strong third-quarter results but narrowed its full-year revenue forecast, leading to a share price decline.
- Qualcomm posted solid Q1 earnings but saw a dip in shares due to flat revenue forecasts in patent licensing after its agreement with Huawei ended.
- Novo Nordisk achieved a 37% increase in operating profit driven by doubled Wegovy sales. However, it expects slower growth of 16% to 24% in 2025 due to competition from Eli Lilly and pricing pressures in the obesity drug market.
- Uber shares fell after missing Q4 adjusted profit estimates. Operating income came in at $770 million, below the expected $1.22 billion.
- Disney beat quarterly earnings expectations, driven by streaming and “Moana 2” success. Domestic theme park profits fell due to hurricanes, though international park gains helped offset this. Disney forecasts continued earnings growth in fiscal 2025.
- TotalEnergies exceeded Q4 earnings expectations at $4.4 billion, raised its 2024 dividend by 7%, and announced $2 billion in quarterly share buybacks for 2025.
- Strategy (formerly MicroStrategy) reported another quarterly loss due to a Bitcoin impairment charge. The company plans further Bitcoin acquisitions and aims to rebrand around cryptocurrency investments.
- Amazon is launching its generative AI-powered Alexa on February 26, a major upgrade aimed at increasing subscriptions.
Analyst Ratings Updates
- Loop Capital gave Viking a “Buy” rating but maintained “Hold” for Carnival, Norwegian Cruise Line, and Royal Caribbean.
- Rosenblatt Securities downgraded Spotify to “Neutral” due to limited upside potential after a significant stock rally.
- Stifel downgraded LVMH to “Hold” from “Buy,” citing valuation concerns.
- Barclays downgraded Ferrari to “Equal Weight,” maintaining a €485 price target.
- Raymond James initiated coverage on Robinhood with a “Market Perform” rating, noting concerns over transaction volume sustainability.
- Wells Fargo downgraded Snap, lowering the price target to $11 from $15 due to increased costs and a slow app redesign.
- Skyworks Solutions Inc. faced downgrades from Mizuho and Stifel due to concerns over Apple’s upcoming iPhone 17 impacting revenue.
- TD Cowen reiterated a “Buy” for Tempus AI after its Ambry Genetics acquisition.
- JPMorgan named Fresnillo its top gold mining pick in EMEA, raising its target price to £10.
Upcoming Economic Data and Corporate Earnings
Key events and data releases include:
- The Bank of England is expected to announce its decision on interest rates, with markets anticipating a rate cut.
- U.S. reports on jobless claims, nonfarm productivity, and unit labor costs.
- Earnings from Amazon, Eli Lilly, L’Oreal, ConocoPhillips, Bristol-Myers, Vinci, and Fortinet.
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