US Equities Gain Momentum Amid Tech Rally
The US equities market maintained its upward trajectory on Wednesday, with major indices hitting fresh record highs. The S&P 500 rose by 0.61%, the Dow Jones climbed 0.69%, and the Nasdaq gained 1.30%, propelled by mega-cap tech companies like Apple, Meta, and Amazon.
The rally was supported by robust earnings from Salesforce and positive prospects for AI-driven growth, particularly in semiconductors. However, the broader market showed mixed performance, as more sectors lost ground than gained. Defensive sectors such as utilities and real estate experienced declines despite falling Treasury yields.
Investors Digest Mixed Economic Data
Mixed economic data shaped market sentiment, with the ISM Services PMI and ADP employment report coming in softer than expected. Despite these weaker readings, optimism about future economic growth persisted.
Federal Reserve Chairman Jerome Powell adopted a cautious tone, indicating no urgency to cut interest rates. Nonetheless, Treasury yields dropped, and equities continued to rise. Futures markets are pricing in a 75% probability of a 25-basis-point rate cut at the Fed’s December meeting, with further reductions anticipated in 2025. Market focus now shifts to Friday’s nonfarm payrolls report, which will offer further insight into labour market conditions.
European Political Turmoil
In Europe, political uncertainty deepened as French lawmakers passed a no-confidence vote against Prime Minister Michel Barnier, throwing the government into crisis. This raises questions about France’s ability to pass key legislation, including the 2025 budget, and risks further destabilizing the European Union.
Asian Markets Show Mixed Performance
Most Asian equities rose on Thursday, buoyed by a tech rally. Japan’s Nikkei and Australia’s ASX 200 both posted gains. However, South Korean shares declined due to political instability. Broader market sentiment in Asia remained cautious amid ongoing geopolitical risks and concerns over the impact of US trade policies.
Commodity and Currency Market Trends
- US Dollar: Remained strong on Thursday, with the dollar index at 106.27. Traders focused on the potential for Federal Reserve rate cuts, despite mixed economic data. The euro struggled near a two-year low of $1.052, weighed down by political uncertainty in France.
- Oil Prices: Rose slightly, supported by a larger-than-expected draw in US inventories and geopolitical tensions in the Middle East. However, gains were tempered by builds in product inventories and anticipation of the OPEC+ meeting, where production cuts are expected to be extended amidst concerns over slowing demand, particularly from China.
Cryptocurrency Highlights
Bitcoin surged to a record high of $101,438 on Thursday, driven by optimism surrounding pro-crypto regulations under President-elect Donald Trump. The appointment of Paul Atkins to lead the SEC further boosted sentiment. Additionally, comments by Federal Reserve Chairman Jerome Powell comparing Bitcoin to gold enhanced its appeal as a speculative asset.
Equities on the Move
Several companies experienced notable stock movements:
- Apple and Baidu: Collaborating to integrate AI features into iPhones sold in China. However, challenges with Baidu’s large language model accuracy and data privacy have arisen. These issues come as iPhone sales in China stagnate, while competitor Huawei reports strong sales growth.
- Eli Lilly: Its obesity drug Zepbound outperformed Novo Nordisk’s Wegovy in head-to-head trials, demonstrating 20.2% weight loss compared to 13.7%. Zepbound’s dual-action mechanism achieved significant results with a safety profile consistent with earlier studies.
- Foot Locker: Shares dropped over 9% after the company cut its annual earnings and sales forecast, citing weaker consumer spending and heightened promotional competition. The company also missed analyst expectations for Q3 earnings, revenue, and comparable sales growth.
- Roku: Shares rose 9.6% after Needham & Company reiterated a Buy rating and a $100 price target. Analysts highlighted Roku’s large user base, valuable data, and strong positioning in the connected TV market.
- Country Garden: Reported a 52.3% decline in November sales, exacerbating liquidity concerns as China’s property market struggles. Despite government support measures, the company faces mounting financial challenges, including delayed debt restructuring talks.
Upcoming Data and Events
Key market events and data releases include:
- US Initial Jobless Claims Report: Offering insights into labor market trends.
- OPEC+ Meeting: Expected to impact global oil prices through potential production cuts.
- Additional data on trade balance and continuing jobless claims will also be in focus.
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