Equity markets hit new peaks amid AI optimism

General market commentary

US equity markets ended Tuesday firmly higher, with a broad based rally across most sectors. The Dow Jones Industrial Average rose 1 percent to a fresh record close, while the S&P 500 gained 0.6 percent and the Nasdaq Composite added 0.7 percent. Leadership was widespread, as cyclical areas such as materials, industrials, consumer discretionary and technology performed strongly alongside the defensive healthcare sector. Small cap equities also outperformed, with the Russell 2000 rising by more than 1 percent, while energy was one of the few lagging sectors.

In fixed income markets, US Treasury yields edged modestly higher, with the 10 year yield closing around 4.17 percent and the 2 year at 3.47 percent. In commodities, oil prices fell sharply on the day, while gold and silver moved higher amid ongoing geopolitical uncertainty. Economic data pointed to a gradual cooling in activity, with US services growth revised lower for December, although consumer spending indicators remained resilient. Attention is now turning to a heavy slate of labour market data later this week, including ADP employment, job openings and the December jobs report, which will be closely watched for further confirmation of slowing but still stable employment conditions.

Latest market and economic update

Asian equity markets were mixed, with South Korea’s KOSPI hitting a record on AI optimism, supported by Samsung Electronics and SK Hynix. Japan’s Nikkei 225 and TOPIX, as well as Hong Kong’s Hang Seng, fell amid profit taking, while Australia’s S&P/ASX 200 was steady after inflation data suggested rates would remain unchanged.

U.S. equity futures were largely flat overnight, with S&P 500 futures near 6,987, Nasdaq 100 slightly weaker and Dow Jones futures modestly firmer after the S&P 500 and Dow hit record highs in the regular session on chip-led gains. The muted action reflects a pause after the rally as investors await key US economic data.

The STOXX 50 remained near record levels on Tuesday, while the STOXX 600 rose 0.4%, boosted by higher metal prices. Major miners gained, including Rio Tinto 1.1%, Anglo American 1.0%, Glencore 0.7%, and ArcelorMittal 0.6%. Technology shares fell, with ASML down 0.7% and SAP 1.6%, as investors monitored European economic data and Venezuela developments.

The US dollar remained firm, with the dollar index around 98.5, supported by a weaker euro following softer German and French inflation data. EUR/USD traded near 1.1696 as investors awaited US economic releases including ISM Services, JOLTs, and the December jobs report, while markets largely expect the Federal Reserve to keep interest rates unchanged.

Oil prices fell on Wednesday after US President Donald Trump said Venezuela will transfer 30–50 million barrels of sanctioned oil to the United States. West Texas Intermediate dropped about 1.4 % to around $56.35 a barrel and Brent fell about 1 % to near $60.09, as markets weighed increased supply against ongoing Venezuelan output uncertainty.

Germany’s annual inflation fell to 1.8% in December 2025, below expectations and the ECB’s 2% target midpoint. Goods inflation slowed sharply, while services remained at 3.5%. Core inflation eased to 2.4%, the lowest since June 2021. EU-harmonised CPI dropped to 2.0%, with 2025 national and harmonised inflation averaging 2.2% and 2.3%.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Memory and storage shares surged on Tuesday after Nvidia CEO Jensen Huang highlighted the sector’s massive growth potential, describing it as largely unserved and essential for AI workloads. Western Digital jumped 17%, Seagate rose 14%, Micron gained 9%, and Sandisk climbed 27%, as investors anticipated strong demand and new solutions like Nvidia’s KV cache.

Lockheed Martin has reached a seven-year agreement with the US Department of War to increase PAC-3 missile production from 600 to 2,000 units annually. Rising demand reflects heightened global security concerns. The company supplies 16 allied countries and recently secured a $9.8 billion contract for 1,970 missiles, the largest order in Patriot system history.

Meta has paused international expansion of its Ray-Ban Display smart glasses due to strong US demand and limited supply, prioritising domestic orders. Since launch, waitlists extend into 2026. The glasses, developed with Ray-Ban, sold 15,000 units in Q1, capturing 6% market share. Meta also announced new teleprompter and navigation features.

Strategy Inc shares rose over 6% in after-hours trading on Tuesday after MSCI confirmed it will not exclude digital asset treasury companies from its global indexes. Other crypto-related equities, including Bitmine Immersion, also gained, while MSCI plans a broader consultation on non-operating companies but deferred changes to share counts or index weighting.

Lenovo is partnering with Nvidia to provide large-scale AI computing infrastructure through its AI Cloud Gigafactory, using Nvidia’s Blackwell Ultra chips and upcoming Vera Rubin platform. The collaboration aims to help cloud operators scale AI quickly. Lenovo also unveiled Qira and enterprise AI applications, while noting potential device price hikes from rising memory costs.

Singapore’s Grab Holdings has acquired China-based Infermove, a developer of AI-enabled robotics, to enhance its first- and last-mile delivery services. Grab plans to further develop Infermove’s solutions in Singapore and explore how autonomous robots can improve customer and partner experiences. Financial terms of the acquisition were not disclosed.

Shares of US Heating, Ventilation, and Air Conditioning (HVAC) companies fell after Nvidia CEO Jensen Huang said upcoming chips could sharply reduce data centre cooling needs. HVAC systems control indoor climate—heating warms, ventilation circulates air, and air conditioning cools. Analysts noted potential gains for nVent and Vertiv, which focus on liquid cooling.

Nuclear and power equities rose after the US expanded domestic nuclear fuel production and AI-driven demand boosted data centre power needs. Federal funding supports Centrus Energy, General Matter, and Orano SA in producing next-generation reactor fuel, part of efforts to reduce reliance on Russian uranium and strengthen the domestic nuclear supply chain.

The US House will hold a hearing on January 13 to consider legislation easing deployment of autonomous vehicles without human controls. Proposals include raising NHTSA’s exemption cap to 90,000 vehicles, removing certain safety requirements, and limiting state rules, as automakers and robotaxi operators like Tesla and Waymo push for faster adoption amid safety scrutiny.

U.S. shares of STMicroelectronics rose about 7% after reports that Apple is considering its LiDAR sensors for future iPhones, potentially ending Sony’s sole-supplier role. Analysts see this as positive for market position and product strategy for 2026–2027, though near-term profitability gains are uncertain, with margin recovery expected in the second half of 2026.

SoFi shares fell over 8% after Bank of America maintained an underperform rating despite recent capital raises. While BofA raised its price target to $20.50, it still sees notable downside from current levels, citing limited upside at the valuation. The bank views the capital raise as supportive of growth, but expects only modest acquisitions.

Marvell shares fell in excess of 2.5% after announcing a $540 million acquisition of XConn Technologies, aimed at expanding its PCIe and CXL switching portfolio and enhancing AI and cloud data centre connectivity. The deal, closing in early 2026, is expected to contribute to revenue from 2027. Raymond James maintained a Strong Buy rating.

Wolfe Research downgraded Shopify to Peer Perform, citing a fully valued equity after strong re-rating over two years. Growth and profitability expectations are high, with limited margin expansion and AI-driven commerce already priced in. While Shopify remains high quality with a strong competitive position, upside is constrained, and risk-reward is skewed to the downside.

Bank of America downgraded Adidas to Underperform, citing a slowdown in growth and margins as the brand enters a lower-growth phase. Analysts expect single-digit organic sales growth, normalising margins, and fading momentum after a temporary World Cup boost. The €160 price target reflects reduced earnings forecasts and a return to sector-average performance.

Roblox shares fell around 5% after TD Cowen lowered its price target to $70, maintaining a Sell rating due to slower December user engagement. Hours spent on the platform grew just 66% YoY—the weakest holiday performance in four years—though Q4 bookings are still projected to rise 65% year-on-year, above guidance and consensus.

Evercore ISI upgraded SLB to Outperform, citing a clearer outlook, the ChampionX acquisition, and stronger international spending, with a $54 price target. Halliburton, Canadian Natural Resources, and BP were downgraded to In Line due to US land headwinds, high capex, management turnover, and commodity sensitivity, prompting lower 2026–2027 EPS estimates.

Cantor Fitzgerald upgraded KLA and Microchip to Overweight, citing an AI-driven semiconductor upcycle limited by capacity. KLA benefits from advanced manufacturing, Microchip from improving analog and microcontroller demand. Analysts expect tight capacity and AI investment to support earnings growth and a semiconductor cycle upswing into 2026.

Upcoming data and events

Today’s key economic releases include EU and Italy December inflation data, US MBA mortgage applications and 30-year rates, ADP December employment change, US factory orders and ISM services PMI for December, JOLTs November job openings and quits, and US EIA weekly crude, gasoline, distillate, and heating oil inventory changes.

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