Equities little changed after Christmas break

General market commentary

Equities closed near the flatline on Thursday, maintaining positive momentum for the holiday-shortened week. Trading volumes were light due to the Christmas holiday, with most sectors of the S&P 500 finishing close to unchanged. Overseas, Asian markets were mostly higher, while European markets were closed for the Boxing Day holiday. Bond yields remained relatively stable, with the 10-year Treasury yield ending the day at 4.58%. In commodities, oil prices saw a modest decline of 0.8%, while gold rose by 0.7%. Despite the quiet trading day, initial jobless claims came in below expectations, suggesting that labour market conditions remain healthy and supportive of consumer spending. This could help extend the economic expansion into 2025, though conditions are expected to moderate next year.

The broader market is on track for another year of strong returns, with the S&P 500 up more than 28% so far in 2024, following a 26.3% gain in 2023. If this year's performance holds, it would mark the first time since 1999 that the index has returned 20% or more in consecutive years. Historically, the S&P 500 has shown positive returns in the third year following back-to-back 20% gains in the majority of instances. While there are no guarantees, the fundamental backdrop continues to support the current bull market. The small-cap Russell 2000 index posted a notable rebound after last week's sell-off triggered by the Federal Reserve's signals on interest rates, suggesting that market participants are adjusting expectations. Meanwhile, megacap tech shares, including Tesla, Amazon, and Meta Platforms, saw slight declines, but Apple shares rose as it approaches a historic market valuation of $4 trillion. Cryptocurrency-related equities also faced losses, as a drop in bitcoin prices weighed on shares like MicroStrategy and Coinbase Global.

Latest market update

Most Asian equities were higher on Friday, with Japan's Nikkei 225 surging 1.5% following stronger-than-expected Tokyo inflation data, while Chinese shares rose modestly on improved industrial profits. However, South Korean shares slumped over 1.5% amid ongoing political unrest, marking their third consecutive decline.

U.S. equity index futures point to a slightly lower open as investors remain cautious amidst higher Treasury yields and thin trading volumes in the holiday-shortened week. With key jobless claims data already in focus, markets will likely stay attentive to any new economic updates, while the Fed's cautious approach on interest rates continues to shape sentiment ahead of the new year.

The US dollar held steady near two-year highs on Friday, supported by the Fed’s hawkish outlook and expectations of modest rate cuts in 2025. Against the euro, the dollar was trading at 1.0410, reflecting its strength amid investor concerns about potential inflationary pressures from President-elect Trump’s policies.

Oil prices remained largely unchanged in thin trading on Friday, with caution around year-end and traders awaiting key U.S. inventory data. A drawdown in U.S. crude stocks and hopes for additional Chinese fiscal stimulus supported prices, although concerns over potential oversupply and weaker demand persist.

Equities on the move

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

Wedbush has raised its price target for Apple to $325, citing an AI-driven iPhone upgrade cycle expected to fuel growth into 2025 and propel Apple's market cap past $4 trillion. The firm anticipates significant consumer adoption and service revenue growth from AI innovations, positioning Apple for a potential "supercycle" with iPhone unit sales forecast to surpass 240 million in fiscal 2025.

Citi has maintained its "buy" rating on Palo Alto Networks, raising its price target to $216 after the company's share split, citing strong growth prospects and a stable pricing environment. The firm highlighted sustained revenue growth, robust demand in the firewall market, and a promising outlook for its Next-Generation Security business as key drivers of its premium valuation.

Upcoming data and events

Today's economic calendar features a range of key data releases, with the spotlight on the EIA Crude Oil Inventories report, expected to show a decrease in crude stocks. Other important updates include retail inventories, the goods trade balance, housing price indices, and various reports on energy production and speculative positions across commodities.

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