General market commentary

The first few weeks of 2025 have seen notable market activity, with rising bond yields dominating headlines and sparking some volatility. The benchmark 10-year US Treasury yield briefly reached a 14-month high of 4.8% before retreating following encouraging inflation data. While higher yields have begun to pressure equity valuations, solid corporate and economic fundamentals continue to underpin the broader bull market. Notably, despite previous pullbacks triggered by similar yield levels, equities have demonstrated resilience, supported by strong earnings and economic growth.

The past week brought signs of easing inflation concerns, with core CPI unexpectedly ticking lower and wage growth showing moderation. These developments, combined with solid economic data such as robust retail sales, house price gains, and industrial production, reinforced optimism about a "Goldilocks" scenario of steady growth with contained inflation. As a result, equities rallied, with the S&P 500 and Dow achieving their largest weekly gains since November, and the Nasdaq enjoying its best performance since December.

Earnings season began on a strong note, led by positive results from major banks, which helped the S&P 500 bank index climb nearly 7% for the week. Tech shares also surged, with Nvidia and Broadcom advancing on upgraded price targets, while Intel and Qorvo posted double-digit gains on takeover speculation and activist investor involvement, respectively. With sentiment more balanced and recent inflation fears easing, the outlook for equities appears constructive, albeit with continued sensitivity to policy developments under the new administration.

Latest market and economic update

Asian markets mostly rose on Monday, with Japan’s Nikkei and Hong Kong’s Hang Seng leading the gains, as investors grew hopeful that U.S. President-elect Trump might soften his stance on China. However, caution prevailed ahead of his inauguration, with other regional indices showing mixed performances, as concerns over potential trade disruptions and global economic impacts kept investors on edge.

U.S. equity index futures edged lower on Monday, as investors adopted a cautious stance ahead of President-elect Trump’s inauguration. With markets closed for the Martin Luther King Jr. Day holiday, traders are closely watching for potential executive actions and policy shifts from the new administration.

European shares finished the week on a high, with the STOXX 600 gaining 0.7% and achieving its fourth consecutive weekly rise, driven by falling government bond yields and positive data from China. Rate-sensitive sectors like construction and industrials outperformed, along with a 2% rise in the basic resources sector.

The U.S. dollar edged lower at the start of the week, with the euro trading at $1.0303, as investors awaited President-elect Trump’s inauguration and his anticipated policy moves. Despite the dollar remaining close to a 26-month high, there was cautious trading, with market participants weighing the potential impacts of tariffs and interest rate decisions.

Oil prices were little changed this morning, as expectations that President-elect Trump may ease sanctions on Russia's energy sector in exchange for a Ukraine peace deal offset concerns over supply disruptions from new sanctions. Brent crude futures held steady at $80.73 per barrel, while U.S. West Texas Intermediate crude saw a slight rise to $77.98.

Equities on the move

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

TikTok began restoring its U.S. services after briefly going dark due to a Supreme Court-backed ban, with President-elect Trump promising more time for the app to find a U.S. buyer. While the app remains unavailable on Apple and Google’s app stores, potential buyers, including Elon Musk and Amazon, are being speculated, as lawmakers raised concerns over data security.

Shares of Novo Nordisk fell 5.3% in regular trading on Friday after the U.S. Department of Health and Human Services included Ozempic and Wegovy in Medicare price negotiations under the Inflation Reduction Act. This second round of negotiations could pressure the company’s future revenues, with new prices set to take effect in 2027.

Moderna was awarded $590 million by the U.S. Department of Health and Human Services to develop a bird flu vaccine using its mRNA technology, as part of efforts to strengthen pandemic preparedness. The funding, through the Biomedical Advanced Research and Development Authority, underscores the government's confidence in Moderna's ability to address emerging diseases.

Schlumberger raised its quarterly dividend by 3.6% and announced an accelerated $2.3 billion share buyback, despite forecasting flat 2025 revenue due to an oil oversupply. The company reported a slight increase in international revenues but faced a sharp deceleration in growth, particularly in Latin America, and warned of slower oilfield activity in the coming year.

Chinese property giant Country Garden, which defaulted on $11 billion in offshore debt late last year, expects to reach a debt restructuring agreement with creditors by next month. The company has proposed cutting its $16.4 billion in offshore debt by 70% and has reportedly reached an understanding with a lender group, although the court hearing has been adjourned until May 26 for further progress.

TD Cowen initiated coverage of ConocoPhillips with a "Buy" rating and a $125 price target, citing its vast asset base, low-cost operations, and long-term growth potential from projects like Willow and LNG initiatives. The company plans to return $11 billion to shareholders in 2025, supported by a strong production growth forecast and capital efficiency improvements.

BMO Capital Markets raised its price target for Alphabet, maintaining an Outperform rating, after positive channel checks indicated growth in Google’s Search, YouTube, and Google Cloud Platform (GCP). The firm increased its revenue growth estimates for Search, YouTube, and GCP, with improved ad spending and AI platform traction contributing to higher forecasts for 2025 and 2026.

BMO Capital also raised its target for Amazon to $265, citing strong growth prospects for AWS, retail, and advertising. The firm expects AWS to accelerate in 2025, with increased cloud adoption and AI workloads, while also boosting revenue estimates for retail and ad services.

Cantor Fitzgerald initiated coverage on Microsoft with an Overweight rating and a $509 price target, citing strong growth potential driven by its Azure cloud platform and AI-related revenues. The firm expects continued growth in its Intelligent Cloud division and sees easing supply constraints as a key catalyst for future equity performance.

TD Cowen upgraded SAP to a "Buy" rating with a raised price target of $305, driven by strong growth in Cloud ERP and AI. The firm anticipates continued acceleration in growth and margin expansion through 2027, supporting a higher valuation.

TD Cowen upgraded Salesforce to "Buy" and raised its price target, citing strong growth potential from its Agentforce platform and favourable IT spending outlook. The firm expects robust adoption of Agentforce and a solid financial performance, with projected revenue growth and high free cash flow margins by 2026.

KeyBanc Capital Markets upgraded Applied Materials and Lam Research to Overweight, citing strong positioning in AI devices and advanced technologies as growth drivers. The firm expects continued growth in the Wafer Fab Equipment market, with higher spending on AI-related devices and leading-edge technology transitions.

Barclays highlights Booking Holdings as a standout in the online travel sector for 2025, citing its strong execution, growth in alternative accommodations and airfare, and resilience despite foreign exchange headwinds. In contrast, Airbnb faces a more cautious outlook, with analysts concerned about profitability pressures due to rising investments and anticipated EBITDA margin compression, making its growth prospects less certain.

Wolfe Research downgraded Spotify to Peer Perform, citing concerns over its valuation, limited profitability in its core music streaming business, and challenges in sustaining growth. While the company’s growth story remains strong, the firm sees limited near-term margin expansion and increased risks to future revenue forecasts.

Upcoming data and events

This week, markets will react to President-elect Trump's second-term inauguration and key earnings reports from companies like Netflix, P&G, and Johnson & Johnson, while attention will also be on economic data such as PMIs and existing home sales in the U.S. Globally, focus will be on the Bank of Japan’s potential rate hike, flash PMIs across major economies, and important economic releases from Germany, the UK, South Korea, and Taiwan.

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