Mega-cap pressure hurts equities

General market commentary

Major U.S. indices declined on Wednesday ahead of the Thanksgiving holiday, weighed down by continued weakness in mega-cap technology equities despite broader market strength. The S&P 500 saw most of its components gain ground, but losses in heavyweight tech names dragged the index lower. Inflation data released earlier in the day aligned with forecasts, showing persistent, if not worsening, price pressures. The Personal Consumption Expenditures (PCE) price index—a key inflation gauge—rose by 0.2% month-on-month and 2.3% year-on-year. Core PCE, which excludes food and energy, showed a 0.3% monthly increase and a 2.8% annual rise, suggesting inflation remains sticky.

Despite inflation numbers matching expectations, the bond market signalled optimism for an interest rate cut at the Federal Reserve's next meeting. Treasury yields declined sharply, with the 10-year note dropping to a one-month low of 4.24%. Futures trading now prices in a 66% probability of a quarter-point rate cut in December, up from 60% the day before. However, the broader market remained cautious as investors balanced the potential for monetary easing against the challenges of stubborn inflation. By the close, the S&P 500 fell 0.38%, the Dow Jones Industrial Average slipped 0.31%, and the Nasdaq Composite lost 0.60%, reflecting the ongoing defensive posture of major tech equities.

Latest market update

• Most Asian equity markets declined on Thursday as cautious sentiment prevailed following strong U.S. inflation data and uncertainty over interest rates. While Chinese and Hong Kong shares slipped amid tariff concerns, Japan's Nikkei 225 and TOPIX bucked the trend with modest gains, supported by local optimism.

• European equities closed lower on Wednesday, with the Stoxx 50 dropping 0.6% amid concerns over ECB policy and the impact of US tariff threats. French financial shares, including AXA and BNP Paribas, were hit by political uncertainty, while tech equities like ASML also suffered losses.

• The US dollar index remained subdued around 106.1 on Thursday, reflecting reduced volatility due to the US Thanksgiving holiday and weaker sentiment following inflation data that aligned with expectations. The EUR/USD exchange rate held near 1.0550, bolstered by a stronger euro driven by hawkish ECB comments.

• Oil prices edged lower in Asian trading on Thursday after a surprise rise in U.S. gasoline stocks raised demand concerns ahead of the Thanksgiving holiday. Weaker fuel demand growth in the U.S. and China, combined with geopolitical uncertainties, continues to weigh on the market despite OPEC+ supply cuts limiting losses.

Equities on the move

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

• Amazon is reportedly developing a new generative AI model, code-named Olympus, capable of processing text, images, and videos to reduce reliance on Anthropic's AI tools. The announcement, potentially at next week's AWS re:Invent conference, highlights Amazon's efforts to compete with Google, Microsoft, and OpenAI in generative AI advancements.

• Microsoft is under investigation by the U.S. Federal Trade Commission for antitrust concerns, spanning areas such as cloud computing and artificial intelligence. The probe follows a year-long inquiry, with FTC lawyers set to meet with Microsoft's competitors to gather more information on its business practices.

• Chinese automaker BYD has asked its suppliers to reduce prices by 10% from January 1, signalling an intensifying price war in China's competitive auto market. The move follows BYD’s aggressive discounting strategy, which has helped it surpass Tesla as the world’s top electric vehicle seller, with a significant share of the Chinese market.

• EasyJet reported a 34% rise in annual profits, driven by strong demand for flights and holiday packages, alongside improvements in reducing winter losses. The airline expects further growth in 2025, with increased seat capacity and a 25% expansion in its holiday business, while maintaining tight cost controls.

• CrowdStrike has been downgraded to "hold" from "buy" by HSBC, with its price target raised to $347 from $339, citing limited near-term visibility on revenue growth despite strong quarterly results. The firm’s fourth-quarter outlook signals a slowdown, with weaker demand and a high valuation raising concerns about future growth potential.

• Mizuho lowered Dell Technologies' price target to $150 from $155 after weak earnings and conservative guidance, despite strong growth in AI server orders and a growing backlog. Analysts remain optimistic about Dell’s long-term prospects, citing its market share gains in AI servers and upcoming opportunities with next-gen chips and the end-of-life of Windows 10.

• Baird initiated coverage on Booking Holdings with an "outperform" rating and a $5,850 price target, citing strong growth prospects in international markets and the company's dominant position in global travel. The firm also started coverage on Expedia with a $225 target, highlighting its business transformation and potential for a meaningful turnaround, despite execution challenges.

Upcoming data and events

U.S. markets are closed today, in observance of Thanksgiving and will close early on Friday.

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