Nvidia results in focus as election boost stalls

General market commentary

Equities faced a challenging environment last week, with the major indices closing lower for the third time in four weeks. On Friday, the S&P 500 index fell by 1.32%, slipping below its 20-day moving average intraday before recovering slightly to close at 5,870. Robust retail sales data and hawkish comments from Federal Reserve Chair Jerome Powell weighed on sentiment, as December rate cut expectations plunged to below 60% from earlier peaks near 80%. Despite some late-session "dip buying," caution prevailed as markets digested the Fed’s signal of patience in adjusting monetary policy.

For the week, the S&P 500 fell 2.28%, while the Nasdaq Composite dropped a sharper 2.92%, led by a notable sell-off in the technology sector. Rising Treasury yields and a strengthening US dollar compounded headwinds for tech shares, with semiconductor companies and major names like Nvidia, Apple, and Microsoft posting significant losses. Defensive sectors, including utilities and real estate, managed modest gains, reflecting a shift towards safer assets amid growing policy uncertainties, such as concerns about tariffs and potential fiscal imbalances from the incoming administration.

Looking ahead, while seasonal trends in November and December are historically supportive, markets are likely to remain volatile in the near term. Strong retail sales and upwardly revised September data highlight continued consumer resilience, but these same factors reinforce the Fed’s cautious stance, limiting the scope for rate cuts. Despite last week’s weakness, long-term fundamentals, including steady economic growth and easing inflation, remain favourable. However, with major indices already showing robust year-to-date gains, further upside may be more gradual as investors weigh economic data and policy signals.

Latest market update

European and US markets are expected to open with cautious optimism, supported by higher Treasury yields and a steady dollar, as investors await key earnings reports, particularly from Nvidia, and monitor central bank signals.

Asian equities were mostly rose on Monday, with South Korea’s KOSPI leading the gains, jumping around 2%, bolstered by a more than 5% rally in heavyweight Samsung Electronics. Shares in Australia, China, and Hong Kong also advanced, while Japanese equities posted a decline.

US shares closed sharply lower on Friday, with the S&P 500 down 1.3%, hit by hawkish Fed comments and losses in tech giants like Nvidia, Amazon, and Meta. For the week, the S&P 500, Dow, and Nasdaq all posted losses.

European equity markets fell on Friday, with the Euro Stoxx 50 dropping 0.8%, as concerns over rising French inflation and hawkish comments from Fed chair Jerome Powell weighed on sentiment. The DAX and CAC 40 also edged lower amid broader economic uncertainties.

US Treasury yields have risen over the past week, reflecting stronger economic indicators and market expectations of elevated interest rates. This environment has led to a decline in investment-grade indices and a more pronounced impact on high-yield indices, reflecting increased risk aversion among investors.

The dollar index held steady around 106.6, near two-year highs, driven by expectations of fewer Fed rate cuts and a resilient US economy, while the euro remained under pressure, trading at 1.0544 against the dollar.

Oil prices edged up slightly amid rising geopolitical tensions between Russia and Ukraine, though concerns over weaker demand in China and a forecasted global oil surplus capped gains. Last week, oil prices fell by over 3%.

Equities on the move

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

Nvidia is addressing overheating issues with its new Blackwell AI chips in customised server racks, according to The Information, but despite late-stage design changes, it has not notified customers of any delays ahead of its earnings report this Wednesday.

Tesla shares rose over 4% in after-hours trading on Friday following reports that the incoming Trump administration plans to prioritise a federal framework for self-driving vehicles, potentially benefiting Tesla's Robotaxi ambitions.

Applied Materials, an important supplier to the semiconductor industry, slid more than 9% Friday. The company's fiscal Q4 EPS and revenue surpassed analysts' views, but the outlook came up short on both. Weakness in the semiconductor market outside of AI-related chips burdens the business.

Alibaba dropped 2.2% after quarterly sales for the Chinese e-commerce giant missed analysts' expectations. Sales grew 5% year over year, roughly the same as for competitor JD.com, which reported on Thursday.

Palantir climbed more than 11% after announcing shares will leave the New York Stock Exchange to trade on the Nasdaq, with expectations to join the Nasdaq 100 index. This could lead to funds being forced to buy its shares.

Health care shares, particularly vaccine and weight-loss drug makers like Moderna, Eli Lilly, and Pfizer, lost ground after the nomination of Robert Kennedy for U.S. health secretary. He's known for his anti-vaccine views and his distaste for weight-loss drugs. The Nasdaq Biotech Index had a dreadful week, down 10%.

Ulta Beauty shares dropped 4.6% on Friday after Berkshire Hathaway revealed it had reduced its stake in the cosmetics retailer by over 96%. The sell-off adds pressure to Ulta, which has seen its shares fall more 25% year-to-date.

Goldman Sachs upgraded Delta, United, and Alaska Air to Buy, while downgrading JetBlue and Southwest, citing challenges in demand recovery and costs. Despite sector headwinds, Goldman sees long-term profitability potential for carriers with strong premium demand and disciplined capacity.

Country Garden has submitted a revised offshore debt restructuring proposal to creditors, including a weaker cash flow projection, as it seeks to avoid liquidation. The Chinese property developer, which defaulted on $11 billion of offshore bonds, faces a court hearing in January 2025, with hopes to secure creditor support for its plan.

Upcoming data and events

This week, attention turns to US housing data and earnings from major retailers and Nvidia, alongside global PMI releases and updates on China's economic trends, which could shape international market dynamics.

For more information visit https://cc.com.mt/. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice.