Salesforce surges on revenue beat, AI prospects

General market commentary

The equities market was largely flat on Tuesday, with investors adopting a cautious approach ahead of key labour market reports and Federal Reserve Chair Jerome Powell’s comments on Wednesday. Treasury yields rose slightly after a stronger-than-expected Job Openings and Labor Turnover Survey (JOLTS) indicated resilience in the labour market, adding pressure to rate-sensitive sectors. In the US, mega-cap and big tech shares continued to outperform, even as broader market participation remained weak, with declining equities outnumbering advancers two-to-one on the New York Stock Exchange. This divergence underscores how indices can climb despite underlying market softness, as seen in the S&P 500’s and Nasdaq’s modest gains.

Global events further influenced sentiment. In South Korea, President Yoon Suk Yeol briefly declared martial law before reversing the decision hours later, creating volatility in markets. South Korean companies trading on US exchanges experienced selling pressure, reflecting investor unease. Meanwhile, European equities saw muted performance, with geopolitical and economic uncertainties weighing on sentiment. In the US, sectoral rotation persisted, with financials and industrials retreating, possibly driven by profit-taking as the year-end nears. Attention now shifts to Friday’s US nonfarm payrolls report, expected to provide crucial insights into the labour market and its implications for monetary policy.

Latest market update

Asian equities mostly declined on Wednesday, led by a 2% slump in South Korea’s KOSPI index amid political turmoil following President Yoon Suk-Yeol’s brief imposition of martial law. Japan and China also saw losses, weighed down by geopolitical concerns and weaker-than-expected economic data.

US equity futures rose slightly on Tuesday evening, with investors awaiting Federal Reserve Chair Jerome Powell’s speech for more clarity on interest rates. Despite gains in technology shares, the rally appeared to be slowing amid rising uncertainty over the economic outlook and trade tariffs.

The Euro STOXX 50 rose 0.5% on Tuesday, reaching a one-month high, driven by a 1.6% gain in retail shares and over 1% increases in construction and materials sectors. However, insurance equities weighed on the index, falling by 0.4%, while the CAC 40 and DAX saw mixed performance, with the latter crossing the 20,000 mark for the first time.

The US dollar remained steady around 106.4 on Wednesday, with market focus on upcoming US job data and Federal Reserve policy signals. While stable against most major currencies, the dollar strengthened against the Australian and New Zealand dollars and remained near two-year highs against the South Korean won, while the euro traded at 1.0517.

The yield on the US 10-year Treasury note held steady at around 4.23% on Wednesday as investors assessed the Federal Reserve's monetary policy outlook. Market participants are awaiting key labour market reports this week, with a 75% probability priced in for a 25 basis point rate cut by the Fed in December.

Oil prices firmed this morning, supported by geopolitical tensions and the prospect of OPEC+ extending supply cuts, despite concerns over weaker demand from major economies like China and the US. The market was also influenced by a rise in US crude inventories, with analysts expecting a decline in crude stocks and a rise in gasoline inventories.

Equities on the move

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

Salesforce reported third-quarter revenue of $9.44 billion, surpassing Wall Street estimates, and raised its full-year revenue forecast, driven by strong demand for its enterprise cloud and AI-powered products. The company’s shares rose 10.5% in after-hours trading, though analysts noted that its steady 8% growth falls short of the rapid pace typically expected in the tech sector.

Marvell Technology reported third-quarter earnings of $0.43 per share, exceeding expectations, with revenue of $1.52 billion, driven by strong demand for AI-related products. The company's upbeat fourth-quarter guidance, forecasting revenue of $1.8 billion, sent its shares up nearly 11% in after-hours trading.

Amazon's cloud unit unveiled new AI chips, Trainium2, which will power a massive supercomputer, with Apple onboard as a customer. The new servers aim to compete with Nvidia’s offerings, offering more compute power at a lower cost, with AWS promising to connect more chips than Nvidia’s flagship servers.

Mastercard has reached an agreement in principle to settle a UK collective lawsuit over card fees, involving around 46 million British consumers. The settlement, subject to approval, is valued at approximately £200 million, far below the £10 billion originally claimed, and aims to compensate consumers who choose to participate.

Broadcom was initiated with a Hold rating and a $160 price target by HSBC, citing limited upside to FY25 earnings amid slowing growth in key segments and potential headwinds in FY26. Despite its strong position in the AI sector, HSBC expressed concerns over decelerating ASIC revenue, market share risks, and its premium valuation compared to peers like NVIDIA and AMD.

Deutsche Bank upgraded CVS Health to "buy" from "hold," citing a potential earnings turnaround in its managed care segment and leadership changes as catalysts for growth. The bank set a price target of $66, with a 30% upside, and forecasted shares could reach $76-$80 within a year.

Both Barclays and UBS downgraded Mercedes-Benz, with Barclays cutting its target to €48.50 and UBS to €55, citing disappointing results, margin pressures, and challenges in key markets. Meanwhile, Porsche was upgraded to "overweight" by Barclays, and BMW to "buy" by UBS, with both firms highlighting strong growth potential, cash flow, and new product launches, particularly BMW's "Neue Klasse" platform.

Upcoming data and events

Today’s economic data brings the ADP jobs report on private hiring for November and the ISM Services PMI, expected to show continued expansion in the sector. Fed Chair Jerome Powell will speak in the afternoon, with markets watching closely for any policy signals ahead of key labour and inflation data.

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