S&P 500 eyes winning week

General market commentary

US benchmark equity indices closed mostly lower on Thursday, with the Nasdaq Composite down 0.3% to 17,691.6 and the S&P 500 slipping 0.2% to 5,662.9, while the Dow Jones Industrial Average was flat at 41,953.3. Materials led the declines, while utilities and energy gained. Market sentiment was weighed down by former President Donald Trump’s renewed calls for the Federal Reserve to cut interest rates after it opted to hold steady for a second consecutive meeting. Policymakers lowered economic growth projections and highlighted increased uncertainty. US Treasury yields declined, and economic data showed a rebound in home sales alongside a slight rise in jobless claims, suggesting continued labour market resilience. The Conference Board’s Leading Economic Index fell 0.3%, reflecting weaker consumer sentiment and manufacturing orders but showing no immediate recession risk.

In corporate news, Accenture shares dropped 7.3% on concerns over weaker federal revenue, while Microchip Technology fell 6.5% after announcing the sale of a wafer fabrication facility. Darden Restaurants gained 5.8% following strong results, and Jabil rose 3.1% after raising its full-year outlook. Elsewhere, markets were mixed. European equities declined as banks and auto shares fell following the Bank of England’s decision to keep rates at 4.5%, while Asian equities fluctuated after China’s central bank held rates steady. The US dollar strengthened, though it remains 5% below its January peak, and bond yields softened amid ongoing economic and policy uncertainty.

Latest market and economic update

Most Asian equities traded in a flat-to-lower range on Friday as investors weighed the impact of higher US trade tariffs and interest rates, while Chinese markets pulled back from a stimulus-driven rally. Japanese shares edged higher after stronger-than-expected inflation data reinforced expectations of further rate hikes, while profit-taking hit major Chinese technology firms, particularly in Hong Kong, following recent gains.

US equity futures edged higher overnight, with the S&P 500 set to break a four-week losing streak, while the Dow remained in positive territory, and the Nasdaq Composite faced a fifth consecutive weekly decline. Investor sentiment was influenced by the Federal Reserve’s decision to hold interest rates while signalling future cuts, alongside concerns over weaker growth and higher inflation.

European equities closed lower on Thursday, with the Eurozone's STOXX 50 falling 1% and the STOXX 600 down 0.4%, as investors digested recent monetary policy decisions and concerns over the impact of higher deficit spending on growth. Banks led the declines, with major financials like Intesa Sanpaolo, BNP Paribas, and BBVA dropping nearly 3%, while defence equities also took a hit after strong rallies.

The dollar index rose for the third consecutive session on Friday, approaching 104 as investors assessed the Federal Reserve's monetary policy, including its signal of two rate cuts this year. The EUR/USD exchange rate traded at 1.0828, with the dollar strengthening as global growth concerns and trade tensions weighed on the euro and other major currencies.

Oil prices rose this morning, with Brent crude reaching $72.21 per barrel and West Texas Intermediate at $68.32, driven by fresh US sanctions on Iran and OPEC+'s new plan to cut output. Both Brent and WTI are set for their biggest weekly gains since the first week of 2025, as tighter supply expectations grow, although concerns remain over whether OPEC+ members will fully adhere to the planned cuts.

Equities on the move

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

Nike warned of a steeper-than-expected revenue decline for the fourth quarter, forecasting a drop in the mid-teens percentage range, driven by discounts on older products and weak demand in China. Despite beating third-quarter expectations, the company faces ongoing challenges, including declining sales in China and Europe, as it works on a turnaround plan under new CEO Elliott Hill.

Micron Technology forecast third-quarter revenue above Wall Street estimates, driven by strong demand for its high-bandwidth memory (HBM) chips used in AI models. The company expects continued growth in DRAM and NAND demand, with a strong outlook for fiscal 2025, despite uncertainty around potential new tariffs from President Trump.

FedEx lowered its full-year profit and revenue forecasts due to weak demand and uncertainty in the U.S. industrial economy, exacerbated by President Trump's tariffs. The company now expects adjusted profit of $18 to $18.60 per share, down from previous forecasts, while facing pressure from rivals like UPS and challenges in its e-commerce and industrial sectors.

Accenture’s shares fell over 7% after the company reported a slowdown in its federal services unit due to the Trump administration’s efforts to cut federal spending, leading to delays and cancellations of contracts. The consultancy revised its revenue growth forecast to 5%-7%, down from its previous estimate, citing challenges in procurement and contract reviews.

PDD Holdings missed quarterly revenue estimates due to weak demand in China, despite stimulus and discounts, and competition from Alibaba and JD.com. However, the company posted a profit beat, driven by strong international growth through Temu and favourable currency rates, with concerns over U.S. trade policy changes affecting Temu's pricing advantage.

Heathrow Airport was forced to close on Friday after a massive fire at a nearby electrical substation caused a power outage, disrupting flight schedules globally. With at least 1,351 flights affected and significant delays expected, the chaos is set to continue for several days, as airlines scramble to reconfigure their networks and manage a growing passenger backlog.

Nvidia announced plans to open a quantum computing research lab in Boston, partnering with Harvard University and MIT, to advance the field with quantum firms like Quantinuum and QuEra Computing. CEO Jensen Huang also acknowledged his earlier comments about quantum computers being 20 years away were incorrect, as executives from quantum firms discussed how their technology will complement, rather than replace, traditional computing.

Lyft announced plans to launch driverless rides this summer, aiming to integrate autonomous vehicles (AVs) into its platform through partnerships with companies like May Mobility, Mobileye, and Marubeni. The company expects AVs to enhance rider experience and expand the rideshare market, with a hybrid network of both AVs and human drivers coexisting, while supporting drivers through job training and new opportunities.

Tesla is recalling over 46,000 Cybertrucks in the US due to a risk that the exterior panel could detach while driving, marking its eighth recall for the model since January 2024. The recall, which affects the majority of Cybertrucks on the road, follows quality concerns and could damage Tesla’s reputation, though analysts note the impact on Tesla’s overall sales will be limited.

Oppenheimer initiated coverage on Lam Research with an Outperform rating and a $95 price target, citing its leadership in etch technology and growth prospects from NAND upgrades and AI demand. Despite potential headwinds, the firm sees Lam’s strong financials and historical performance as a good buying opportunity, projecting significant earnings growth through 2028.

JPMorgan has placed SAP on Positive Catalyst Watch, reiterating its Overweight rating and €300 price target, citing the company’s strong recurring revenue, cloud backlog, and transition to the S/4HANA platform. Analysts believe SAP's margin expansion and AI initiatives could drive significant earnings growth, with potential upside to €425 per share in a bullish scenario.

JP Morgan upgraded Freeport-McMoRan to Overweight, citing potential upside from US copper tariffs and long-term supply challenges, raising its price target to $52. The firm expects the company's US-based operations to benefit from tariff premiums and supply deficits, forecasting significant free cash flow in 2025 and 2026 despite recession concerns.

JP Morgan upgraded Cava Group to Overweight, raising its price target to $110, citing the company's significant US expansion potential and early free cash flow generation. The firm expects Cava to grow beyond its initial IPO target and sees strong long-term growth prospects with solid margins and operational initiatives driving sales and profits.

Piper Sandler upgraded Carvana and ACV Auctions to Overweight, citing strong growth potential in the used vehicle technology sector, while downgrading Stellantis and Rivian due to political uncertainty in the auto supply chain. The firm also sees long-term value in Tesla, despite reducing its price target and delivery expectations for 2025.

Upcoming data and events

The calendar is light in terms of economic data today, while earnings reports include Meituan, Carnival Corporation and Nio Inc.

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