suggested title: Shares find support on in-line inflation

General market commentary

U.S. equity markets experienced a significant rally on Wednesday, with the Nasdaq Composite index closing above 20,000 for the first time, buoyed by strong performances from major technology companies. The rise was supported by inflation data from November, which met market expectations and reinforced predictions of an interest rate cut by the Federal Reserve at its upcoming meeting. The S&P 500 also saw gains of approximately 0.8%, while the Dow Jones Industrial Average lagged, dipping by about 0.2%. Notable movers included Tesla, which surged nearly 6% to a record high, and Nvidia, alongside other major tech shares like Alphabet and Amazon, which contributed to the overall positive sentiment in the market.

The inflation report indicated a 0.3% increase in the Consumer Price Index (CPI) for November, aligning with forecasts and suggesting that inflation pressures may be stabilising. This has led to heightened expectations for a quarter-percentage-point interest rate cut by the Federal Reserve next week, as analysts believe the economic environment remains conducive for further easing. Recent data points towards a "soft landing" for the economy, alleviating recession fears and encouraging a "risk-on" approach among investors. In contrast to tech shares' robust performance, Adobe's share price fell nearly 9% in after-hours trading following disappointing revenue forecasts, highlighting mixed results across different sectors.

Latest market update

• Most major Asian equities rose on Thursday, buoyed by a rally in U.S. technology shares. Japan's Nikkei climbed 1.6%, while China's Shanghai Composite and Hong Kong's Hang Seng also posted gains, as investors awaited stimulus cues from China's Central Economic Work Conference.

• US equity futures are expected to open slightly lower, with the S&P 500 futures down 0.1% and Nasdaq 100 futures down 0.2%, ahead of key producer inflation data and earnings reports from Broadcom and Costco.

• European equities closed higher on Wednesday, with the STOXX 50 gaining 0.2% as U.S. inflation data reinforced expectations for a Federal Reserve interest rate cut. Inditex shares fell 6.5% due to weaker-than-expected sales, while Siemens Energy rose 3.4%, and Adidas rebounded to add 0.5% amid a tax investigation.

• The dollar index remained around 106.5 on Thursday, supported by recent weakness in the euro, which is trading at 1.0508 against the dollar amid a dovish monetary policy outlook in the Eurozone. While U.S. inflation data bolstered expectations for a Federal Reserve interest rate cut, the dollar lost some ground against the Australian dollar following strong jobs data from Australia.

• Oil prices remained largely stable as traders weighed factors such as new U.S. sanctions on Russia and anticipated economic stimulus measures from China that could boost demand. Despite recent gains driven by tighter global supplies and rising geopolitical tensions, OPEC's downward revision of oil demand growth forecasts for 2024 and 2025 tempered market optimism.

Equities on the move

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

• Adobe reported strong fiscal fourth-quarter results, with revenue of $5.61 billion and adjusted earnings per share of $4.81, surpassing analyst expectations. However, the company's softer revenue guidance for the current quarter led to a 9.1% decline in its share price during after-hours trading while BMO cut its price target on the shares to $570 from $600.

• Inditex, the owner of Zara, reported a rare miss on quarterly sales and profit, leading to a 6.5% drop in shares as results were affected by currency fluctuations and floods in Spain. Third-quarter sales of €9.36 billion fell short of analyst expectations, and while the company noted a strong start to the holiday season, analysts expressed concerns over growth slowing more than anticipated.

• Investigators conducted a second day of searches at Adidas' headquarters as part of a lengthy tax investigation concerning alleged damages of €1.1 billion related to customs and tax compliance from October 2019 to August 2024. While Adidas confirmed its cooperation with authorities, it does not anticipate significant financial repercussions from the inquiry.

• Broadcom shares rose over 6% after reports emerged that Apple is collaborating with the chipmaker to develop its first server chip for artificial intelligence, code-named "Baltra," expected for mass production by 2026. This partnership aims to enhance Apple's AI capabilities while reducing reliance on Nvidia's processors, with Broadcom providing critical networking technology for AI processing.

• Hershey's main controlling owner has rejected Mondelez International's preliminary takeover offer, deeming it too low, which could halt a potential acquisition that would have created one of the world's largest confectioners. The Hershey Trust Company's approval is crucial for any deal, as it holds about 80% of the voting power in Hershey.

• Shares of GE Vernova rose to over $347 following its investor day presentation, where Morgan Stanley reiterated its overweight rating with a price target of $367. The company announced a $0.25 quarterly dividend and a $6 billion share repurchase authorization, while projecting 2025 revenue between $36 billion and $37 billion.

• Macy's has cut its annual profit forecast, causing shares to drop over 5% due to weak demand and heavy discounts ahead of the holiday season. The company faces challenges from increased competition and a shift towards online shopping, while activist investors are urging it to explore options for its luxury brands and real estate assets.

• Mizuho analyst Jordan Klein has a bullish outlook for NVIDIA, predicting the equity could reach $160-170 ahead of the GPU Technology Conference in March, buoyed by strong financial results and strategic positioning in the AI market.

• JPMorgan has raised its target price for Netflix to $1,010, driven by strong subscriber growth and increased ad revenue following the record viewership of the Jake Paul vs. Mike Tyson boxing event. The firm expects Netflix to add 10 million subscribers in the fourth quarter and projects free cash flow to reach $9.3 billion by 2025.

• TD Cowen has named Lam Research Corp its top pick, highlighting its strong position in the NAND wafer fab equipment market, which is expected to grow at a 28% annual rate. The firm has set a price target of $100 for Lam Research, anticipating significant opportunities due to underinvestment in NAND and easing restrictions on China.

• Goldman Sachs has maintained a neutral rating on Tesla, raising its price target from $250 to $345 amid recognition of the company's leadership in the clean mobility space, despite potential challenges in its core automotive business. Analysts expect headwinds from slower EV demand and pricing pressures, while long-term opportunities related to Full Self-Driving technology may support a higher equity multiple.

• Barclays downgraded U.S. homebuilders D.R. Horton, Lennar, PulteGroup, and KB Home to Equal Weight, anticipating flattening home prices due to rising inventory. It upgraded Taylor Morrison and Owens Corning to Overweight, expecting building products and distributors to outperform homebuilders.

Upcoming data and events

Today, the European Central Bank is expected to announce a 0.25% interest rate cut, reducing the rate to 3.00%, while in the U.S., the November Producer Price Index (PPI) and core PPI figures will be released, alongside earnings reports from Broadcom and Costco.

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