Tech-drive rally persists after mixed jobs data

General market commentary

Last week ended with technology shares continuing to dominate, buoyed by a mixed jobs report that fuelled hopes for an interest rate cut by the Federal Reserve later this month. Despite broader market softness, the outsized gains in tech helped mask the underperformance of seven of the eleven sectors in the S&P index. While only three sectors advanced last week, optimism remains high as the holiday season approaches, driven by strong economic fundamentals, a forthcoming pro-business administration, and the potential for year-end portfolio adjustments. The Nasdaq Composite led the charge, rising 3.3% for the week, while the S&P 500 gained 1.0%, and the Dow Jones Industrial Average slipped 0.6%.

Economic data showed U.S. job growth rebounding in November with a solid 227,000 nonfarm payrolls added, but underlying weakness lingered with a slight uptick in unemployment and declining labour force participation. Treasury yields fell to near six-week lows, with the 10-year note down 30 basis points over the past three weeks, suggesting restrained inflation concerns. Consumer discretionary shares stood out as the best performers, reflecting bullish sentiment on strong economic prospects and potential policy tailwinds, while defensive sectors like utilities and real estate lagged. Energy shares suffered as WTI crude prices dropped to $67.2 per barrel amid soft demand concerns, despite OPEC maintaining production curbs. The risk-on appetite appears firmly in place as the year-end rally approaches.

Latest market update

Asian equities were mostly lower on Monday, with South Korea’s KOSPI leading the decline amid political instability, while Japan saw slight gains following better-than-expected GDP data. Chinese shares edged up despite weak inflation figures, with focus shifting to China’s economic conference and U.S. inflation data later this week.

U.S. equity futures were little changed on Monday as investors awaited key inflation data this week for further cues on interest rates, with focus also on the geopolitical situation in Syria.

The Euro Stoxx 50 gained 0.6% on Friday, closing at its highest level since mid-October, with French companies like Kering, LVMH, L'Oréal, Carrefour, and BNP Paribas among the top performers. For the week, the index added 3.2%, its best weekly performance in ten weeks, despite ASML Holding being one of the worst performers, down around 1%.

The US dollar held steady around 106 on Monday with the euro trading at 1.0537 against the dollar. Despite stronger-than-expected US job gains and improved consumer confidence, market expectations for a 25 basis point rate cut by the Federal Reserve this month remain high, while geopolitical tensions in South Korea, France, and Syria have boosted demand for the dollar as a safe haven.

Oil prices rose slightly on Monday, supported by heightened geopolitical tensions in Syria and the broader Middle East, but concerns over weakening demand, especially in China, capped gains. Despite OPEC+ extending its supply cuts until April 2025, soft inflation data from China and broader demand worries kept market sentiment cautious.

Equities on the move

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

Allianz and Amundi have paused talks about merging their asset management units, with disagreements over control and structure. Allianz continues to explore options for its Allianz Global Investors division following BNP Paribas's acquisition of AXA Investment Managers.

Super Micro Computer received an extension from Nasdaq until February 25 to file its delayed reports, causing its shares to rise 9% in after-hours trading on Friday. The company, which has faced scrutiny over its financial controls, expects to file the necessary documents by the deadline and has also started searching for a new finance chief.

Jefferies reaffirmed Caterpillar as its top pick in the machinery sector for 2025, highlighting strong fundamentals and growth potential from global infrastructure and energy transition trends. Analysts expect significant upside from a new mining cycle and infrastructure spending, projecting earnings of at least $35 per share.

Loop Capital upgraded Shopify to "buy" from "hold" and raised its price target to $140, citing the company's effective use of AI to enhance merchant tools and streamline operations. The brokerage believes Shopify's AI-driven innovations will lead to faster revenue growth, improved margins, and a higher valuation, with AI being a key driver of its long-term profitability.

Raymond James initiated coverage on Abercrombie & Fitch with an Outperform rating and a $180 price target, citing strong progress in its transformation and revenue growth, particularly from the Abercrombie and Hollister brands. The firm expects continued margin expansion and strong international growth.

Upcoming data and events

This week, focus will be on inflation indicators and central bank policy updates from the Euro Area, Australia, Canada, Switzerland, and the UK. In the US, attention will be on inflation metrics (CPI, PPI), trade data, and central bank signals, while earnings reports from Oracle, Broadcom, Ciena, Toll Brothers, and Costco will offer insights into the tech, housing, and retail sectors.

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