US dollar trading at two year highs

Thursday’s market session showcased substantial gains on Wall Street, driven by cyclicals such as financials, industrials, and retailers, as equities surged broadly while technology took a back seat. The S&P 500 extended its winning streak to four days, supported by strength in shares like Deere, Caterpillar, and Goldman Sachs. The rally reflected a rotation into economically sensitive sectors that tend to benefit from a warming U.S. economy, a theme that echoes earlier trends post-election and in autumn. Meanwhile, mega-cap tech shares like Microsoft and Alphabet underperformed, highlighting a potential broadening of market participation.

Nvidia's post-earnings movement encapsulated mixed investor sentiment; its stellar revenue and earnings beat clashed with tempered guidance, leading to initial profit-taking before shares turned positive. The PHLX Semiconductor Index also edged higher, underscoring optimism around AI-driven growth. On the macro front, the possibility of a Federal Reserve pause in December gained traction, as recent Fed remarks balanced cautious optimism with data dependency. Treasury yields rose slightly, yet utilities—surprisingly—led all sectors, potentially reflecting AI-related demand expectations. Crypto stole the spotlight too, with Bitcoin nearing a record $100,000, cementing its relevance in diversified portfolios amidst Wall Street’s cyclical revival.

Latest market update

• U.S. equity futures held steady on Friday morning, signalling a positive market open with major indices on track to end the week higher, driven by strength in cyclical stocks and upbeat earnings from Gap and Ross Stores.

• Most Asian shares rose on Friday, led by Japan’s Nikkei and South Korea’s KOSPI, driven by strength in chipmaking equities, while Chinese markets lagged. Mixed economic data showed Japan’s inflation rising and weak business activity, while Australian equities gained on a shift into cyclical sectors.

• US equities closed mixed on Thursday, with the S&P 500 and Dow Jones gaining, supported by strong performances from Salesforce and Snowflake, while the Nasdaq remained flat as Alphabet, Amazon, and Meta weighed on tech. Nvidia rose modestly on solid earnings, but flagged supply chain issues, while resilient jobless claims data boosted expectations of no rate hike in December.

• European equities closed higher on Thursday, with the Euro Stoxx 50 rising 0.6 percent as markets recovered from earlier losses, driven by gains in tech shares like ASML, SAP, and Adyen. Insurers Allianz and Munich Re also saw strong gains.

• The US dollar hovered near a 13-month high on Friday, supported by strong economic data and uncertainty around the Federal Reserve's rate path, while the euro remained subdued at $1.0475, pressured by geopolitical tensions and political uncertainty in Europe.

• Oil prices rose this morning, heading for a strong weekly gain as heightened Russia-Ukraine tensions and potential supply disruptions outweighed concerns over rising U.S. inventories. Reports of OPEC+ likely postponing a production hike further supported prices, alongside bargain buying after October's declines.

Equities on the move

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

• Gap Inc. raised its full-year sales forecast after reporting a fourth consecutive quarter of sales growth, with shares jumping 15% in extended trade. The company’s strategy of offering fresher, trendy items and reducing discounts helped drive stronger-than-expected profits, particularly in Old Navy and Athleta.

• Intuit Inc. reported stronger-than-expected first-quarter results, with revenue rising 10% to $3.28 billion, driven by demand for its AI-powered financial tools. However, shares fell over 8% in extended trading despite the positive earnings beat, as the company warned of a decline in Consumer Group revenue due to changes in retail promotions.

• Deere & Co reported strong quarterly earnings, surpassing expectations, but forecasted lower-than-expected profits for 2025 due to declining farm incomes and high interest rates. Despite a downturn in demand for farm equipment, lower production costs helped cushion the impact, sending its shares up 8%.

• SharkNinja shares initially fell after Grizzly Research accused the company of poor governance, insider enrichment, and undisclosed related-party transactions, including the sale of a key subsidiary to a chairman-controlled entity. However, the shares recovered and ended the session up 5.5%.

• Elf Beauty denied allegations from short-seller Muddy Waters, which claimed the company overstated revenue and inflated inventory, calling the accusations "without merit." Despite an initial 16% drop, the share price recovered and reported further gains yesterday, with analysts backing the company’s growth prospects and reaffirming their buy stance.

• MicroStrategy's valuation has raised concerns from Citron Research, which believes the company's share price, boosted by its Bitcoin strategy, is now detached from Bitcoin's fundamentals. Once a proponent of the firm as a Bitcoin investment, Citron now views the equity as "overheated" and has taken a short position.

• Nvidia's "flawless" first-quarter results were praised by Wedbush analysts, who highlighted strong data centre growth and the rapid ramp-up of its Blackwell chips. Despite a slight dip in post-earnings trading, they view the company's outlook as conservative and remain bullish, forecasting Nvidia to reach a $4 trillion market cap by 2025.

• Palo Alto Networks saw its price target raised to $450 by Wells Fargo, following strong first-quarter results and growth from its "platformisation" strategy. Despite a premarket dip due to weaker-than-expected billings, analysts view the pullback as a buying opportunity, driven by increasing demand for cybersecurity solutions.

• Ulta Beauty was downgraded to "market perform" by William Blair, citing a slower-than-expected recovery in the beauty sector and concerns about online competition. The firm questioned Ulta's ability to meet its 2025 growth targets and warned that the ongoing shift to digital shopping could negatively impact traditional retail stores.

• Bayer AG's price target was cut by UBS to €22 from €30 after the company posted mixed third-quarter results and issued a downbeat earnings forecast for 2025. The downgrade reflects challenges in its pharmaceutical division, including declining revenues from Xarelto, and lower expectations for its seeds business.

Upcoming data and events

The day ahead brings key data releases, including the final November University of Michigan Consumer Sentiment, with inflation expectations in focus, and S&P Global PMI figures, expected to highlight divergence between manufacturing contraction and robust services growth.

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