Weak jobs data further strengthen rate cut case

General market commentary

US equities rose on Wednesday as softer-than-expected labour-market data pushed bond yields lower and strengthened expectations of another Federal Reserve rate cut next week. The ADP report showed a surprise 32,000 drop in private sector employment, prompting markets to price in an almost 90% probability of a quarter point cut. Bond yields eased, with the 10-year settling near 4.06%, while cyclical sectors such as energy and financials led the day’s gains. Small caps outperformed strongly, the Russell 2000 advancing more than 1%, while major indices also closed higher: the Dow up 0.9%, the S&P 500 up 0.3% and the Nasdaq up 0.2%. In other markets, Asian performance was mixed and European equities were little changed following a stronger eurozone PMI.

Economic data added to the positive tone, with the ISM Services PMI rising to 52.6, its highest since February, while the prices component eased and offered some relief on services sector inflation. Corporate news was mixed, with Netflix among the day’s notable laggards after share sales by co-founder Reed Hastings. Looking ahead, earnings momentum remains supportive, with S&P 500 profits on track for double digit growth in 2024 and 2025 and expectations for broad based gains across all sectors in 2026. While technology and communication services continue to lead, analysts highlight the importance of diversification, with opportunities in industrials, health care and consumer discretionary supported by resilient economic activity.

Latest market and economic update

Asian equities opened mixed, with Japan’s Nikkei up 0.8% while broader regional shares fell, led by Korea and New Zealand. The U.S. dollar weakened to a five-week low amid growing Fed rate-cut expectations. The Chinese yuan held firm, while the Australian dollar strengthened on strong household spending and trade data. Gold and silver continued rising, extending recent gains.

US equity futures were broadly steady, with S&P 500 futures flat, Nasdaq 100 futures slightly lower and Dow futures a touch higher as rate cut expectations firmed. After hours, Salesforce jumped on strong results and upgraded guidance, while Five Below also advanced following a solid performance and strong comparable sales growth.

European shares were largely steady, with technology gains offsetting declines in financials. The STOXX 600 rose 0.08%, led by Inditex, which jumped 8.9% on strong winter sales. Services and composite PMIs signalled Eurozone activity strength, while basic resources and defence stocks also rose. Banks and insurers lagged, and individual movers included Hugo Boss, Airbus, and Sainsbury’s.

The U.S. dollar weakened following soft economic data and heightened expectations of a Federal Reserve rate cut, easing to near a five-week low. The euro rose to $1.1674, its highest since mid-October, supported by strong eurozone activity. The yen, sterling, Australian and New Zealand dollars also strengthened, reflecting both Fed easing bets and improving global economic signals.

Oil prices rose modestly in Asian trading, supported by renewed strikes on Russian oil infrastructure and stalled Ukraine peace talks, which heightened geopolitical risk. Brent climbed to $62.89 and WTI to $59.23 per barrel. Gains were partly offset by rising U.S. crude and refined product inventories, signalling lingering demand weakness in the world’s largest oil consumer.

US private payrolls fell 32,000 in November, reflecting weakness in manufacturing, services, information, and construction, while slower pay growth raises expectations of a Fed rate cut. Meanwhile, the ISM Services PMI rose to 52.6, signalling sector recovery, though employment remained in contraction and tariffs, slower deliveries, and government shutdown pressures persisted.

Equities on the move

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

Microsoft denied reports that it had reduced AI software sales quotas, responding to claims that divisions lowered targets after missed goals. The company reaffirmed its 2025 AI ambitions, including automating complex tasks such as generating dashboards from sales data, emphasising that expectations for AI product monetisation remain unchanged.

Salesforce reported Q3 adjusted EPS of $3.25, beating estimates, while revenue rose 9% to $10.26 billion, slightly below expectations. Subscription revenue grew 10% to $9.73 billion. After-hours, shares gained 1.8%, having traded as high as 8.5%. The company raised FY26 guidance, expecting adjusted EPS of $11.75–$11.77 and revenue of $41.45–$41.55 billion.

Snowflake forecast fourth-quarter product revenue of $1.19–$1.20 billion, above analyst estimates but below investor expectations, sending shares down 8% after hours. Quarterly revenue reached $1.21 billion. The company expanded partnerships with Anthropic, Accenture, AWS and Google to enhance AI capabilities amid growing demand for generative AI cloud services.

Macy’s reported a surprise quarterly profit and raised annual sales and earnings forecasts, driven by demand at Bloomingdale’s and Bluemercury. However, CEO Tony Spring warned that consumers remain cautious amid inflation, expecting holiday-quarter profits below estimates. The retailer continues investing in store refreshes and smaller formats as part of its turnaround strategy.

PayPal shares fell after CFO Jamie Miller warned of slower growth in the company’s branded checkout business for Q4, citing macroeconomic weakness and transitional challenges. While overall guidance remains unchanged, analysts noted the deceleration is sharper than expected. Total payment volume remains a key metric amid rising digital payments competition.

Delta Air Lines expects a $200 million hit to Q4 pre-tax profit, or 25 cents per share, due to the recent U.S. government shutdown, which disrupted flights and prompted FAA-mandated cuts. Despite this, booking growth has rebounded, and demand remains strong, with CEO Ed Bastian optimistic about a robust year-end performance.

The Trump administration plans to accelerate robotics development, meeting with industry leaders and considering an executive order next year. Building on prior AI plans, Congress is exploring robotics legislation and working groups to strengthen US advanced manufacturing, support automation companies, and bring more critical production back to the United States.

Bank of America reported that its institutional clients accelerated their purchases of U.S. shares last week, marking one of the strongest buying weeks since the financial crisis. The surge was driven by strong demand for both single-share and ETF equities, with Tech and Industrials leading the inflows. Mid-caps saw outflows, while private clients continued selling.

Yardeni Research reaffirmed long-term projections for gold to reach $10,000 an ounce and the S&P 500 to hit 10,000 by 2029, citing persistent central-bank buying and long-term trends. It expects gold to rise to $5,000 by end-2026. The firm remains neutral on Bitcoin, noting stablecoins may limit its transaction demand.

Bank of America named ASML a top semiconductor pick for 2026, citing a multi-year upturn driven by rising lithography intensity, stronger product mix, and accelerating earnings. The bank expects gross margin expansion, doubling free cash flow, and robust DRAM and foundry demand, supporting significant shareholder returns, including a €15.5 billion buyback and €6.4 billion in dividends.

TD Cowen named AMD a “Best Idea 2026,” citing the upcoming Helios rack-scale platform and MI450 accelerator as key drivers for its AI business. The firm maintains a Buy rating with a $290 target, highlighting strong AI compute demand, overlooked server and PC businesses, and potential revenue growth despite bearish sentiment and competitive scrutiny.

Wells Fargo initiated coverage of Oracle with an Overweight rating and $280 target, citing its growing leadership in AI infrastructure. The bank highlights Oracle Cloud Infrastructure’s potential to capture ~16% of the cloud market by 2029, backed by major AI deals, including OpenAI, while its high-margin software division is set to benefit from scaling AI adoption.

UBS upgraded Stellantis to Buy, citing a €3 billion operating income improvement in North America from new products, a more profitable mix, and cost cuts, while highlighting U.S. opportunities. Renault was downgraded due to margin pressures, EV mix challenges, and Chinese competition. Michelin was lowered to Neutral, facing cyclical headwinds and weaker 2026 earnings prospects.

Morgan Stanley upgraded Novartis and Bayer to Overweight, citing attractive valuations and clearer fundamentals into 2026. Novartis’s outlook is supported by growth drivers and pipeline depth, despite modest 2026 progress, while Bayer benefits from litigation de-risking and pharma momentum. Price targets were raised to CHF 115 for Novartis and €40 for Bayer.

Upcoming data and events

Today’s main economic events include US labour data, with jobless claims, Challenger job cuts, and the four-week average, alongside September trade figures for exports, imports, and the balance of trade. Treasury bill auctions, mortgage rates, and Fed updates are also scheduled. Key US corporate earnings releases include Dollar General, Kroger, Fastenal, Hewlett Packard Enterprise, Ulta Beauty and Samsara.

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