Tech Stocks Drive U.S. Indices to Record Highs

In a significant political development, the Republican Party has regained control of the U.S. House of Representatives, securing 220 seats. This shift has led to the nomination of Paul Atkins, a supporter of cryptocurrency, as the new chairman of the Securities and Exchange Commission (SEC). In response to this news, Bitcoin's price experienced a surge, climbing over $4,000 during the trading session and nearing the critical $100,000 mark.

Despite the Republican gains, recent economic data has pointed to weaker-than-expected performance for the U.S. economy. The ADP report for November showed only 146,000 new jobs added, marking the slowest growth in four months. Furthermore, the ISM services sector index indicated the slowest expansion rate in three months, falling significantly below analysts' predictions. Following the release of this data, U.S. Treasury yields plummeted. However, the Federal Reserve's Beige Book suggested a slight overall economic growth across most regions, with businesses expressing optimism about future demand.

Federal Reserve Chair Jerome Powell acknowledged the resilience of the economy, suggesting the possibility of a more cautious approach to interest rate cuts. He expressed doubts regarding the timing of any changes based on the current economic context. Meanwhile, St. Louis Fed President James Bullard hinted that the window for pausing rate cuts is approaching, with the possibility of a halt as early as this month. Traders are betting on a 25-basis-point rate cut, increasing their expectations from 73% to 77.5%, while the likelihood of a pause in cuts decreased to 22.5%.

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In Asia, South Korea's financial markets have begun to exhibit increased volatility following the implementation of a curfew due to political unrest. The KOSPI index saw a decline of over 2%, while the Governor of the Bank of Korea dismissed the idea of interest rate cuts in the aftermath of the turmoil. In Europe, the French government faced a no-confidence vote and was forced to resign, resulting in a dramatic drop in the euro against the dollar. The OECD issued a warning about the global economic outlook, citing risks from trade tensions, geopolitical strife, and national debt crises. The organization recommended that central banks in developed countries continue a loose monetary policy.

The European Central Bank (ECB) President Christine Lagarde noted that the battle against inflation is nearing its end, albeit not yet entirely victorious. The ECB is expected to take a cautious stance, anticipating that inflation will reach target levels by next year. In contrast, German Bundesbank President Joachim Nagel stated he does not oppose a rate cut in December, but emphasized that rates should not drop below neutral levels, resulting in the market scaling back its bets on ECB rate cuts. Similarly, Bank of England Governor Andrew Bailey signaled that four 25-basis-point rate cuts are most likely next year, leading traders to increase bets on rate reductions while British bonds recovered from earlier losses.

This week, the probability of the Federal Reserve cutting rates dropped from around 80% to 70% mid-session, only to rise again later. In the technology sector, "AI concept stocks" such as Salesforce and Marvell Technology experienced robust earnings, driving the tech sector upwards. Major indices like the Nasdaq and the S&P 500 saw record highs, with the Nasdaq reporting its third consecutive day of gains. However, many Chinese stocks took a downturn.

The major U.S. indices all posted gains, with the S&P 500 climbing by 36.61 points (0.61%), closing at 6086.49. The Dow Jones, closely tied to the economic cycle, increased by 308.51 points (0.69%), reaching 45014.04. The tech-heavy Nasdaq rose by 254.21 points (1.30%), finishing at 19735.12. The Nasdaq 100 index and the Nasdaq’s Technology Market Capitalization Weighted Index (NDXTMC) also saw increases of 1.24% and 1.67%, respectively. The Russell 2000 index, which measures small-cap stocks, grew by 0.42%. However, the VIX, known as the fear gauge, rose by 1.13%, landing at 13.45.

On the sectoral front, most industry ETFs showed positive performance. The networking index ETF climbed by 2.86%, while technology sector, semiconductor, and global tech stock ETFs increased by at least 1.5%. The healthcare ETF saw a slight decline, dropping less than 0.1%, while the financial and energy ETFs fell by approximately 0.4% and 2.4%, respectively. In the S&P 500's 11 sectors, the energy sector declined by 2.47%, and materials fell by about 0.9%, whereas telecommunications rose over 0.6%, and the consumer discretionary sector climbed by 1.2%. The information technology sector increased by 1.77%.

BlackRock has provided its outlook for 2025, predicting that the ongoing AI boom will bolster U.S. stock growth and enhance the economy, despite potential concerns about rising debt impacting overall optimism. The company suggests that advancements in AI technology could lead to greater benefits for American stocks compared to their European counterparts.

Further emphasizing the tech sector's performance, the "Fabulous Seven" tech giants, including Meta, Amazon, and Apple, reported gains across the board. Meta rose by a marginal 0.02%, Amazon by 2.21%, and Apple, marking its fourth consecutive all-time high, increased by 0.15%. There are reports indicating that Apple's collaboration with Baidu on developing AI functionalities specifically for China has faced challenges, which may impact iPhone sales. Nvidia surged by 3.48%, Microsoft gained 1.44%, Google’s parent Alphabet rose by 1.77%, and Tesla climbed by 1.85%.

Chip stocks primarily recorded upward movements, with the Philadelphia Semiconductor Index gaining 1.71% to reach 5121.78. The industry ETF SOXX also rose by 1.71%. Notably, an ETF focused on doubling Nvidia's performance skyrocketed by 6.94%. Marvell Technology saw a whopping 23.19% increase, marking its best single-day performance since May 2023, driven by strong AI demand, with quarterly sales rising by 19%, significantly surpassing expectations. Micron Technology gained 3.37%, Broadcom rose by 1.43%, AMD by 1.42%, TSMC by 0.91%, Arm Holdings by 0.66%, Qualcom by 0.47%, while Intel dipped by 2.27%, and ON Semiconductor fell sharply by 5.5%. Synopsys issued disappointing earnings guidance, predicting sales for fiscal-year 2025 that fell short of expectations, prompting a post-session drop by as much as 10%.

Within the AI segment, most stocks rose in value. Salesforce, as a frontrunner in AI solutions, surged by 10.99%, with both Q3 revenue and Q4 performance guidance surpassing estimates. SoundHound AI, an AI voice technology company backed by Nvidia, saw a 14.3% increase, while CrowdStrike rose by 4.06%, Snowflake by 6.01%, Super Micro Computer by 3.98%, Dell Technologies by 0.43%, BullFrog AI by 0.97%, C3.ai by 2.29%, Oracle by 2.9%, while BigBear.ai declined by 7.77% and Palantir fell by 1.56%.

Conversely, most Chinese stocks encountered headwinds, as the Nasdaq Golden Dragon China Index declined by 1.38%. In the global ETF landscape, the ProShares UltraShort FTSE China 3x ETF (YINN) dropped by 2.19%, while the internet ETF concerning Chinese companies (KWEB) fell by 1.54%, and the China Technology Index ETF (CQQQ) decreased by 1.18%. Meanwhile, the FTSE A50 index futures also saw a continuous drop of 0.34% closing at 13247.00 points. Among popular Chinese stocks, Zeekr rose by 7.67%, while NetEase gained 1.6%, Xiaopeng Motors increased by 0.71%, and Pinduoduo climbed by 0.26%. However, Bilibili fell by 0.31%, NIO dropped by 0.86%, Alibaba by 0.88%, Li Auto by 1.23%, Baidu by 1.51%, JD.com by 3.69%, Miniso dropped 5.44%, and Daqo New Energy fell by 8.31%. Within notable company developments, Eli Lilly's weight-loss drug Zepbound showed better weight loss results compared to Novo Nordisk's Wegovy in its first comparative trial, prompting Eli Lilly's stock to rise by 2.03%; meanwhile, Novo Nordisk's ADR fell by 0.21%. UnitedHealth's CEO of its Medicaid division was assassinated in New York, causing a cancellation of investors' day activities, leading UnitedHealth to experience over a 2.9% rise before closing up by 0.92%. Shift4 Payments faced a drop of over 12%, while PSQ Holdings, which surged 270% the day before, plummeted nearly 38% upon announcing a direct stock registration of $36.2 million. In the earnings reports, Dollar Tree gained 5.5% and subsequently closed near 2%, benefiting from a favorable Q3 report and the impending resignation of the CFO. Pet products e-commerce platform Chewy saw a significant decline of 11%, despite posting disappointing Q3 earnings, with an optimistic full-year revenue guidance. Foot Locker, a leading sneaker retailer, continued to be under pressure with a 20% dip after missing profit expectations and providing a tepid outlook, although it managed to cut that loss in half.

In European markets, the German stock index rose approximately 1.1%, maintaining its historical peak up five consecutive days while surpassing the 20,000-point mark. French stocks posted gains, but British stocks dipped slightly. European retail stocks led the way with a rise of over 2%, with Stellantis, the world’s fourth-largest car manufacturer, rising by more than 1% following the announcement of the appointment of the outgoing Apple CFO as the new CEO.

The pan-European STOXX 600 index increased by 0.37%, closing at 517.45 points. The eurozone's STOXX 50 index was up by 0.83%, reaching 4919.02 points. The FTSE Eurozone top 300 index rose by 0.30%, to 2056.10 points. Italy's FTSE MIB index increased by 0.75%. Germany's DAX 30 index climbed by 1.08%. France's CAC 40 index was up by 0.66%. However, the UK's FTSE 100 index fell by 0.28%. Spain's IBEX 35 index gained 0.49%. The Netherlands' AEX index increased by 0.19%.

Despite hawkish statements from Federal Reserve officials, slowing economic data in the U.S. has failed to stabilize Treasury yields, which have continued to decline. The two-year U.S. Treasury yield dropped by over 7 basis points at times. The yield gap between French and German bonds tightened slightly ahead of the no-confidence vote. Expectations for rate cuts by the Bank of England are rising, causing British bond yields to retreat from earlier highs, specifically:

In the U.S. bond market, the benchmark 10-year Treasury yield fell by 4.26 basis points, settling at 4.1820%. This followed a day-high of 4.2789% before oscillating downwards. The yield dipped to 4.1723% shortly before Powell's speech. Meanwhile, the two-year Treasury yield decreased by 5.29 basis points to 4.1235%, trading between 4.2803% and 4.1132% throughout the day. Most other Treasury yields also saw reductions of around 5 basis points. In European markets: at the close in Europe, the German 10-year bond yield rose by 0.7 basis points, and the two-year German yield increased by a full basis point. The UK’s 10-year yield gained 0.6 basis points, and the two-year yield rose by 1.1 basis points. French 10-year yields fell by 0.7 basis points, and Italian yields decreased by 2.8 basis points.

The dollar index initially climbed but then receded, with the yen briefly falling below 151 before attempting to recover the 150 mark prior to Powell's remarks. The offshore yuan spiked by over 200 points, surpassing the 7.27 mark. Following France's government disbandment, the euro erased its gains against the dollar, and Bitcoin futures climbed to the vicinity of $100,000:

In the currency market, the dollar index (DXY) remained fairly stable, closing at 106.380 points after peaking at 106.702 before pulling back significantly, hitting a low of 106.090 shortly after Powell's address (lasting less than 30 minutes). The Bloomberg dollar index fell by 0.03%, closing at 1280.81 points, trading within a daily range of 1284.81 to 1278.92. For non-dollar currencies: the euro's exchange rate against the dollar remained flat, reported at 1.0511, dipping to a day-low of 1.0473 before rebounding to 1.0544 before the close just after the French government faced a no-confidence vote. The British pound rose by 0.21%, settling at 1.27, while the dollar dipped against the Swiss franc by 0.18%, to 0.8845. Commodity currencies saw some shifts as well: the Australian dollar dropped by 0.85% following the weaker-than-expected GDP data for Q3, causing speculation for rate cuts. The New Zealand dollar dipped by 0.54%, whereas the dollar increased against the Canadian dollar by 0.04%. The South Korean won surged about 1% earlier in the day after a six-hour-long curfew was lifted.

As of the end of the trading day, the yen saw a drop of 0.69% against the dollar, settling at 150.64, with intraday lows noted at 151.23 prior to Powell's remarks. The offshore yuan, or CNH, rebounded by 222 points, concluding at 7.2776, fluctuating within a range of 7.3063 - 7.2673. In addition, the largest cryptocurrency by market capitalization, Bitcoin, closed up by 2.33%, priced at $98,780.00. Earlier, it had been as high as nearly $100,000. Ethereum rose over 6.00%, concluding at $3,893.50, with a daily peak of $3,949.00. XRP reported a drop of over 7.70%.

Adding another layer of complexity, U.S. oil inventories showed a more significant decline than expected last week, coupled with speculations that OPEC+ may delay production increases during Thursday's meeting, lending support to oil price stability. Yet, slowing economic indicators across the U.S. and Europe have prompted concerns about future oil demand, resulting in WTI crude dipping nearly 2.1% to just below $68.50.

In commodity trading, WTI crude for January delivery settled $1.40 lower, closing at $68.54 per barrel — the lowest price seen during the day. Similarly, Brent crude for February delivery fell by $1.31 or approximately 1.78%, ending at $72.31 per barrel. Natural gas futures for January marginally increased by $0.03, finalizing at $3.0430 per million British thermal units.

The slowdown of the U.S. economy, alongside expectations for rate cuts, and geopolitical tensions—including in the Middle East, South Korea, and France—have contributed to heightened safe-haven demand; spot gold prices peaked over $2,660 per ounce at one point:

In the precious metals market, COMEX gold futures for February rose by 0.22%, closing at $2,673.90 per ounce. Meanwhile, spot gold peaked during midday trading, surpassing $2,657, before closing up by 0.24% at $2,649.78. The precious metal fluctuated above the $2,650 range, continuing to oscillate within narrow parameters. For silver, COMEX silver futures for March increased by 1.11%, finishing at $31.840 per ounce. Spot silver also achieved intraday highs exceeding $31.50, before concluding at $31.2915 with a 1.04% gain. Most London Metal Exchange (LME) industrial metals concluded positively, with London aluminum rising over 1%. London copper fell $28, standing at $9,083 per ton. COMEX copper futures dropped by 0.10%, closing at $4.1980 per pound. London zinc gained $4, concluding at $3,099 per ton. Meanwhile, London aluminum saw an uptick of $37, settling at $2,646 per ton. London lead prices rose by $7 to $2,086 per ton, while nickel appreciated by $92, closing at $16,107 per ton. Lastly, tin saw a significant rise of $210, wrapping up at $29,034 per ton, and cobalt prices remained unchanged at $24,300 per ton.