Stocks and futures pause after record-breaking rally: Markets wrap

(Bloomberg) — Markets took a breather Friday as investors weighed the outlook for stocks after benchmark indexes from the U.S. to Europe and Japan hit all-time highs in the wake of Nvidia Corp.'s huge earnings.

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US futures were little changed after overnight gains pushed the S&P 500 and Nasdaq 100, along with the MSCI All-County Index, to new records. Nvidia is on track to increase its market cap to $2 trillion for the first time ever after shares rose as much as 2.7% in premarket trading, adding to Thursday's meteoric rise.

Nvidia's $277 billion one-day increase to its market cap on Thursday was the largest single-session value increase ever — surpassing the recent $197 billion gain by Meta Platforms Inc. The question is whether the tech rally can be sustained and expanded to other sectors, even as bets on interest rate cuts by the Federal Reserve wane amid data showing the world's largest economy remains strong.

“The speed of technology’s rise has investors wondering whether they will take profits,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “While we see merit in rebalancing portfolios, we believe maintaining strategic exposure to large-cap technology in the U.S. is important, and the rally in technology stocks could continue even further.”

The Stoxx Europe 600 index erased early gains amid mixed earnings, hovering around the record closing level reached on Thursday.

UK-based Standard Chartered Bank rose more than 8% after revealing a dividend and share buyback. Shares of German insurance company Allianz SE fell after non-life insurance profits fell short of analysts' expectations. Shares of Deutsche Telekom AG, the largest telecommunications company in Europe, fell after a decline in its profits outside the United States.

The story continues

Gains in European stocks were largely driven by ASML Holding NV, SAP SE, LVMH and Novo Nordisk A/S. Just like the US, Europe now faces its own concentration risk, with these four stocks accounting for more than half of the STOXX 600's 3% advance in 2024, versus a combined weight in the benchmark index of only about 10%.

However, global equity returns should expand, although stock performance in 2024 will likely revolve around earnings, according to Citigroup strategists. Rising AI and optimism about economic growth at a time of easing monetary policy is a “magic sauce” for further gains in stock markets, according to Michael Hartnett of Bank of America Corp.

UBS's Hafele agreed: “Beyond technology, we believe investors should also prepare for a potential extension of the stock market rally, which could materialize with a combination of Fed rate cuts and still strong growth.” Strong, low inflation.

In Asia, China's benchmark CSI 300 index extended its gains for the ninth session, while Hong Kong stocks remained steady. Australian, Taiwanese and South Korean stocks advanced. Japanese markets were closed on Friday for a public holiday.

Fed hawks

The 10-year Treasury yield rose about 2 basis points after top Federal Reserve officials reiterated the message Thursday that the U.S. central bank remains on track to cut interest rates this year — but not anytime soon. The dollar measure was constant.

In commodities, oil fell as investors weighed signs of market tightening against continuing concerns about demand. Gold is fickle. Nickel and copper rose, but iron ore was headed for its biggest weekly decline in almost a year on concerns that Chinese steel demand could disappoint.

Some key movements in the markets:

Stores

• S&P 500 futures were little changed as of 5:57 a.m. New York time

• Nasdaq 100 futures fell 0.1%

• Dow Jones Industrial Average futures were little changed

• The Stoxx Europe 600 index was little changed

• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• There was little change in the euro at $1.0824

• The British pound rose 0.1 percent to $1.2675

• The Japanese yen fell 0.1 percent to 150.72 yen to the dollar

Digital currencies

• Bitcoin fell 1 percent to $51,157.76

• Ethereum fell 1.5% to $2,941.06

Bonds

• The yield on 10-year Treasury bonds rose two basis points to 4.34%.

• The yield on 10-year German bonds rose two basis points to 2.46%.

• The yield on British 10-year bonds rose two basis points to 4.13%.

Goods

This story was produced with assistance from Bloomberg Automation.

-With assistance from Michael Msika and Subrat Patnaik.

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