Tech Leads Markets Amid Global Rate Decision Anticipation:
Financial markets are experiencing cautious anticipation as the Federal Reserve’s meeting approaches next week.
U.S. tech stocks continue to deliver exceptional performance while global bond markets decline.
At the same time, U.S. and international economic indicators
provide mixed signals about the economy’s direction and monetary policies.
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Tech Stocks Continue to Break Records
Major U.S. tech stocks have continued their record-breaking gains,
while Treasury bonds have declined as Wall Street braces for a potential
slowdown in the Federal Reserve’s rate-cutting pace ahead of its next meeting.
The Nasdaq 100 index rose for the fourth consecutive week,
supported by strong performances from semiconductor technology companies,
Broadcom leading the way on Friday.
The index, known for its focus on tech stocks, climbed 0.8%,
reaching a new record high for the second time in three days.
In contrast, other U.S. indices struggled, with the S&P 500 falling by 0.6% for the week
and the Dow Jones Industrial Average declining by 1.8%.
Broadcom’s stock jumped 24% to a record high,
driven by the company’s expectations of a significant increase in demand for its AI chips.
This boosted its market valuation to $1 trillion. Other companies,
including Marvel Technology, Micron Technology, and Nvidia Corp, also saw notable gains.
The Federal Reserve and the Anticipated Rate Cuts
The Federal Reserve’s expected rate cuts will likely support the ongoing market rally,
with the tech sector continuing to lead the gains.
The S&P 500 has risen by 27% since the beginning of the year,
and analysts predict its strong performance will persist compared
to European indices through 2025.
However, the lackluster performance of other stocks
has raised concerns among investors about the growing disparity between the tech sector and the broader market.
Tech Leads Markets Amid Global Rate Decision Anticipation
Tom Essaye, founder of The Sevens Report, stated,
“The tech sector continues to affirm its dominance in the market,
driven by the momentum of AI and quantum computing.”
However, he noted that the robust performance of tech stocks has overshadowed the rest of the market.
According to data from Bespoke Investment Group,
the number of advancing stocks in the S&P 500 has not outpaced declining stocks in any December session,
marking an unprecedented streak in over 20 years.
Bond Declines: A “Hawkish” Rate Cut?
U.S. Treasury bonds continued their downward trend,
with the 10-year bond yield rising to 4.40%.
Ian Lyngen of BMO stated that the market is preparing for a new move by the Federal Reserve,
likely to be described as a “hawkish” rate cut.
Following mixed data this week,
investors have scaled back their expectations for significant monetary easing,
reflecting uncertainty around the central bank’s decisions.
The U.S. Dollar Outperforms in Currency Markets
The U.S. dollar remained stable against a basket of major currencies
in the currency markets but is on track for its second consecutive week of gains.
Timothy Graf from State Street Global Markets projected further dollar strength,
noting that the U.S. monetary easing cycle might be shorter than Europe’s.
Meanwhile, the British pound declined due to continued economic contraction in the UK,
while the Euro strengthened following less dovish signals from the European Central Bank.
Declining Asian Stocks and Continued Uncertainty in China
Earlier, Asian stock indices fell as a significant economic meeting
in China pledged to stimulate consumption but failed to provide precise details on fiscal stimulus plans.
The global stock index is expected to record its worst weekly performance in nearly a month.
Beata Manthey, Head of European Equity Strategy at Citi Group,
commented on the announcements from China, saying, “The flow of news was disappointing,”
and added, “Markets want numbers, but we didn’t get them.”
Nevertheless, Chinese 10-year government bond yields fell below 1.8%
for the first time in history, authorities pledged to cut interest rates
and reduce banks’ reserve requirement ratios.
Analysts at Bank of America noted that investors poured $5.6 billion
into Chinese equity funds over the past week,
attributing these inflows to promises of monetary easing by Chinese authorities.
Oil Prices Rebound
In the energy market, Oil prices surpassed $71 per barrel.
West Texas Intermediate crude gained 6% this week,
driven by expectations of stricter U.S. sanctions on Iran and Russia, further tightening global supply pressures.
Conclusion
Financial markets are witnessing dynamic movements across tech stocks, bonds,
and currencies as they await the Federal Reserve’s decisions,
which could shape the trajectory of the markets in the coming period.
The focus remains on how monetary policies will impact
various sectors and how global markets respond to mounting economic challenges.
Tech Leads Markets Amid Global Rate Decision Anticipation