The latest wave of enthusiasm for technology stocks extended into Friday, driving U.S. stock index futures higher. Small-cap stocks also advanced as investors continued to broaden their allocations and diversify risk exposure. The yen's sharp sell-off paused amid caution over potential official intervention.
As of writing, Dow Jones futures were up 0.08%, S&P 500 index futures rose 0.31%, and Nasdaq futures climbed 0.61%.
Although the performance of the technology sector in European markets was relatively subdued, Morgan Stanley raised its price target for the European AI bellwether, ASML, by 40%.
An Asian tech stock index hit a fresh record high on Friday; in the previous session, a U.S. chip stock index also reached a new peak.
Nasdaq 100 futures advanced 0.6%, outperforming S&P 500 futures. The Dow Jones Industrial Average and the S&P 500 closed the previous trading session just 0.3% and 0.5% below their respective record closing highs, while the small-cap Russell 2000 index achieved a new all-time high.
With only a few companies reporting earnings, the corporate earnings calendar for the week was relatively light. M&T Bank and PNC Financial Services Group are set to announce results, and State Street Corp. will also report earnings.
The tech stock rebound nearing the weekend was fueled by Taiwan Semiconductor Manufacturing's outlook on capital expenditure and revenue prospects; this guidance reignited optimism surrounding artificial intelligence after concerns over valuations and returns had previously weighed on the sector. As the U.S. economy shows resilience, the balance between tech-led gains and broader market participation is expected to persist, potentially benefiting a wider range of stocks.
Geoff Yu, Senior Macro Strategist at BNY Mellon, stated, "There is room in the market for some degree of dispersion from highly concentrated positions. This does not necessarily have to come at the expense of the overall market. As long as the U.S. economy continues to expand and market return expectations remain favorable, a 'rising tide can lift all boats'."
The first full week of the latest earnings season performed well, hinting at potentially strong results ahead: among the 28 companies that have reported so far, 89% have exceeded market expectations. As the early part of the earnings season is dominated by large banks, investors will gain a clearer view of the broader economic landscape next week with results from companies like Netflix, Johnson & Johnson, and 3M.
Andrea Gabellone, Global Head of Equities at KBC Global Services, commented, "Results so far at least show that, on the banking side, consumer conditions are acceptable, M&A and deal activity along with capital markets are healthy, and earnings estimate revisions remain very positive. At the same time, you also have some strong tailwinds, such as a weaker U.S. dollar."
The U.S. dollar traded in a narrow range. The U.S. Dollar Index, which measures the greenback against a basket of major currencies, was poised for a third consecutive weekly gain after robust U.S. economic data prompted markets to push back expectations for Federal Reserve interest rate cuts. The dollar's rally paused, with the currency dipping 0.07% to 99.28, but it remained on track for a 0.15% weekly increase.
The dollar rose on Thursday after data showed an unexpected drop in U.S. weekly jobless claims, which might reflect some technical difficulties with seasonal adjustments.
Federal funds rate futures indicate that markets have delayed the expected timing of the next rate cut to June, following improved jobs data and ongoing concerns about inflation among policymakers.
The yen strengthened against the dollar but was still headed for a third straight weekly decline against the greenback. This followed comments from Japan's Finance Minister, Satsuki Katayama, who stated that Tokyo "will not rule out any options" to address the yen's weakness, including coordinated intervention with the United States. Earlier in the week, the yen had fallen to a one-and-a-half-year low.
U.S. Treasury prices were largely flat. The yield on the 2-year Treasury note fell 0.5 basis points to 3.558%; the 10-year yield rose 0.6 basis points to 4.165%; and the 30-year yield increased 0.9 basis points to 4.794%.
Eurozone government bond yields edged higher in early trading. Trading was relatively calm, not driven by economic data, U.S. Treasury movements, or government bond auctions completed during the week. Christoph Rieger of Commerzbank Research noted in a report, "The domestic macro backdrop gives investors the confidence to buy new 10-year German bonds above 2.8% or spread products above that level."
In commodities, oil prices stabilized after recording their largest decline since June. Concerns about imminent U.S. military action against Iran have receded, although any escalation could reignite fears of supply disruptions from the Persian Gulf.
Geopolitical risks temporarily took a back seat. As the likelihood of direct U.S. intervention against Iran diminished recently, market concerns over associated risks have eased.
Looking ahead, investors will focus on U.S. December industrial production and capacity utilization data for further insights into the health of the U.S. economy. Meanwhile, speeches from Federal Reserve Governors Michelle Bowman and Philip Jefferson will be scrutinized for clues regarding the Federal Open Market Committee's interest rate policy path. Investors will pay attention to comments on the survey of Fed Chair Jerome Powell and any hints about the potential direction of monetary policy.
The market appears to be in a state of 'hibernation'! The volatility of the 10-year U.S. Treasury yield has hit a record low.
The 10-year U.S. Treasury yield is heading for a fifth consecutive week of minimal movement, approaching the longest period of inertia seen in the past two decades.
Since 2006, the median weekly trading range for the 10-year yield has been 16 basis points. Over the past five weeks, this range has consistently been under 10 basis points, marking the longest such streak since 2020.
This trend is primarily driven by market expectations for stability in U.S. monetary policy but is causing anxiety among bond investors, as previous periods of narrow yield fluctuations have often been followed by sell-offs.
Focus Stocks: Talen Energy fell 6.8%, Vistra declined 3.2%, and Constellation Energy dropped 2.6% amid reports the Trump administration will sign an agreement to curb electricity prices.
Some nuclear energy stocks weakened premarket: Talen Energy dropped nearly 7%, Constellation Energy fell over 5%, and Vistra Energy declined over 4%.
Space-related stocks gained premarket: AST SpaceMobile surged over 7% after being selected as the prime contractor for the U.S. Missile Defense Agency's "Shield" program; Rocket Lab and EchoStar Communications rose nearly 3%.
Micron Technology's stock rose 3.6% premarket after its director, Teyin Liu, purchased 23,200 shares of Micron common stock, a transaction valued at $7.8 million.
Novo Nordisk's shares increased 2.6% premarket as its next-generation innovative drug advances to Phase III clinical trials.
Ferrari's stock fell nearly 2% premarket after Morgan Stanley downgraded the company from Overweight to Equal-weight and lowered its price target from $520 to $425.
Intel's shares rose over 1% premarket, with Citi suggesting the company is entering a "window of opportunity" for AI chip foundry services.
Devon Energy's stock climbed over 1% premarket on rumors of merger talks with Coterra Energy.
United Microelectronics Corporation (UMC) saw its shares jump 5.7% premarket after announcing a partnership with global substrate leader Unimicron Technology.
WeRide's stock advanced over 3% premarket as its global Robotaxi fleet entered the "thousand-vehicle era".
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