Thursday showed little sign of the relentless rally in technology stocks cooling off. Following a surge led by NVIDIA that pushed the S&P 500 and Nasdaq to new record highs on Wednesday, U.S. stock futures and European equities advanced. Bitcoin also edged higher, buoyed by the U.S. market's gains. The momentum in AI-related deals was highlighted by a major stock offering from Cerebras Systems Inc. and strong results from Cisco Systems. As of writing, Dow Jones futures were up 0.71%, and S&P 500 futures gained 0.29%. Nasdaq futures rose 0.24%, putting the index on track for its fifth intraday record high since early last week. NVIDIA shares were up 2.6% in pre-market trading. Networking giant Cisco surged 19% after issuing a sales forecast that exceeded expectations. AI chipmaker Cerebras Systems Inc. raised $5.55 billion in the year's largest initial public offering. European stock indices opened higher. The pan-European Stoxx 600 index rose 0.3%, benefiting from strength in the technology sector, which was lifted by gains in U.S. tech shares. In London, shares of luxury group Burberry fell 4.3% after it reported results and announced that Chairman Gerry Murphy would step down. Private equity firm 3i dropped 18%, leading the index lower, after its core investment, Action, reported weaker-than-expected results. The UK's FTSE 100 gained 0.3%, Germany's DAX rose 1.0%, and France's CAC 40 advanced 0.4%. Since early April, chip stocks have led an unprecedented rebound in U.S. equities, shaking off market turbulence triggered by the Middle East conflict. Major tech companies, including NVIDIA, have accelerated their gains, with their executives joining the U.S. President's delegation to China. Asian markets were broadly lower. Japan's Nikkei 225 closed down 1.0%. China's Shanghai Composite fell 1.5%, while the ChiNext and Shenzhen Component indices both lost over 2%. Hong Kong's Hang Seng Index was flat, and the Hang Seng Tech Index dipped 0.1%. Manish Kabra, Chief U.S. Equity Strategist at Société Générale, stated, "The key ingredients for a market top remain absent, including multiple Fed rate hikes, widening credit spreads, or an overheating pulse in economic growth. Therefore, the bullish case for the S&P 500 remains intact." Focus on Iran Conflict The conflict has kept a key Middle Eastern oil transit route largely closed for over two months. Ulrich Urbahn, Head of Multi-Asset Strategy & Research at Berenberg, commented, "I expect this summit to have a greater impact on market sentiment than on a major policy reset. Markets will likely hope to see a de-escalatory tone, reduced tariff threats, and no new restrictions in trade, technology, or geopolitics." Oil prices edged higher. Brent crude rose slightly above $106 per barrel. WTI crude futures increased 0.1% to $96.90 per barrel. Meanwhile, investors are monitoring the expiration of U.S. sanctions waivers that allowed purchases of Russian crude cargoes until May 16th. Market observers believe that if the waivers expire, supply conditions could tighten further. Focus on Economic Data Most government bond prices saw modest gains, temporarily halting the recent rise in yields driven by inflation concerns stemming from higher oil prices. The yield on the 10-year U.S. Treasury note was largely flat at 4.46%, after touching a high of 4.500% on Wednesday. On Wednesday, the 10-year yield had climbed to its highest level since June of last year following strong U.S. producer price data. Analysts at Commerzbank noted in a report that further analysis suggests the data's impact on the Fed's preferred inflation gauge, the PCE price index, may be limited. Market focus will shift to U.S. retail sales and weekly jobless claims data, due at 8:30 p.m. Hong Kong time on Thursday; weaker data could push yields lower. Meanwhile, Middle East uncertainties persist. Dollar Retreats The U.S. dollar retreated slightly. The dollar index fell 0.1% to 98.483, after reaching 98.598 on Wednesday. The greenback had hit a near two-week high in the previous session after U.S. PPI inflation data exceeded expectations. Bitcoin inched higher but remained below $80,000. LSEG data showed Bitcoin up 0.1% at $79,725, after falling to $78,728 on Wednesday. Bitcoin had dropped to a one-week low in the previous session. Higher-than-expected U.S. inflation data for April, released on Tuesday, dampened Fed rate cut prospects, hurting risk appetite and boosting the dollar. Gold held above $4,700. However, expectations for rates to stay higher for longer following the latest U.S. inflation data continue to weigh on the metal. Soojin Kim of MUFG said, "Gold extended its decline after U.S. wholesale inflation accelerated at the fastest pace since 2022 in April; concurrently, U.S. Treasury yields climbed toward their highest levels since July, pressuring the non-yielding asset." Famed Bear Turns Bullish! Morgan Stanley Analyst Sees S&P 500 at 8300 in 12 Months. Supported by the AI boom, expanding corporate profits, and U.S. economic resilience, Wall Street is growing increasingly optimistic about U.S. stocks. Morgan Stanley's well-known strategist Wilson, long cautious, has now turned fully bullish. Wilson now forecasts the S&P 500 could reach 8300 points in the next 12 months and expects it to be around 8000 by year-end. If realized, this would mark one of the strongest multi-year rallies for U.S. stocks since the dot-com bubble of the 1990s. He stated that corporate earnings growth over the next 12 months will remain the core driver for stock gains, with accelerating AI adoption, improved operating leverage, and continued corporate efficiency efforts further strengthening profit performance. Fed Chair Change But Inflation Script Unchanged, Treasury Market Braces for '5% Era'. The Senate narrowly voted to confirm Kevin Warsh as Federal Reserve Chair on Wednesday. This initiates the most contentious leadership transition at the U.S. central bank in decades and will test its political independence. Simultaneously, investors are preparing for U.S. Treasury yields to remain elevated for an extended period. They question whether incoming Fed Chair Kevin Warsh can tame inflation fueled by surging oil prices stemming from the protracted Middle East conflict. As energy price pressures mount, investors are demanding higher compensation for inflation risk, leading to a spike in long-term yields, including the benchmark 10-year Treasury. Rising long-term yields directly translate to higher borrowing costs across the economy: mortgages, corporate bonds, and leveraged loans all become more expensive. Focus Stocks Biogen rose 4%. The biopharmaceutical company announced it would advance its investigational Alzheimer's drug to Phase 3 trials despite failing to meet the primary endpoint in Phase 2; Biogen stated the drug showed cognitive improvement effects. Versant Media Group shares soared 14.5%. The company reported growth in Q1 content licensing and digital platform revenue, though overall revenue was dragged down by continued declines in traditional pay-TV network distribution and advertising. According to FactSet analyst surveys, adjusted EBITDA reached $704 million, surpassing the expected $608 million. Outdoor products company Yeti Holdings jumped 10% after reporting Q1 revenue and profit that exceeded market expectations. Yeti's adjusted EPS was $0.26, beating the FactSet analyst consensus of $0.18; revenue of $380.4 million also topped the consensus estimate of $374.7 million. Cryptocurrency exchange Bullish fell 9% after its Q1 results missed expectations. According to FactSet data, adjusted net income was $20.3 million, below the analyst estimate of $23.9 million; adjusted revenue of $92.8 million fell short of the $94.9 million market expectation. Cisco surged 15% after reporting third-quarter results and guidance that both exceeded Wall Street expectations. The company forecasts current-quarter adjusted EPS of $1.16–$1.18 and revenue of $16.7–$16.9 billion; Refinitiv-surveyed analysts had expected EPS of $1.07 and revenue of $15.82 billion. Cisco's previous quarter also beat revenue and profit estimates, and the company announced plans to cut nearly 4,000 jobs. Ticket platform StubHub gained 14%, with Q1 revenue of $446 million and adjusted EBITDA of $72.1 million; Refinitiv analysts had expected revenue of $432 million and EBITDA of $65.1 million. Healthcare digital platform Doximity plunged 23%. Its quarterly and full-year revenue guidance fell short of analyst expectations, and its Q4 adjusted EPS of $0.26 also missed the market consensus of $0.28. Fast-food chain Jack in the Box rose 4%. According to FactSet data, its Q2 adjusted EBITDA was $51.3 million, above the analyst estimate of $50.3 million; however, the company's adjusted profit and revenue both fell short of market consensus. NVIDIA rose 2%. The U.S. has approved the sale of NVIDIA's H200 AI chips to about ten Chinese companies, though no deliveries have been completed yet. U.S.-listed Honda shares increased 3%. The automotive giant posted its first annual loss in nearly 70 years due to a $9 billion cost from restructuring its EV business. However, its full-year guidance for fiscal 2027 exceeded expectations, and it maintained its dividend. Cruise operator Viking Holdings advanced 3.4%, with Q1 revenue of $1.05 billion, beating the FactSet analyst consensus of $1.01 billion; a loss per share of $0.11 was in line with market expectations. Global payments firm Klarna surged 16% after reporting Q1 revenue of $1 billion, exceeding FactSet analyst expectations. The company reported an operating profit of $17 million, though comparability with the market expectation of $15.6 million could not be immediately confirmed.
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