Tech stocks take center stage, rate cut bets remain strong

Equities set to close out the week on a high despite muted sentiment.

DEC 13, 2024

By Bloomberg

by John Viljoen

Tech stocks led gains in US equity futures, signaling a positive end to the week on Wall Street as traders look ahead to the final Federal Reserve interest-rate decision of the year.

Nasdaq 100 contracts climbed 0.5%, suggesting a partial rebound from Thursday’s declines as traders assessed the implications of higher-than-expected US jobless claims and mixed readings on producer prices for next week’s Fed meeting. Europe’s Stoxx 600 index slipped 0.1%, while Asian stocks fell.

The pound weakened after Britain’s economy unexpectedly contracted for a second straight month in October. An index of dollar strength was little changed and Treasury yields were steady. Oil and gold headed for weekly gains.

Sentiment in markets was somewhat subdued after China’s Central Economic Work Conference ended without policy details on fiscal stimulus, even as authorities pledged to boost consumption. A gauge of world stocks is headed for the worst week in nearly a month.

“The market may have some hope that the CEWC would give more details on consumption stimulus and property inventory clearance packages,” said Jason Chan, senior investment strategist of Bank of East Asia. “Investors may need to wait for more fiscal policy rollout in the first quarter.”

On Thursday, the S&P 500 fell 0.5%, at least temporarily pausing this year’s 27% rally. Recent trading has also highlighted a concerning trend for some Wall Street strategists, that the number of stocks powering the advance is dwindling.

The US benchmark closed out its ninth consecutive day where the number of constituents falling outnumbered those rising. That’s the longest such streak since Bloomberg started collecting the data in 2004.

Still, looking ahead to next year, forecasts from strategists polled by Bloomberg showed they expect European stocks to trail their US peers again in 2025. The Stoxx Europe 600 Index will end 2025 at 535 points, the survey showed, indicating gains of less than 3% from Wednesday’s close. That’s compared with forecasts for the S&P 500 Index to rise 7.5% on average.

While the Stoxx 600 has climbed over 8% this year, it is still heading for one of its worst annual performances against the S&P 500 on record. Political turmoil in France and Germany and sluggish growth have weighed left European equities struggling to keep pace with US stocks buoyed by a resilient economy. Meanwhile, Donald Trump’s potential trade tariffs loom as an additional headwind for Europe.

US economic data released Thursday offered a muddy outlook on the health of the economy. Weekly jobless claims rose more than expected, while producer price readings were mixed. US wholesale inflation accelerated in November due to a surge in egg prices.

The data did little to shift expectations for a US rate cut next week. Swaps market pricing reflects around a 95% level of confidence the central bank will reduce borrowing costs by a quarter point at the December meeting.

Back in Asia, China’s vow to cut policy rates as well as banks’ reserve ratios sent the Chinese 10-year government bonds to slide below 1.8% for the first time in history.

Oil edged higher, with Brent crude up 3.5% this week on the prospect for tighter US sanctions against Iran and Russia. Gold is set to notch a weekly gain on expectations of a US rate cut next week. Bitcoin traded around $100,000.

Key events this week: