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 volatile after overnight gains pushed the S&P 500 and Nasdaq 100, along with the MSCI All-Star Index, to new records. The buoyant outlook for Nvidia, the most valuable chipmaker, helped its shares rise 16% amid the artificial intelligence mania.

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 continue and expand to other sectors, even as bets on interest rate cuts by the Federal Reserve decline amid data showing the world's largest economy remains strong.

“Generative AI will prove to be this decade's growth theme, and Nvidia's earnings report demonstrates the current strength of AI infrastructure spending,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “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, strong growth, and lower inflation.”

The Stoxx Europe 600 index erased early gains amid mixed gains to trade little changed 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 stock returns are expected to expand after a tight first quarter, although stock performance in 2024 is likely to 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.

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 three 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 aluminum prices rose, but iron ore headed for its biggest weekly decline in nearly a year amid concerns that Chinese steel demand may disappoint.

Main events this week:

• Germany Ifo Business Climate, Friday

• The European Central Bank publishes its one- and three-year inflation expectations survey on Friday

Some key movements in the markets:

Stores

• The Stoxx Europe 600 index was little changed as of 9:35 a.m. London time

• S&P 500 futures were little changed

• Nasdaq 100 futures fell 0.2%

• Dow Jones Industrial Average futures were little changed

• There was little change in the MSCI Asian stock index

• There was little change in the MSCI Emerging Markets Index

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%.

• There was little change in the euro at $1.0819

• The Japanese yen fell 0.2 percent to 150.76 yen to the dollar

• The yuan in external transactions fell 0.2 percent to 7.2133 per dollar

• There was little change in the pound sterling at $1.2654

Digital currencies

• Bitcoin fell 1.3% to $51,001.06

• Ethereum fell 1.8% to $2,932.27

Bonds

• The yield on 10-year Treasury bonds rose by three basis points to 4.35%.

• The yield on 10-year German bonds rose four basis points to 2.48%.

• The UK 10-year bond yield rose three basis points to 4.14%.

Goods

• Brent crude fell 1.2 percent to $82.70 a barrel

• Gold in spot transactions fell 0.3 percent to $2,018.08 per ounce

This story was produced with assistance from Bloomberg Automation.

–With assistance from Michael Msika and Pearl Liu.

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