Stocks and futures pause after record-breaking rally: Markets wrap

(Bloomberg) — Stocks are ending the week on a quieter note as investors weigh the outlook for stocks after markets 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 little changed on Friday after overnight gains pushed the S&P 500 and Nasdaq 100, along with the MSCI All-County 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 be sustained and expanded to other sectors, even as bets on interest rate cuts by the Federal Reserve wane 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 rose after also closing at a record high on Thursday. Mining company stocks led the rise, with most industrial metals rising ahead of expected new US sanctions on Russia, which could disrupt supplies.

BASF SE rose as much as 3% after Europe's largest chemicals company said profits will partially recover as it deepens cost cuts to counter rising energy expenses and falling demand. Standard Chartered Bank shares rose more than 6% after revealing profits and share repurchases. Allianz SE fell after reporting earnings that largely matched estimates.

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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 equity 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.

In Asian markets, the Chinese benchmark CSI 300 index continued its gains for the ninth session, while Hong Kong stocks stabilized. Australian, Taiwanese and South Korean stocks advanced. Japanese markets were closed on Friday for a public holiday.

Fed hawks

Back in the US, traders are receptive to the Fed's more hawkish comments. Three senior Federal Reserve officials confirmed Thursday that the U.S. central bank is still on track to cut interest rates this year — but not anytime soon. 10-year Treasury yields rose two basis points and the dollar measure was flat.

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 almost 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 up 0.2% as of 8:17 a.m. London time

• S&P 500 futures were little changed

• Nasdaq 100 futures were little changed

• Dow Jones Industrial Average futures were little changed

• MSCI Asia Pacific Stock Index rose 0.1%

• There was little change in the MSCI Emerging Markets Index

Currencies

• The Bloomberg Dollar Spot Index was little changed

• There was little change in the euro at $1.0831

• There was little change in the Japanese yen at 150.60 to the dollar

• There was little change in the yuan in external transactions at 7.2093 to the dollar

• There was little change in the pound sterling at $1.2671

Digital currencies

• Bitcoin fell 1.1% to $51,102.88

• Ethereum fell 1.5% to $2,940.5

Bonds

• The yield on 10-year Treasury bonds rose two basis points to 4.34%.

• The German 10-year bond yield rose 1 basis point to 2.45%.

• There was little change in the yield on British 10-year bonds at 4.11%.

Goods

• Brent crude fell 0.5 percent to $83.21 a barrel

• Gold in spot transactions fell 0.2 percent to $2,021.27 per ounce

This story was produced with assistance from Bloomberg Automation.

–With assistance from Michael Msika and Jason Scott.

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