- Japan's snap election results and rebounding confidence in AI industry have provided new momentum in the markets
- US Federal Reserve interest rate decisions could disrupt markets in the coming weeks
- Investors are also digesting data from US retail sales and jobs figures for hints on the outlook
Stock markets today show mixed, but mostly positive, results as investors think about recent economic signs and get ready for data coming out soon. After a fast start to the week, which saw the Dow Jones Industrial Average reach a new high above 50,000 points, markets are trading pretty flat as investors take a break. S&P 500 and Nasdaq futures are just a bit up, around 0.1%, as traders wait for a lot of economic data that was delayed.
European markets went down, with the DAX rising losing 0.19% and the FTSE 100 dropping 0.5%. Asian markets went the opposite direction, with Japan’s Nikkei 225 jumping 2.28% because of post-election positive sentiment, as mentioned in coverage by The Wall Street Journal.
US Markets Have Record Highs with Subdued Futures
The main thing moving the markets today isn’t one earnings report, but waiting for things to become clearer. In the United States, the main markets kept going up, but futures suggest a flat start. The Nasdaq Composite went up the most, gaining 0.9%, thanks to tech stocks bouncing back, while the S&P 500 rose 0.5%.
Interestingly, the US 10-year Treasury yield has dropped below 4.2%. Usually, when yields fall, it’s good news for growth stocks, especially in tech. But, there’s a bit of a struggle happening. While lower borrowing costs help big tech companies like Alphabet, there’s a growing worry that if yields are falling because the economy is slowing down too much, the idea of a soft landing might be at risk.
Asian Stocks Lead the Charge
Asian stocks did very well, with the Nikkei reaching record highs after the election, up over 2%, expecting financial boosts, according to Bloomberg’s report today. The Hang Seng went up 0.54%, and Taiwan’s TAIEX rose 1.85%, showing positive feelings. European markets followed, boosted by luxury goods like Kering SA jumping 11% from a Gucci turnaround, as reported by Bloomberg.
It’s worth noting how this global agreement goes against recent ups and downs, but some might say that people don’t think tariff threats will impact supply chains enough, which could undo gains if trade problems get worse.
Key Stock Movers and Influencing Factors
Today’s main driver isn’t one earnings report, but waiting for clarity. Data from Schwab says that markets are dealing with a large amount of retail sales and job cost data. These numbers are important because they will decide how quickly the Federal Reserve, soon to be led by Kevin Warsh, changes interest rates.
Investors are going back to safer big tech companies because they’re the only ones that can pay for their own growth when interest rates are high. The broadening might just be a short-term change, not a long-lasting one. For individual stocks, Oracle (ORCL) has stood out, rising almost 10% after an upgrade from D.A. Davidson. Also, Nvidia and AMD are still gaining, helped by the huge $527 billion spending plans from hyperscalers.
When the 10-year yield falls below 4.2%, it lowers the rate used to calculate the value of future earnings. Since tech companies are valued based on future profits, lower yields usually make their stock prices go up.
Even though stock valuations are high, the general fear of a bubble is questioned by record spending. Alphabet and Amazon are spending over $500 billion together, which is a real build-out, not just speculation.
Markets are expecting a goldilocks situation where inflation cools down enough for the Fed to lower rates, but not so fast that it means a recession. The Dow’s record at 50,135 reflects this optimism