Markets Rally as Cyclical Stocks Shine While Tech Falters Amid Regulatory Pressures | Daily Market Analysis

Key events:

• USA - Michigan Consumer Sentiment (Nov)
• USA - S&P Global US Manufacturing PMI (Nov)
• USA - S&P Global Services PMI (Nov)

The S&P 500 ended Thursday on a positive note, with gains driven by cyclical sectors such as financials and industrials, while technology stocks lagged behind. Alphabet (NASDAQ: GOOGL) faced a sharp decline on regulatory concerns, weighing on the tech-heavy Nasdaq, which edged up just 0.04%. The Dow Jones Industrial Average climbed 461 points, or 1.1%, while the S&P 500 rose 0.5%.

Nvidia (NASDAQ: NVDA) shares inched higher after beating third-quarter earnings expectations, but its fourth-quarter revenue forecast fell short of some traders' hopes for a stronger outlook. The guidance signals a marked slowdown in revenue growth compared to the robust year-on-year gains the company has achieved in recent quarters. Nvidia also highlighted supply constraints for its upcoming Blackwell AI chips, despite strong demand for its advanced AI products. The company, which recently surpassed Apple (NASDAQ: AAPL) as the most valuable listed firm, remains under scrutiny as it navigates these challenges.

Alphabet shares dropped over 4% following a U.S. Department of Justice push for Google to divest its Chrome browser, part of a broader crackdown on its dominance in online search.

In currency markets, the Japanese Yen reversed much of its earlier session gains against the US Dollar, with USD/JPY trading near the mid-154.00s. Bank of Japan Governor Kazuo Ueda hinted at the potential impact of exchange rate fluctuations on the economic outlook, leaving the door open for a rate hike in December. However, domestic political uncertainty and a risk-on market sentiment limited the Yen's safe-haven appeal.

Meanwhile, the Australian Dollar weakened against the US Dollar, weighed down by mixed Judo Bank PMI data. While the Manufacturing PMI rose to 49.4 in November from 47.3 in October, marking the slowest contraction in six months, the Services PMI dropped to 49.6, signaling its first contraction in nearly a year. Despite this, the Reserve Bank of Australia’s hawkish stance on future rate decisions provided some support for the currency. Australia’s major banks have revised their rate cut predictions, with most now forecasting a reduction in May.

The New Zealand Dollar continued to trade lower, with the NZD/USD pair near 0.5855, pressured by a strengthening US Dollar and rising expectations of a 50-basis-point rate cut by the Reserve Bank of New Zealand next week. According to Moody’s Analytics, sluggish economic growth and a weak labor market are key factors prompting the RBNZ’s dovish stance.

In the Eurozone, the EUR/USD pair declined for a third consecutive session, reaching a low of 1.0462 - the weakest level since October 2023. This downward trend reflects concerns that the European Central Bank might accelerate its shift toward policy easing. Markets anticipate the ECB will lower the Deposit Facility Rate by 25 basis points to 3% in December, with expectations of a neutral stance by 2025 as the Eurozone's economic outlook remains under pressure.

Traders are also focused on the release of Eurozone PMI data, with the Manufacturing PMI forecast to remain at 46.0, while Services PMI may edge higher to 51.8. Across the Atlantic, attention turns to US PMI figures, with forecasts indicating slight improvements in both Manufacturing and Services PMIs for November. The US Dollar Index hovers near 107.00, just below its recent peak of 107.15, supported by better-than-expected jobless claims data. Weekly initial claims fell to 213,000, fueling speculation that the Federal Reserve may adopt a slower pace of rate cuts.