Tech Earnings Weigh on Nasdaq

STOCK INDEX FUTURES

The Nasdaq and S&P lagged while the Dow was higher, continuing its advance from Thursday, while the Nasdaq fell lower after a slew of disappointing earnings results caused investors to rotate out of big tech names. Broadcom dropped 6% before the bell on a disappointing sales outlook, while Oracle’s weak revenue result saw shares of the company drop more than 10% on Thursday. Elsewhere on the corporate front, Nvidia, Micron and CoreWeave were all lower in premarket trading. Still, optimism around the Fed’s rate cut is supporting broader market strength and reducing concentration risk tied to the Mag Seven. Lululemon shares jumped 9% after announcing that its CEO will step down at the end of January following a year of weak performance for the athletic apparel company. For the week, the S&P 500 is up 0.5% and the Dow nearly 1.6%, while the Nasdaq trails both with gains of less than 0.1%.

The Supreme Court’s ruling on tariffs is expected to come soon, and President Trump reiterated on Tuesday that the effects of appealing the tariffs could be disastrous for the economy, signaling that he could be expecting an unfavorable ruling towards his trade policies. Trump did suggest that the tariffs could stay but would require a longer implementation process, while calling the ruling the greatest threat to national security in history. In a social media post on Sunday, Trump argued that his method of instituting tariffs is far less cumbersome than other methods, suggesting that if the court knocks down his tariffs, there are still feasible ways to implement them.

CURRENCY FUTURES

US DOLLAR: The USD index edged higher on Friday but still remained set for its third weekly drop as pressure from the Fed chair Powell’s lack of hawkishness caught markets off guard and weighed on the greenback. Only two voters dissented from cutting rates, far below an expected pushback of five. Markets are pricing in two rate cuts for 2026, while the Fed’s summary of economic projections was unchanged at just one for 2026. Powell suggested a rate hike is off the table and that it was not any policymakers base case. Dollar direction will be driven by upcoming economic data as markets finally begin to see up-to-date figures on the economy.

EURO: The euro edged lower against the dollar as final CPI readings from major European economies were left unchanged, apart from France and Spain, who saw minor changes to their readings at -0.2% vs. -0.1% (MoM) and 3.2% vs. 3.1% (YoY) respectively. Strong economic data and recent comments from European Central Bank board member Isabel Schnabel have been supportive of euro. Schabel said that the next move out of the central bank may be a rate hike rather than a rate cut, contrary to what most have expected. ECB President Christine Lagarde said on Wednesday the ECB might lift its growth projections again in December given the economy’s unexpected resilience to uncertainty and trade tensions. However, given the current economic landscape of the eurozone, policy moves from the ECB are not expected to happen anytime soon, and 2026 could very well see no action from the central bank.

BRITISH POUND: The pound recovered earlier losses to slip lower against the dollar following the release of weaker-than-expected monthly GDP figures out of the UK, which showed the economy contracted. GDP fell by 0.1% in the August-October period, and by that same amount in October alone, according to data from the Office for National Statistics. Forecasts had expected readings of 0.0% and 0.1% respectively. It is unclear if weakness in the economy during this period was a result of a fundamental downturn or a reflection of a pre-budget dip in spending, which could prove temporary. Regardless, the Bank of England is still expected to move to lower rates next week. Markets are implying a 90% chance of a rate cut after the committee held rates steady last month in a tight 5-4 vote. Inflation expectations in the country have gone down, per a newly released BoE survey and wage growth is expected to remain subdued and weigh on spending, all of which present downside risks for inflation and the sterling. Next week will also bring CPI data out of the UK, which will be crucial in determining the outlook for rates and presents a situation that could bring volatility in FX markets.

JAPANESE YEN: The yen is weaker ahead of the Bank of Japan’s meeting next week, where a rate hike is expected but focus will also be on signals of the pace of, or lack thereof, future rate hikes. It is likely that the bank will stress that the pace of further rate hikes depends on how the economy reacts to the initial increase in rates. Reports indicate that Prime Minister Takaichi’s administration is unlikely to oppose a rate increase, citing concerns that a weak yen. Strong prospects for next year’s spring wage talks have been driving rate hike expectations, as BoJ Governor Ueda has said that the negotiations will be instrumental in deciding on the timing of a rate hike. Yields on JGBs have recently risen on a mix of market anxiety over fiscal spending, heightened inflation expectations, and expectations that the Bank of Japan will raise rates in December. Governor Kazuo Ueda on Tuesday said that the BoJ could ramp up its plans to purchase government bonds if yields continue to rise sharply, noting that recent moves in rates have been somewhat rapid.

AUSTRALIAN DOLLAR: The Aussie was unchanged as the currency is set for its third week of gains against the dollar, despite falling on Thursday after a surprise drop in employment led markets to slightly scale back bets on a rate hikes next year. Data showed that Australian employment fell by the most nine months in November as full-time jobs more than reversed a large increase the previous month. However, the unemployment rate held steady  at 4.3% despite markets forecasting a rise to 4.4% as fewer people went looking for work. The Reserve Bank of Australia kept rates on hold on Tuesday and signaled that the next move out of the central bank is likely to be upwards. Increased risks to inflation have presented themselves in the economy, requiring the RBA to need more time to assess the persistence of the inflationary pressures. Household spending, monthly inflation, and private demand figures have all posted strong readings recently and are likely to stay elevated. Data from the National Australia Bank earlier in the day showed that capacity utilization across the economy was at its highest level in 18 months, which will add to the RBA’s level of concern about the inflation outlook.

INTEREST RATE MARKET FUTURES

Yields are higher across the curve in what looks to be a quiet day for markets, apart from a speech from Chicago Fed President Goolsbee. Goolsbee said that he dissented because he believed that the Fed should have waited for more economic data, particularly about inflation. Goolsbee said that the labor market is not showing signs of decaying so fast that the Fed could not have waited until early 2026 to cut rates again. He said most data is showing stable economic growth, with the labor market only showing signs of moderation. Elsewhere, new data showed that in the week ending December 3, custody holdings by foreign official and international accounts at the Federal Reserve climbed by 0.17% to $3.077 trillion. Treasury securities held in custody by foreign official accounts were up 0.2% to $2.768trn. Holdings of MBS gained 0.01% at $230.9bn, holdings of other securities fell by 0.35% to $78.3bn, while current holdings of marketable US Treasuries, agencies, and other securities were 4.9%, 29%, and 11% below levels seen one year ago. Next week will be a bust week of data for the US economy. In terms of data, NY Fed manufacturing (Dec) and homebuilder sentiment (Dec) are Monday; NFP (Nov), import prices (Nov), retail sales (Nov), PMI December flashes, and business inventories (Sep) are Tuesday; CPI (Nov), Philly and Kansas City Feds manufacturing (Dec), and ETI (Oct) on Thursday; and the PCE (Oct), existing home sales (Nov), and final December consumer sentiment is Friday.

Chair Powell offered a less hawkish outlook than expected on Wednesday, while the Summary of Economic Projections saw no changes to its median expectations for monetary policy, still expecting one 25 bp cut in 2026 and 2027. Powell said that the policy rate is now within broad estimates of neutral, which will allow the unemployment rate to stabilize or tick up one or two more tenths, while inflation is well placed to reach target after working through tariffs. Powell also said that he doesn’t think a rate hike is anybody’s base case at this point, just that some people felt that we should stop here and wait. It should be noted, however, that three of the 2026 dots in this quarter’s SEP saw the appropriate policy rate for the end of 2026 being 3.875% (as well as two for 2027, two for 2028, and one for the longer run). Powell noted that if not for tariffs, inflation would be having an easier time returning to the bank’s 2% target, mentioning that more than half of the source of inflation is a result from goods related to tariffs.

The spread between the two- and 10-year yields to 64.50 bps, while the two-year yield, which reflects short-term interest rate expectations, rose to 3.545%.

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