Markets closed a momentous week on a high note, boosted by a surge in optimism following Donald Trump’s election victory. The Dow Jones Industrial Average crossed the 44,000 threshold for the first time, while the S&P 500 hit an all-time high, reflecting investors’ confidence in a growth-driven agenda. The rally has been fuelled by expectations of business-friendly policies, with investors eyeing potential deregulation and tax cuts. Although tech stocks showed some restraint, gains in small-cap stocks and renewed interest in domestic-focused companies underscored market enthusiasm for the new administration’s potential impact on the economy. 

Key Takeaways:

  • Dow Breaks 44,000 Milestone for the First Time: The Dow Jones Industrial Average surged by 260 points, or 0.6%, to close above 44,000, marking the first time in history that the index has reached this milestone. With a weekly gain of 4.7%, this marks the Dow’s strongest weekly performance since November 2023. 
  • S&P 500 Reaches Record High, Capping Off a Historic Week: The S&P 500 closed at an all-time high above 6,000, climbing 0.4% on Friday and recording a weekly gain of 4.7%. As the week’s rally gained momentum, both the Dow and S&P 500 achieved their best weekly performance in a year.
  • Small-Cap Rally Drives the Russell 2000 to Its Best Week Since 2020: Small-cap stocks, represented by the Russell 2000, saw a tremendous surge this week, with the index gaining over 8.4%, its strongest weekly performance since April 2020. 
  • Treasury Yields Dip Amid Economic Uncertainty and Election Aftermath: The 10-year Treasury yield ended the week lower, dipping 4 basis points to 4.29%, following a decline of 11 basis points in the prior session. Despite a brief post-election rally, the yield remains below last week’s level of 4.37%, as investors assess the economic outlook under the incoming administration. The 2-year yield edged up by 4 basis points to 4.24%, reflecting market caution around the potential for increased federal spending and inflation concerns in the months ahead.
  • European Markets Close Lower as Political Turmoil in Germany Weighs on Sentiment: European markets ended the week on a down note, with the pan-European Stoxx 600 falling 0.66% on Friday, driven by a 4.2% drop in mining stocks and closing the week down 0.19%. The FTSE 100 Index in the UK dropped by 1.28% to 8,072.39, while France’s CAC 40 fell 1.17% to 7,339.16. Germany’s DAX index decreased 0.76% on Friday as political uncertainty mounted after Chancellor Olaf Scholz dismissed Finance Minister Christian Lindner, raising the prospect of a no-confidence vote and potential new elections. This political shake-up has introduced additional volatility into European markets as investors digest the implications for Germany’s economic policy.
  • Mixed Results for Asia-Pacific Markets as China’s National People’s Congress Wraps Up: Asia-Pacific markets had a mixed day on Friday, influenced by the US Federal Reserve’s rate cut and anticipation surrounding China’s fiscal policy announcements. Japan’s Nikkei 225 rose 0.3% to 39,500, while the broader Topix index dipped slightly to 2,742.15. South Korea’s Kospi fell 0.14% to 2,561.15, while the Kosdaq, focused on smaller stocks, climbed 1.34% to 743.38. Hong Kong’s Hang Seng index declined 0.95%, and mainland China’s CSI 300 fell by 1% to 4,104.05. With China’s National People’s Congress expected to unveil stimulus measures to address economic challenges, investors are closely watching for potential policy shifts aimed at supporting growth.
  • Oil Prices Drop Over 2% as Supply Concerns Ease and China’s Stimulus Disappoints: Oil prices fell significantly on Friday, with US West Texas Intermediate (WTI) crude dropping 2.74% to $70.38 per barrel, and Brent crude declining by 2.33% to $73.87. This downturn reflects receding fears over supply disruptions from Hurricane Rafael in the US Gulf of Mexico and underwhelming stimulus measures from China, which disappointed some investors expecting stronger support for demand. Although US energy producers had temporarily shut down over 22% of oil output as a precaution, concerns about continued disruptions have faded, leading to a pullback in prices.

FX Today:

  • EUR/USD Holds Near 1.0717 Amid Limited Recovery Attempt: EUR/USD traded around 1.0717, showing a modest attempt to recover but struggling to overcome resistance at the 50-period SMA near 1.0827. The pair faced bearish pressure as sellers emerged at higher levels, with recent attempts to break above key resistance levels facing significant obstacles. Should EUR/USD decline further, it could test support around 1.0700, while a successful move above the 50-period SMA might suggest a potential upward move. Key support and resistance levels to watch are 1.0700 and 1.0827, respectively.
  • GBP/USD Encounters Resistance Near Moving Averages in Downtrend: GBP/USD closed around 1.2921, facing selling pressure near the 50-period SMA at 1.2951. The pair was unable to break through this resistance level, reflecting the dominance of sellers as it remains within a downtrend. Further declines could push the pair toward support around 1.2900, while a potential break above the 100-period SMA at 1.2967 might signal a reversal. Key support and resistance levels lie at 1.2900 and 1.2967, respectively.
  • USD/CHF Struggles Near 100-period SMA as Sellers Dominate: USD/CHF traded close to 0.8754, encountering resistance around the 100-period SMA at 0.8768. Despite recent upward momentum, the pair struggled to maintain gains, with the broader trend leaning bearish as it remains below the 200-period SMA positioned at 0.8603. A drop below the 50-period SMA at 0.8684 could indicate further weakness, with additional support around 0.8650. Key resistance remains at 0.8768, with support levels at 0.8684 and 0.8650.
  • USD/CAD Slides Amid Weak Canadian Jobs Data: The Canadian Dollar struggled to hold ground against the US Dollar on Friday, with USD/CAD trading near 1.3960 after reaching a 14-month high earlier in November. Weak employment data from Canada weighed on the Loonie, keeping the pair near recent highs. If USD/CAD breaks above 1.3960, it may signal continued strength for the Greenback. Conversely, a decline below the 1.3900 level could indicate a potential pullback. Key resistance and support levels to watch are 1.3960 and 1.3900, respectively.
  • Gold Eases Back to $2,685 After Failing to Sustain Rally: Gold retreated to $2,685.28, pulling back after an unsuccessful rally attempt near resistance at the 50-period SMA around $2,732. Sellers defended this level, halting the recent upward momentum and indicating a possible pause in the broader bullish trend. If gold dips below the 200-period SMA at $2,690, further declines could target support around $2,650. However, a recovery above the 50-period SMA at $2,732 would indicate renewed bullish potential, with a focus on resistance around previous highs near $2,750. Key support and resistance are found at $2,690 and $2,732, respectively.

Market Movers:

  • Tesla Continues Rally, Market Cap Surpasses $1 Trillion: Tesla shares climbed nearly 7% on Friday, extending gains from earlier in the week. The electric vehicle giant, led by Elon Musk, reached a market capitalisation of over $1 trillion, benefiting from strong investor sentiment following Donald Trump’s election victory. Tesla’s stock has surged more than 26% this week, marking its fourth consecutive positive session.
  • Upstart Soars on Strong Forecast and Earnings Beat: Shares of the lending platform Upstart surged more than 46% after the company posted better-than-expected earnings and revenue for the third quarter. Upstart also issued an optimistic revenue forecast for the current quarter, which surpassed analysts’ expectations and spurred investor interest.
  • Pinterest Falls on Lower Revenue Outlook: Pinterest shares plummeted 16% after the image-sharing platform issued a revenue forecast below market expectations. The disappointing guidance overshadowed otherwise stable performance, causing a significant pullback as investors reassessed the company’s growth potential.
  • Block Declines After Revenue Miss: Block, the parent company of Cash App, saw its stock slump over 4.5% following a third-quarter revenue report that fell short of expectations. The company reported $5.98 billion in revenue, below analysts’ forecast of $6.24 billion, which led to investor concerns about growth.
  • Airbnb Dips Despite Beating Revenue Estimates: Airbnb shares dropped more than 8% after the company posted mixed quarterly results. While Airbnb managed to exceed revenue expectations, earnings came in just below forecasts, leading to concerns about the company’s profitability amid economic uncertainty.
  • Capri Holdings Tumbles on Earnings and Revenue Miss: Capri Holdings, owner of luxury brands like Michael Kors and Versace, saw its shares drop more than 10% after reporting fiscal second-quarter earnings of 65 cents per share, missing analysts’ estimates of 75 cents. Revenue was also below expectations at $1.08 billion, versus the forecasted $1.18 billion.
  • Affirm Holdings Slips Despite Beating Estimates: Affirm Holdings, a “buy now, pay later” provider, fell over 10% despite reporting better-than-expected first-quarter results on both the top and bottom lines. Investors appeared cautious about the company’s ability to maintain growth amid economic headwinds.

As the week wraps up, the markets have surged to historic levels. The Dow’s break above 44,000 and the S&P 500’s record high signal investor confidence in a pro-growth agenda, with small-cap stocks rallying to their best week since 2020. European markets faced setbacks amid political uncertainty in Germany, while Asia-Pacific indices saw mixed results as China’s National People’s Congress concluded without significant new stimulus. Oil prices declined on reduced hurricane risks and tepid Chinese stimulus measures, while gold retraced after a brief rally attempt. Investors remain focused on how the president-elect’s policies and the Fed’s next moves will shape market sentiment heading into the final months of the year.