US markets witnessed a remarkable session on Wednesday, with the Nasdaq Composite closing above the 20,000 milestone for the first time in history. November’s inflation report aligned with economists’ expectations, reinforcing hopes for a potential Federal Reserve rate cut at next week’s policy meeting. Tech stocks led the charge, with Alphabet’s quantum computing breakthrough fuelling gains across the sector. While the S&P 500 extended its upward trajectory, the Dow Jones Industrial Average lagged, weighed down by losses in healthcare and consumer stocks. Investors remained optimistic as tame inflation data boosted confidence, even as broader economic uncertainties persisted.

Key Takeaways:

  • Nasdaq Achieves Milestone with First Close Above 20,000: The Nasdaq Composite surged 1.77% on Wednesday, closing at an all-time high of 20,034.89. This marks the first time the tech-heavy index has surpassed the 20,000 threshold, driven by strong performances from major tech players like Alphabet, Tesla, and Nvidia. 
  • S&P 500 Rises on Inflation Data and Tech Strength: The S&P 500 added 0.82%, closing at 6,084.19, lifted by the broader strength in the technology sector. Investors reacted positively to the encouraging inflation data that fuelled hopes of a Federal Reserve rate cut in the upcoming policy meeting.
  • Dow Drops Despite Broader Market Strength: The Dow Jones Industrial Average fell 99.27 points, or 0.22%, to close at 44,148.56, bucking the trend seen in the Nasdaq and S&P 500. Losses in healthcare and consumer stocks weighed on the index, with UnitedHealth Group plummeting over 5% following news of potential legislative moves to force health insurers to divest pharmacies they own. 
  • US Annual Inflation Rate Hits 2.7% in November, as Expected: Consumer prices rose at an annualised rate of 2.7% in November, in line with expectations and up from 2.6% in October. The monthly increase of 0.3% was driven largely by shelter costs, which contributed about 40% of the total rise. Core CPI, which excludes food and energy, rose 3.3% year-over-year and 0.3% month-over-month, holding steady from the previous month. 
  • Treasury Yields Edge Higher Ahead of Fed Decision: Treasury yields climbed following the inflation report. The benchmark 10-year Treasury yield rose nearly 5 basis points to 4.269%, while the 2-year yield ticked up less than 1 basis point to 4.153%. The inflation data, coming in line with forecasts, provided one of the final key economic indicators before next week’s Federal Reserve meeting, where policymakers are expected to announce their latest interest rate decision.
  • European Markets Rebound as Inflation Data Boosts Sentiment: The Stoxx 600 index rose 0.28%, recovering from losses earlier in the week, with media stocks leading gains at 1.4%. Germany’s DAX closed 0.4% higher at 20,415, while the FTSE 100 climbed 0.26% to 8,301.62, and France’s CAC 40 advanced 0.5% to surpass 7,423. Spanish retail giant Inditex dropped 6.5% after reporting mixed earnings, while Zalando rebounded late in the session, closing 2.2% higher.
  • Asia-Pacific Markets Show Mixed Performance Amid Chinese Policy Talks: Asia-Pacific markets delivered mixed results on Wednesday. South Korea’s Kospi rose 1.02% to 2,442.51, while the Kosdaq gained 2.17% to 675.92, following parliamentary approval of a downsized 2025 budget. Japan’s Nikkei 225 edged up marginally to 39,372.23, supported by stronger-than-expected producer price index data. In contrast, China’s Hang Seng dipped 0.76%, and the CSI 300 slipped 0.17% to 3,988.83, as investors remained cautious ahead of China’s economic policy announcements. Australia’s S&P/ASX 200 ended lower at 8,353.60. 
  • Oil Prices Surge on European Sanctions and Chinese Demand Recovery: Brent crude futures rose $1.33, or 1.84%, to settle at $73.52 per barrel, while US West Texas Intermediate crude jumped $1.70, or 2.48%, to close at $70.29. The European Union’s latest sanctions against Russia and signs of recovering Chinese demand drove oil prices higher. However, gains were tempered by OPEC’s revised forecasts showing reduced demand growth for 2024 and 2025.

FX Today:

  • EUR/USD Edges Higher as Dollar Softens Post-Inflation Data: EUR/USD traded slightly higher at 1.0499 on Wednesday, posting a modest gain of 0.04% as investors reacted to US inflation data that met expectations. The pair is attempting to recover from last week’s dip to 1.0450, with near-term support emerging at the 1.0450 psychological level. Resistance at 1.0500 remains a key barrier for the pair, with a potential breakout paving the way toward 1.0550. Technical indicators suggest short-term stabilisation, though the longer-term bearish trend persists as the 200-SMA hovers above the current price. 
  • GBP/USD Struggles Below Resistance Amid Market Caution: GBP/USD traded slightly lower at 1.2743, just under the key resistance level of 1.2750. The pair continues to recover after finding strong support near 1.2600 last week. A recent crossover of the 50-SMA above the 100-SMA hints at potential bullish momentum, but the 200-SMA remains a significant barrier for further upside. A breakout above 1.2750 could propel the pair toward 1.2800, with 1.2900 as the next target. Conversely, failure to maintain support at 1.2700 could result in a retest of 1.2600 and potentially resume the broader bearish trend.
  • USD/JPY Climbs Toward $153.00 as Yen Weakens Further: USD/JPY advanced to 152.60, gaining momentum after holding above the key support level at 152.00. Buyers are targeting the 153.00 resistance level, a zone that has proven difficult to breach in recent weeks. A successful breakout above 153.00 could lead to further gains toward 154.50, aligning with October highs. However, the pair is approaching overbought territory according to RSI, which may limit short-term gains. On the downside, support at 152.00 remains critical, with additional protection at 151.50. 
  • USD/CHF Remains Rangebound Amid Lack of Directional Momentum: USD/CHF traded at 0.8844, posting a negligible loss of 0.02% as the pair remained confined within the 0.8800-0.8900 range. Sideways movement continues, with the 50-SMA and 100-SMA providing mild support. A breakout above 0.8900 could trigger a rally toward $0.9000, while failure to hold above 0.8800 may expose the pair to further downside risks at 0.8750 or 0.8700. 
  • Gold Holds Firm Amid Mixed Market Sentiment: Gold (XAU/USD) traded near $2,716 on Wednesday, consolidating after recent gains driven by expectations of Federal Reserve easing. The yellow metal tested resistance at $2,720 but failed to break higher, reflecting profit-taking at these levels. A decisive move above $2,720 could open the door to further gains toward $2,750, followed by $2,800. On the downside, immediate support lies at $2,700, with further protection at $2,680.

Market Movers:

  • Alphabet Climbs on Quantum Computing Breakthrough: Alphabet (GOOGL) surged 5.5% on Wednesday, building on a 5% gain from the previous session. The company announced a breakthrough in quantum computing with its new Willow quantum chip, which has bolstered optimism around its innovation leadership. 
  • Tesla Rallies Nearly 6% Amid Bullish Momentum: Tesla (TSLA) advanced 5.9% as investors responded positively to the broader tech rally. Year-to-date, Tesla’s stock has climbed nearly 71%, cementing its position as a key contributor to the Nasdaq’s historic rise. 
  • Nvidia Adds Over 3% as Tech Stocks Lead: Nvidia (NVDA) rose 3.2% on Wednesday, continuing its strong run as one of the market’s top performers in 2023. Year-to-date, the chipmaker’s stock is up 181%, driven by ongoing demand for AI.
  • Broadcom Rises Over 6% on AI Collaboration with Apple: Broadcom (AVGO) closed 6.1% higher, leading the S&P 500 and Nasdaq 100, following reports that the company is collaborating with Apple on a server chip designed for artificial intelligence.
  • Patterson Companies Soars Over 35% on Acquisition News: Patterson Companies (PDCO) skyrocketed 35.6% after Patient Square Capital announced its intention to acquire the company for $31.35 per share in a deal valued at $2.8 billion. 
  • Dave & Buster’s Plummets Over 20% on Weak Earnings and CEO Exit: Dave & Buster’s Entertainment (PLAY) nosedived 20.5% after reporting Q3 revenue of $453.0 million, falling short of the $463.6 million consensus estimate. 
  • Uber and Lyft Drop Following GM’s Robotaxi Funding Decision: Uber Technologies (UBER) and Lyft (LYFT) fell 5.2% and 4.3%, respectively, after General Motors announced it would halt funding for its Cruise robotaxi division. The decision raised investor concerns about the outlook for autonomous ride-hailing, a key growth area for both companies.

As markets closed on Wednesday, the Nasdaq’s historic climb above 20,000, driven by robust gains in tech giants like Alphabet, Tesla, and Nvidia, showcased the resilience of growth stocks amid steady inflation data. However, the Dow Jones lagged, weighed down by regulatory concerns impacting healthcare and consumer sectors. European markets rebounded as inflation data boosted sentiment, while Asia-Pacific markets delivered mixed performances amid key policy discussions in China. Treasury yields edged higher as markets prepared for next week’s Federal Reserve meeting, and oil prices surged on EU sanctions and Chinese demand recovery. As inflation remains steady at 2.7% and Federal Reserve action looms, markets remain poised for further shifts driven by economic data and policy developments.