Tech stocks lead amid stagflation concerns
The NASDAQ Composite reached a historic milestone above 20,000 while economic data fuels stagflation concerns and rate cut expectations.
Tech leads while stagflation concerns mount
Last week, the NASDAQ 100 achieved a significant milestone, breaking above 20,000 for the first time, although most other US equity indices ended lower. The Dow Jones experienced seven consecutive days of declining prices, highlighting the disconnect between tech stocks and the overall market. With only 31% of stocks in the S&P 500 outperforming the index—the lowest level since the 1998 to 1999 Dot-Com bubble—market breadth is clearly under par and may indicate a top forming soon.
Growth stocks outperformed value for the third consecutive week, driven by strong gains in major tech names. Tesla surged 12% while Alphabet gained 8.4%. The Russell 2000 continued to lag the broader market for a second week. These divergent performances highlight ongoing market rotation into large-cap technology stocks.
Economic indicators and monetary policy
Stagflation concerns intensified as both the consumer price index (CPI) and producer price index (PPI) accelerated year-over-year (YoY). Initial jobless claims unexpectedly jumped to 242,000, a two-month high. Markets now price a 97.1% probability of a Federal Reserve (Fed) rate cut, up from 86% last week. Both the European Central Bank (ECB) and the Swiss National Bank (SNB) implemented rate cuts of 25 and 50 basis points (bp), respectively.
Currency and commodity markets
The US dollar extended its winning streak to six days, testing post-election highs. Gold maintained its weekly gains despite US dollar strength. Oil prices rallied as geopolitical concerns overshadowed supply issues, with WTI approaching pre-election levels above $71. Bitcoin found support at $100,000, rising to $106,500.
Week ahead outlook
Flash purchasing managers indexes (PMIs) on Monday will provide insight into global economic conditions. Central bank decisions dominate mid-week with the US Fed, Bank of Japan (BoJ), and the Bank of England (BoE) all meeting. UK economic data takes centre stage following recent gross domestic product (GDP) declines. The corporate calendar thins ahead of the holiday season, though earnings season will kick in again in mid-January.
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