(Bloomberg) — US stocks are poised to close out a choppy week on a steady note as traders gear up for the year-end stretch that’s typically supportive of equities. Bond yields advanced following the Bank of Japan’s interest-rate hike.
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S&P 500 futures rose 0.1% after the benchmark posted its biggest gain of the month on Thursday. Nasdaq 100 contracts climbed 0.3%.
Oracle Corp., long a focal point of concerns that the artificial-intelligence rally had become overheated, rose more than 4% in premarket trading. The company is leading a group of investors that signed binding agreements to bring TikTok’s US operations under an American-controlled venture.
Options expiries on Friday represent the last major event before markets enter the holiday period, when low volumes, seasonal flows and limited news tend to bolster stocks. Before that, however, a record $7.1 trillion in notional open interest will roll off across the US options market.
Stocks have swung in recent weeks as optimism over the outlook for Federal Reserve interest-rate cuts and a robust economy have clashed with fears that the AI-driven rally is vulnerable to a correction. Some strategists warn that while the broader backdrop remains favorable, volatility may persist.
“While the conditions for a Santa rally are broadly in place, markets may need a fresh catalyst,” said Francisco Simón, European head of strategy at Santander Asset Management. “In that context, a renewed positive trigger — potentially linked to encouraging news in the AI space — could help reignite momentum.”
Still, investors’ optimism is showing through in near-record flows into American stocks. US equities saw inflows of almost $78 billion in the week ended Dec. 17, Bank of America Corp. said in a note citing data from EPFR Global.
Tech contributed to inflows for the first time in three weeks, suggesting that fears over potentially overblown AI stock valuations have diminished. BofA strategist Michael Hartnett said equity bulls are positioned for the economy to run “hot” next year on expectations of lower rates, tariffs and taxes.
Meanwhile, bond yields rose almost everywhere after the BOJ Governor Kazuo Ueda’s policy board lifted its key rate to the highest level in more than three decades and signaled that further hikes could be in the offing. Japan’s 10-year yield climbed to the highest level since 1999, with the BOJ making clear that the tightening cycle will continue if the economy performs as expected.
US Treasury 10-year yields rose three basis points to 4.15%. Germany’s 30-year rate extended an advance and traded at the highest level since 2011.
Despite the rise in yields, the yen led losses among major currencies against a stronger dollar, as traders were left disappointed by the lack of clear guidance on when BOJ officials might tighten policy again.
FAQs:
5 FAQs
1. Why did stocks rise even when bond yields increased?
Investors are confident about economic growth, so stocks gained despite higher yields.
2. What did the Bank of Japan announce?
The BOJ raised interest rates, marking a shift away from long-standing easy money policies.
3. How does a BOJ rate hike affect global markets?
It can push global bond yields higher and impact currencies, especially the yen and dollar.
4. Which sectors benefited the most?
Banking and financial stocks gained as higher rates improve profit margins.
5. What should investors watch next?
Inflation data, central bank statements, and global economic growth signals.
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