Markets Rally on Rate Cut Hopes; Google Challenges OpenAI, BlackRock Doubles Down on Bitcoin
Market Snapshot
- 📈 S&P 500: 6,854 (+0.01%)
- 📈 Dow Jones Industrial Average: 47,883 (+0.86%)
- 📉 NASDAQ 100: 25,637 (-0.08%)
- 📈 US 10-Year Treasury: 4.08% (+0.44%)
- 📉 Gold: $4,199 (-0.09%)
- 📉 Bitcoin: $92,924 (-0.59%)
- 📉 Ethereum: $3,187 (-0.10%)
- 📈 FTSE 100 (U.K.): £9,713 (+0.05%)
US Economic Outlook
Weaker-than-expected economic data has intensified investor conviction for an imminent interest rate cut by the Federal Reserve. A report from payroll firm ADP revealed an unexpected loss of 32,000 private sector jobs in November, contrasting sharply with economists' forecast of a 40,000 gain. The decline, the most significant in over two years, was driven by small businesses with fewer than 50 employees, which cut 120,000 jobs. A separate report showed that layoff announcements in 2025 have reached their highest total since 2020.
This development has cemented a "bad news is good news" sentiment among traders, who interpret signs of a cooling labour market as a clear signal for the Fed to ease monetary policy. Market pricing now indicates a roughly 89% probability of a 25-basis-point rate cut at the central bank's final meeting of the year. The upcoming official jobless claims report is seen as a critical data point that will either validate or challenge this outlook.
Concerns Over Potential New Fed Chair
Adding a layer of complexity to the Fed's future, concerns are growing within the bond market over Kevin Hassett, who is seen as Donald Trump’s likely nominee for Federal Reserve Chair in May 2026. Wall Street executives have reportedly cautioned the U.S. Treasury about the potential appointment, fearing Hassett might lack the credibility to build consensus and could pursue aggressive, politically motivated rate cuts even if inflation remains above the Fed's 2% target.
While the Fed controls short-term rates, long-term yields are determined by the market. If bond investors believe premature rate cuts will reignite inflation, they may demand higher yields on long-term Treasuries to protect their returns. This could lead to a spike in the 10-year Treasury yield, which serves as a benchmark for mortgage and consumer loan rates, potentially slowing the economy—the opposite of a rate cut's intended effect.
The AI Arms Race and Its Ripple Effects
Competition in the artificial intelligence sector has intensified, with reports that Google's Gemini 3 model has surpassed OpenAI's latest GPT-5.1 on key reasoning benchmarks. The development prompted an internal "Code Red" at OpenAI, with the company reportedly freezing other projects to focus on improving its core ChatGPT experience. This challenges the idea of an untouchable leader in the AI space and highlights the immense costs of development, with tech debt for major AI players said to be ten times higher than last year.
Despite the fierce competition, major financial firms including BlackRock and Bank of America have stated that the AI boom is not a speculative mania. They argue the current cycle is driven by tangible corporate investment, solid earnings, and real productivity gains.
The AI boom is causing significant ripple effects. The demand for electricity from US data centres is projected to jump by 36% through 2035, with AI workloads expected to command nearly 40% of total data centre capacity within a decade. This energy surge is straining power grids and creating economic knock-on effects, such as AI data centres outbidding crypto miners for electricity, which has driven the cost to mine a single Bitcoin above $100,000.
Corporate Highlights
Technology and Software
Salesforce (CRM) posted third-quarter results that surpassed analyst expectations, driven by strong performance from its artificial intelligence platforms. The company raised its full-year guidance, noting a 60% quarterly surge in paid deals for its 'Agentforce' AI platform. In contrast, PayPal shares declined after its chief financial and operating officer forecast slowing growth in its key branded checkout service.
South Korean digital comics platform Webtoon ($WBTN) is partnering with Disney and Warner Bros. Animation to expand its presence in the US market by adapting nearly 100 Disney properties and co-developing new projects.
Retail and Luxury
American Eagle (AEO) shares soared over 15% after beating sales and earnings estimates and raising its guidance, crediting successful celebrity advertising campaigns. Macy's ($M) also posted its strongest comparable sales growth in over three years and raised its full-year guidance, though it remains cautious about holiday spending.
In the luxury sector, Italian brand Prada has agreed to acquire fellow Italian designer house Versace from its American owner, Capri Holdings, for approximately $1.5 billion.
Other Developments
- Archer ($ACHR): The eVTOL startup announced a new air taxi network in South Florida and acquired Hawthorne Airport in Los Angeles for $126 million to serve as an operational hub.
- Blue Owl Capital Inc.: Amid a sell-off in private credit BDCs, company executives purchased $130 million of shares in two BDCs they manage to signal confidence.
- Delta Air Lines: The recent government shutdown had an approximate $200 million negative impact on its pre-tax profit.
- General Motors: The automaker appointed Sterling Anderson as its new product chief. The company also stands to benefit from the Trump administration's decision to cut tariffs on South Korea, a key source of its imported vehicles.
Digital Assets and Cryptocurrency
Institutional Adoption and New Products
BlackRock CEO Larry Fink has reversed his stance on Bitcoin, stating he was "fundamentally wrong" in his previous criticisms. Influenced by client demand, he now describes the digital currency as a hedge against geopolitical instability and rising US debt. His firm's Bitcoin ETF (IBIT) has accumulated nearly $70 billion in assets, holding over 776,000 BTC.
Following a streamlined SEC approval process, new alternative cryptocurrency ETFs have launched with varied success. ETFs for XRP and Solana have seen strong demand, while those for Chainlink and Dogecoin have seen more muted interest, suggesting Wall Street is prioritising cryptocurrencies with clear infrastructure utility. Franklin Templeton has also launched a new Solana ETF (SOEZ) on the NYSE Arca.
Regulatory and Technical Developments
The UK's Property Act 2025 has received Royal Assent, officially establishing crypto-assets as a third category of personal property. The legal reform provides clearer pathways for proving ownership and recovering stolen assets.
Meanwhile, Ethereum's 17th major upgrade, Fusaka, has gone live. The upgrade introduces PeerDAS, a scaling solution expected to make layer-2 rollups cheaper and more efficient, and marks the start of a new twice-a-year hard-fork schedule.
Global Policy and Market Developments
The Bank of England's Financial Policy Committee has lowered the Tier 1 capital benchmark for UK banks from 14% to 13%. This reduction, the first of its kind since post-2008 reforms, aims to stimulate the economy by encouraging lending and potentially freeing up capital for dividends or share buybacks.
In Japan, the central bank is facing a policy dilemma as yields on its 10-year government bonds have surged to 1.917%, their highest level since 2007. The Bank of Japan must now decide whether to raise rates to combat inflation or hold them and risk further price increases.
In the US, President Donald Trump has proposed a major rollback of Biden-era fuel-economy standards. The move is seen as a blow to the EV sector and would eliminate a credit-trading system that has been a significant source of revenue for Tesla.
Nvidia CEO Jensen Huang met with President Trump and lawmakers to discuss potential restrictions on exporting advanced AI chips to nations including China. Huang criticised pending legislation, known as the GAIN AI Act, as being detrimental to the US and argued against state-by-state AI regulation.
Global Briefs
- Chinese aerospace company LandScape's attempt to land a reusable rocket was unsuccessful.
- Russian President Vladimir Putin is in India for the 23rd India-Russia annual summit.
- Singapore-based Horizon Quantum has become the first private firm to operate a quantum computer for commercial use in the city-state.
US Real Estate Update
The US apartment rental market is experiencing a significant shift, with rents declining by over 5% since 2022 as vacancy rates reach all-time highs. A recent construction boom has outpaced demand, with projections suggesting home prices will decline in 22 of the largest 100 US cities in 2026. Real estate firm Redfin predicts a slow recovery for the broader housing market, with mortgage rates expected to decrease gradually.
NOTE: This content is for informational and educational purposes only and does not constitute financial advice. Always do your own research. Not financial advice (NFA).