US Markets Hit New Highs as Investors Rotate from Tech; Silver Surges, Cannabis Stocks Rally, and Disney Bets on AI
Market Snapshot
- 📈 S&P 500: 6,901.00 (+0.21%)
- 📈 Dow Jones Industrial Average: 48,704.00 (+1.34%)
- 📉 NASDAQ Composite: 23,594.00 (-0.25%)
- 📉 US 10-Year Treasury: 4.15% (-0.02%)
- 📈 Gold: $4,276.00 (+1.90%)
- 📈 Bitcoin: $92,961.00 (+1.01%)
- 📉 Ethereum: $3,238.00 (-2.13%)
- 📉 FTSE 100 (U.K.): £9,720.00 (-0.04%)
US Markets Reach New Highs Amid Sector Rotation
The S&P 500 and Dow Jones Industrial Average closed at fresh records, buoyed by the U.S. Federal Reserve’s recent quarter-point interest rate cut. The broad-based strength, which also saw the Russell 2000 index reach a new high, occurred even as the tech-heavy Nasdaq Composite underperformed.
This divergence suggests investors are rotating out of technology stocks and into other sectors like financial institutions and insurance providers. The S&P 500 financials sector, for example, closed at a new record. The market's ability to reach new highs without heavy reliance on AI-related stocks is being viewed by some as a sign of healthy diversification and increased market breadth.
Corporate and Tech Sector Highlights
AI Stocks Face Scrutiny Over Costs
The market's patience with the high cost of artificial intelligence development appears to be wearing thin. Oracle (ORCL) shares plummeted nearly 11% after it announced plans to increase AI-related spending to around $50 billion next year, well above estimates, while reporting disappointing revenue. Similarly, Broadcom (AVGO) shares fell approximately 6% despite record Q4 revenue, as management warned of compressed gross margins due to a shift towards lower-margin custom AI chips and declined to provide full-year 2026 AI guidance.
Investors are becoming more selective, questioning the path to profitability for companies burning through cash to build AI infrastructure. This contrasts with firms like Cisco (CSCO), which recently reclaimed its dot-com era peak by profiting from selling the underlying infrastructure for AI. Meanwhile, Meta (META) is reportedly shifting away from open-source models towards closed systems it can monetise more directly.
Disney's Billion-Dollar Pivot to AI
In a major strategic shift, Disney (DIS) has invested $1 billion in OpenAI, forging a three-year licensing deal. The agreement allows users of OpenAI's Sora video generator to create content using over 200 of Disney's famous characters from its Marvel, Pixar, and Star Wars catalogues, though limits will be in place. The deal signals a move from litigation against AI firms to collaboration. As part of the partnership, Disney will also become an enterprise client, using OpenAI's tools to develop new products and deploying ChatGPT to its employees. Crucially, the agreement excludes the use of actors' likenesses and voices, a key point of contention in previous industry disputes.
Rivian's Autonomous Vehicle Strategy Met with Scepticism
Electric vehicle maker Rivian (RIVN) outlined its strategy for developing autonomous vehicles, which will rely on Lidar technology—a contrast to Tesla's camera-based system. The goal is to offer a hands-free autonomous driving subscription service. However, investors reacted negatively, with shares falling over 6%. The response may reflect concerns over the high cost of developing self-driving technology, a field from which other major automakers have scaled back their ambitions.
Other Corporate Movers
Lululemon (LULU) announced that CEO Calvin McDonald will step down at the end of January. Despite the company underperforming for over a year, it reported better-than-expected third-quarter earnings, and its shares rose more than 9% on the news. Elsewhere, Costco (COST) surpassed Wall Street’s forecasts for its first quarter, boosted by strong e-commerce growth and a record-breaking Black Friday for its digital business.
Commodities and Global Economy
Silver and Copper Prices Soar on Supply Constraints
Commodity markets are experiencing significant price surges. Silver has climbed past $64 per ounce, a 125% annual increase, driven by demand as both an inflation hedge and a critical component in AI hardware. The rally is amplified by a physical supply shortage, with Shanghai inventories at decade lows.
Similarly, European mining stocks have rallied, fuelled by forecasts of a global copper shortage. The International Copper Study Group predicts a 150,000-ton deficit for the coming year, as demand from electric vehicle manufacturing and AI data centres outstrips supply, which is being tightened by production cuts. UBS has forecast that copper could reach $13,000 per ton by 2026.
Geopolitical and Economic Pressures
In a move to increase pressure on the Maduro regime, US commandos seized a supertanker in international waters carrying 1 million barrels of Venezuelan crude oil. The vessel was identified as part of a clandestine "shadow fleet" used to circumvent sanctions, and the White House has indicated a willingness to repeat such actions. This introduces a physical risk premium for vessels transporting sanctioned oil.
On the domestic front, the U.S. trade deficit has fallen to its lowest level in five years, reflecting a rise in exports and a decrease in imports. In the food sector, steakhouses are facing significant pressure as beef prices skyrocket due to US cattle inventories being at their lowest levels since the 1950s. This has forced restaurants to either raise menu prices or absorb the higher costs, squeezing holiday-season margins.
Regulatory and Political Landscape
Cannabis Stocks Rally on Rescheduling Hopes
Cannabis stocks, including Tilray (TLRY), experienced a significant rally following reports that the Trump administration is preparing to reclassify marijuana from a Schedule I to a Schedule III substance. This change would be transformative for the industry, as it would remove the IRS Code 280E restriction and allow companies to deduct standard business expenses, potentially making many profitable overnight.
SEC Greenlights Blockchain Pilot for US Stocks
The Securities and Exchange Commission (SEC) has approved a three-year pilot programme for the Depository Trust and Clearing Corporation (DTCC) to tokenize U.S. securities. The initiative, starting in the second half of 2026, will test the creation of digital versions of stocks and bonds on a blockchain, exploring the potential for instantaneous, or "atomic," trade settlement.
Trump Administration's Regulatory Overhaul
The Trump administration is moving to overhaul the Financial Stability Oversight Council (FSOC), the body of regulators formed after the 2008-09 financial crisis. The new approach will prioritise economic growth, which critics argue could loosen vital oversight of the financial system. Separately, President Trump signed an executive order establishing a single national regulation standard for AI, which will curb the regulatory power of individual states.
Housing Market and Federal Reserve Outlook
The Federal Reserve implemented a 25-basis-point interest rate cut, but the move was accompanied by cautious guidance, with only one more cut pencilled in for 2026. This "hawkish cut" suggests the central bank is not embarking on a significant dovish pivot, as it remains focused on inflation data.
Fed Chair Jerome Powell acknowledged that housing "is going to be a problem," noting the Fed cannot solve the core issue of a supply shortage. Despite the rate cut, the 30-year mortgage rate remains high at around 6.26%. Powell expressed concern that further rate cuts could risk pushing home prices even higher. This challenging environment is reflected in market data showing that house-flipping activity has plummeted 32.4% from its 2022 peak, as high borrowing costs and acquisition prices squeeze investor margins.
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).