Wrap: Mixed Action as Rates Rip and Small Caps Dip

The U.S. equity markets delivered a mixed performance, closing near flat amid rising Treasury yields and cautious sentiment following recent inflation data. The S&P 500 finished unchanged, the Nasdaq Composite edged up 0.1 percent, and the Dow Jones Industrial Average dipped 0.2 percent, while the Russell 2000 underperformed with a 0.6 percent decline.

Broadcom's strong earnings and upbeat guidance were a highlight, sparking a significant 24.4 percent surge in its stock price and lifting sentiment in the semiconductor sector. This optimism helped the PHLX Semiconductor Index gain 3.4 percent, although some major players like NVIDIA erased earlier gains to close with declines.

Treasury yields continued their upward march, reflecting concerns over persistent inflation and its implications for monetary policy. The 10-year yield rose eight basis points to 4.40 percent, and the 2-year yield climbed five basis points to 4.24 percent. For the week, the 10-year yield gained 25 basis points, while the 2-year yield was up 14 basis points, ahead of the Federal Reserve’s expected rate cut next week.

In commodities, WTI crude oil gained 1.7 percent to settle at $71.29 per barrel after the International Energy Agency forecast accelerated global oil demand growth for 2025. However, oil prices have faced resistance at the $70 level since September. Natural gas futures declined, while precious metals, including gold and silver, faced losses amid rising rates.

Economic data released today painted a subdued picture. Export prices were unchanged month-over-month, while import prices edged up 0.1 percent. Excluding oil, import prices were flat. The data did little to sway market sentiment, with attention shifting to upcoming indicators such as the Empire State Manufacturing Survey and flash PMIs for December.

Globally, European markets ended slightly lower, with the DAX, FTSE, and CAC posting marginal declines. Asian markets also struggled, with the Nikkei down 1 percent, and sharper losses in the Hang Seng and Shanghai Composite.

Year-to-date, the Nasdaq Composite remains the standout performer with a 32.7 percent gain, followed by the S&P 500 at 26.9 percent. Small-cap and mid-cap indices have also advanced but have shown vulnerability to rate movements in recent weeks.

As the market eyes next week’s Federal Reserve meeting and additional macroeconomic data, volatility is expected to persist, with participants balancing earnings optimism against inflation concerns and monetary policy uncertainty.