WS #16428

Global equity markets are staging a broad-based risk-on rebound, driven by a second day of gains in the technology sector following Anthropic's recent rally. The Nasdaq has climbed more than 1%, outperforming the S&P 500 and Dow Jones, while small caps also participated in the rally. This momentum is heavily concentrated in semiconductors and AI infrastructure, with Nvidia, AMD, and Broadcom all posting gains. The market is pricing in a continuation of the AI capex cycle, supported by strong earnings from GE Vernova and positive sentiment around SK Hynix's sold-out AI memory backlog through 2029. However, the rally is not uniform. Energy and defense sectors are diverging from the broader market, with the energy sector (XLE) falling over 2% despite the ongoing escalation narrative in the Middle East. This suggests that while geopolitical tensions remain high, the immediate market impact is being absorbed or offset by other factors, such as the resolution of specific supply disruptions or a shift in investor focus toward domestic growth and AI. The closure of UAE beaches due to an oil spill in the Strait of Hormuz is a notable event, but its market impact appears contained, with oil prices gaining only modestly. Corporate earnings are providing a mixed but generally supportive backdrop. GE Vernova and GE HealthCare both beat expectations, reinforcing the strength in industrial and healthcare sectors. Conversely, Boeing faces headwinds with a Goldman Sachs price target cut, and Palantir is flagged by RBC as expensive with weakening contract momentum. The macro environment remains supportive for growth, with the ECB noting credit tightening but markets focusing on the potential for stable rate policy. The overall narrative is one of tech-led growth, with energy and traditional industrials lagging despite geopolitical risks.