increases in Europe; Wall Street contracts are trading slightly higher

15:01

It looks like the first trading day on Wall Street will start well – the leading indices are now up – NASDAQ by 0.5% and S&P 500 by 0.4%.

According to Bloomberg, analysts at Bank of America and Morgan Stanley recommend that clients direct investments away from the lantern, or to less popular areas of the market, and prefer sectors such as health, industry and energy towards 2026.

“I’m hearing more and more about investors taking money out of the ‘Fabulous Seven’ investment and moving it to other areas of the market,” Craig Johnson, a technical analyst at Piper Sandler, told Bloomberg. “They will no longer only chase after Microsoft and Amazon – the investment is expanding to the rest of the market.”

Goldman Sachs also believes that market participation will expand. “We expect that macroeconomic headwinds, in the form of an acceleration in economic growth and the fading of the tariffs’ impact on profit margins, will support an acceleration in the rate of earnings growth of the remaining 493 stocks,” wrote Ben Snyder of the bank.

“There is a headwind in the market heading into next year,” Victoria Fernandez, chief market strategist at Crossmark Global Investments, told Yahoo Finance. However, she warns against going “all-in” on just one sector. “The question is who will really be an outstanding implementer of AI, not just who manufactures all this or builds the server farms, but who will use AI effectively,” she said. Beyond technology, Fernandez recommends focusing on industries that show positive technical trends or those that are beginning to stabilize in relation to the market. According to her, specific growth opportunities are beginning to appear in the areas of transportation, residential construction companies, the health andthe energy .

13:38

Moderate weakness in the employment data in the US that will be published this week may actually support gains in the stock markets, as it will increase the probability of continued interest rate cuts by the Fed, according to Michael Wilson, a strategist at Morgan Stanley.

Investors are looking for clues in the data as to whether the central bank is close to ending the cycle of monetary easing after three consecutive interest rate cuts, or whether it will be required to act more aggressively. According to Wilson, the markets have returned to an environment where “good is bad and bad is good”: a strong labor market is indeed positive for the economy, but reduces the chance of interest rate cuts towards 2026.

This week, macro data is expected to be published that will fill the vacuum created during the government shutdown, led by the delayed employment data for the month of November, which are expected to indicate an addition of approximately 50,000 jobs and an unemployment rate of 4.5% – a picture of a weak but not rapidly deteriorating labor market. Later this week, inflation data will also be published, which will continue to influence interest rate expectations.

13:00

The company that makes the Roomba robotic vacuum cleaners declared bankruptcy on Sunday, but stressed that the devices will continue to operate as a series while the company undergoes a restructuring.

iRobot which is located in Massachusetts, has been struggling financially for years, among other things due to foreign competition that has flooded the market with cheaper autonomous vacuum cleaners, and according to some consumers are also more technologically advanced. When a planned sale to Amazon fell through in 2024 due to regulatory concerns, the company’s stock plunged 82% in early trading.

11:38

Bank of America published several forecasts about the European market yesterday. The bank maintains a negative bias, and expects an 8% drop in the Stoxx 600 index until the second quarter of 2026, to a level of 530 points, followed by a recovery to a level of 565 points at the end of the year. “The forecast is motivated by the fact that the financial risk premiums are particularly tight, close to a 20-year low and may be challenged by several factors: a weakening of the American labor market, a decline in the momentum of the global PMI indices, a risk of an “air pocket” in the pricing of artificial intelligence (AI) and increasing credit pressures.”

Accordingly, the bank recommends an underweight for Europe against global stocks and maintaining an underweight in cyclical stocks against defensive stocks. “Our assessment predicts negative earnings per share growth of 3% in the Stoxx 600 index for 2026.”

The bank also recommends an overweight position on Switzerland and an underweight position on the peripheral countries (Italy and Spain).

The overweight recommendation for Switzerland is based on the expectation that a slowdown in global growth will lead to a widening of risk premiums, which will result in a preference for defensive stocks. Switzerland’s high concentration in defensive sectors such as pharmaceuticals (40% of the weight) is key to this forecast. The underweight recommendation for Italy and Spain stems from their strong connection to the banking sector, which is expected to fade. As risk premiums expand and bond yields fall. Italy and Spain have a high exposure to banks, which make up almost half of their market value.

Germany, France and the UK are maintained in the market weight rating. Germany’s fiscal push is expected to take time, France faces ongoing political risk, and Britain’s defensive advantage is offset by the currency effect caused by the strengthening pound.

10:30

Trading in Europe opened with a green trend – the Frankfurt, Paris and London stock exchanges are now up by 0.4%.

08:15

In Asia, the morning declines – the Tokyo Stock Exchange falls by 1.4%, Shanghai by 0.1%, Hong Kong by 0.7%, South Korea by 1.5% and in India, the Nifty index by 0.5%.

In Japan, the tanka survey data for the fourth quarter were published. The business optimism index of major manufacturers rose to the highest level in four years. The Tanka survey, conducted by the Bank of Japan, measures business sentiment among companies in the world’s fourth largest economy.

A series of important economic data from China was published this morning. Retail sales rose 1.3% last month compared to a year earlier, well below the forecast for a 2.8% increase, and slowing compared to a 2.9% increase the previous month. Industrial production rose 4.8% in November compared to a year earlier, compared to 4.9% in the previous month and below expectations for a 5% increase.

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Futures in the US meanwhile point to slight gains at the start of the trading week.

Last Friday, Wall Street concluded a negative week – the S&P 500 index fell by 0.6%, the Nasdaq by 1.6%, while the Dow Jones rose by 1.0%.

Although the markets reacted positively to the Fed’s interest rate decision, and until Thursday it seemed that Wall Street was on its way to a positive week, Friday brought with it relatively sharp declines in the technology sector – which erased the gains recorded earlier.

The chip company Broadcom disappointed investors with a weak-than-expected sales forecast, reigniting concerns over the pricing of artificial intelligence (AI) companies, leading to declines in the sector. Despite this, Bank of America is optimistic about the company and the stock. Bank of America reaffirmed their buy recommendation on the stock, and even raised its target price from $460 to $500, which reflects an upside of nearly 40% compared to its current price.

Meanwhile, the first half of December is characterized by a negative trend, but let’s recall that the second half is historically characterized by positive seasonality, under the influence of the Santa Claus Rally.

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In the coming week, a flurry of data is expected to affect the market – investors will receive delayed reports on employment levels, retail sales and inflation, alongside data published as usual on sales of existing homes and consumer sentiment. Things to be heard from Fed governors Steven Mirren and Christopher Waller may also affect the markets, as they await signals about the central bank’s next move on interest rates.

Investors will also receive another snapshot of the artificial intelligence trade this week, with the publication of reports by the chip manufacturer Micron Technology . reports of Nike , FedEx , Carmax , General Mills andCarnival will provide insights into the state of the American consumer.

The Federal Reserve linked the interest rate cut it made last week to concerns about a growing weakness in the labor market. That picture will become somewhat clearer when the Bureau of Labor Statistics releases employment data for November on Tuesday. On the same day, retail sales data for October and business inventory data for September are also expected to be published, which can provide a more in-depth look at consumer demand.

On Thursday, the release of the Consumer Price Index (CPI) for November will provide insight into the impact of tariffs on inflation, as the Federal Reserve closely monitors price pressures ahead of 2026.

In the American bond market, a mixed movement was recorded along the government curve, with a decrease in yields in the short part and an increase in the long part, against the background of statements by senior Fed officials who expressed fear of further interest rate reductions.

The best predictors are that the Fed’s activity is expected to cause an increase in long-term yields and a steepening of the yield curve. The company’s chief economist, Zebezinski from Meitav wrote that “The Fed’s decision to return to monthly bond purchases of up to one year in the amount of $40 billion is not QE (quantitative expansion), the investment house estimates that after a few months the Fed will simply recycle the redemptions of the same bonds it buys today. “The net purchases will not increase and the size of the portfolio should remain constant. In fact, the Fed is in the process of extending the maturity of the government portfolio that is traded on the free market. This policy constitutes a restrictive monetary activity.”

In the global foreign exchange market, the interest rate differentials in the world are causing unrest in the currency market, and in particular Major investors say that carry trades in emerging markets are expected to continue to deliver returns in 2026 as well, after an extraordinary year for the popular strategy.A Bloomberg index of carry transactions yielded a return of about 17% this year, the highest annual profit since 2009.

A series of asset managers and banks – from Vanguard and Invesco to Goldman Sachs and Bank of America – estimate that the gap between interest rates in developed countries and those in emerging markets will remain next year as well. This, against the background of expectations that the Federal Reserve and most central banks in the rich countries will maintain low interest rates. In theory, such an environment should continue to put pressure on the dollar, which has already lost more than 7% of its value in 2025.

“Carries still offer value, especially in high-yielding currencies such as Brazil, Colombia and some African markets,” said Gorky Urquiata, managing partner of emerging market debt at Neuberger Berman. However, according to him, after this year’s performance, “opportunities become more selective.”

“In an environment of a weaker US dollar, carry deals are expected to continue to be a source of yield,” said Wim Van Andenhoek, managing partner of emerging markets debt at Invesco.

Vandenhoek is optimistic about the Brazilian real, the Turkish lira and the South African rand, among others. Brian Dunn, head of foreign exchange options trading in the Americas at Goldman Sachs, emphasized the attractiveness of short positions on the dollar against the real, the rand and the Mexican peso.

Currency strategists at Bank of America, led by Adarsh ​​Sinha, pointed to a series of factors, including the mid-term elections in the US and the differences in interest policy between central banks, which may increase the volatility of currency rates in the coming months.

Bitcoin traded stable this morning but still slightly below 90 thousand dollars, ethereum traded slightly higher this morning, 3,120 dollars.

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On Wall Street they call it “rotation” – Wall Street strategists advise their clients to prepare for changes in 2026, to reduce exposure to the technology giants.

The analysts at Bank of America and Morgan Stanley recommend that clients direct investments to less popular areas of the market, and to prefer sectors such as health, industry and energy towards 2026. For years, investment in big tech was considered almost the default, thanks to strong balance sheets and high profitability, but now skepticism is increasing regarding the ability of the technology sector, which has jumped by 300% since the beginning of the bull market three years ago, to justify the high multiples over time and the huge investments in artificial intelligence. Recent reports from key players in the field of AI, such as Oracle and Broadcom, which did not meet the high expectations, strengthened these concerns this week, according to Bloomberg.

“I’m hearing more and more about investors taking money out of the ‘Fabulous Seven’ investment and moving it into other areas of the market,” said Craig Johnson, Piper Sandler’s chief technical officer. “They will no longer only chase after Microsoft and Amazon – the investment is expanding to the rest of the market.”

Bloomberg recognizes signs that tight pricing is starting to cool investors’ interest in the tech giants. Capital flows are moving towards underpriced cyclical stocks, smaller companies and sectors sensitive to the economic situation, as traders prepare to benefit from an expected acceleration in economic growth in the coming year.

Since US stocks hit their short-term low on November 20, the Russell 2000 index of small companies has risen by about 11%, compared to an increase of about half that in the Bloomberg index of the “Magnificent Seven”. At the same time, the equal-weighted S&P 500 index, which does not differentiate between a giant like Microsoft and small companies in the index, outperforms the weighted S&P 500 index.

This is also the position of the Morgan Stanley research team, which emphasized the expansion of gains in its forecast for the coming year, favoring the equal weight version of the S&P 500 over the standard index, estimating that in 2026 there will be a “major sectoral rotation” towards sectors that lagged behind this year, such as finance and cyclical consumption.

“We think the tech giant can still perform reasonably well, but will lag behind new areas of the market — particularly the consumer durables sector, especially products, as well as small and mid-cap stocks,” said Michael Wilson, chief equity strategist and US chief investment officer at Morgan Stanley.

Wilson, who correctly predicted the recovery from April’s declines, believes the market expansion is supported by the fact that the economy is now in an “early phase of the cycle,” having bottomed out in April — a situation that typically favors laggards such as financial stocks and cyclical industrials.

Bank of America’s Michael Hartnett said Friday that markets are pricing in a “let the economy heat up” strategy in 2026, with a shift from investing in Wall Street giants to mid-cap, small-cap and micro-cap stocks.

Last week, veteran strategist Ed Yardeni, from Yardeni Research, recommended reducing exposure to the technology giants compared to the rest of the S&P 500 stocks, anticipating a change in the rate of earnings growth.

The fundamental data also supports this: the earnings growth of the other 493 companies in the index (S&P 493) is expected to accelerate to 9% in 2026, compared to 7% this year, while the contribution of the earnings of the seven largest companies in the S&P 500 index is expected to decrease to 46% from 50%, according to Goldman Sachs data.

However, according to Michael Bailey, director of research at FBB Capital Partners, according to Bloomberg, investors will want to see evidence that the S&P 493 companies are meeting or beating earnings forecasts before turning more bullish. “If the employment and inflation data remain unchanged and the Federal Reserve continues to ease policy, we could see a positive move in the 493 stocks next year,” he added.