Relief followed quickly. Futures shoot up. For months, investors have worried that tariffs would push prices sharply higher, forcing the Federal Reserve into an awkward choice between fighting inflation and supporting growth. November's data suggests that, so far, tariffs are nibbling rather than biting. Costs are rising, but not surging. The feared inflation shock has not yet arrived.

However, caution should be exercised. Tariff-driven inflation is the most awkward kind: it comes from politics, not demand, and from borders, not wages. It tends to move slowly at first, then all at once. That it has not yet shown up in force does not mean it will not.

Weekly jobless claims, also released this morning, were steady, neither flashing red nor green. Employment is cooling, but not collapsing. This matters because the Fed has made its priorities clear. With inflation easing and jobs still holding up, policymakers can afford to wait. Markets have taken that message and run with it, pricing in rate cuts next year and debating not whether policy will ease, but how much and how soon.

This comes after a strong forecast from Micron, a maker of memory chips that rarely features in conversations, helped steady nerves still frayed by weeks of selling. Its forecast was genuinely impressive. Demand for memory chips is booming, driven by data centres feeding the AI frenzy. Supply is tight. Prices are rising. Investors, desperate for proof that artificial intelligence can justify eye-watering valuations, took the hint gratefully.

Elsewhere, the market was less forgiving. Birkenstock stumbled. Lululemon jumped not because its products improved, but because an activist investor showed up with opinions and a résumé. Cannabis stocks soared on regulatory whispers.

Investor unease over the AI market party continues to sour sentiment. Oracle has become the sick man of artificial intelligence. The company is crystallising market fears and single-handedly triggered a reversal in sentiment on Wall Street yesterday. 

Until fairly recently, the market was routinely brushing aside the headwinds buffeting the artificial intelligence narrative. No longer. Over the past three months, the "AI bubble" has overtaken the economic shock induced by Donald Trump as the leading concern among major investors. Bank of America's latest global fund manager survey confirms that going long on the Magnificent Seven - Nvidia, Apple, Microsoft, Alphabet, Amazon, Meta, and Tesla - remains the most overcrowded trade in global finance. These two facts - growing anxiety over AI and continued fervour for Big Tech - seem contradictory, but they reflect the almost irrational appeal of the hyperscalers: tech behemoths seen as having the scale to dominate the future of AI, just as they did the early 21st century.

What has changed in recent weeks is that those who have already made substantial gains from AI have paused for breath and taken a closer look at sector fundamentals. What they have seen has not impressed. Investors are becoming more selective while maintaining exposure: they are no novices and understand that the supertanker still has momentum. But the tide is ebbing. The flow of capital has slowed. The corollary is a heightened vigilance towards red flags.

Yesterday's market action laid bare this shift in sentiment. The Financial Times reported that Blue Owl Capital had pulled out of a deal with Oracle to finance a US data centre. The group, led by Larry Ellison, had already wobbled days earlier following a Bloomberg report of potential delays in delivering data centres to OpenAI. Oracle's pivot to AI-focused cloud infrastructure is devouring colossal sums, and the market is questioning the economic rationale, plain and simple. The stock has lost 40% in three months.

OpenAI itself is also drawing caution from investors. Its latest implied valuation stands at $750 billion, but many in finance see it as a dangerously overleveraged house of cards into which the entire tech ecosystem has poured resources. Some argue that its main asset today is not its technology but its West Coast funding network, which has rendered it too big to fail. No player in the AI landscape, not even its rivals, has any real interest in ending the myth of a new techno-financial El Dorado. It's safer to double down, even if the business model looks shaky.

That hasn't stopped investors from blinking. The Blue Owl–Oracle news sent the market sharply lower, dragging the Nasdaq 100 down 1.9% by the close. Oracle shed a further 5.4%.The Nasdaq 100 is down more than 4% over the past week. It has pulled the S&P 500 lower too - down 1.1% yesterday, marking its fourth straight daily decline.

Thursday's session will also be dominated by corporate earnings season continues in earnest, with updates from Accenture, Nike and FedEx set to offer insights into consumer and business spending patterns.

In Asia-Pacific this morning, tech-heavy markets such as Japan, South Korea, Taiwan and, to a lesser extent, China are losing ground. India and Australia are managing to preserve modest gains. European indices are mostly bullish.

Today's economic highlights:

On today's agenda: In the United States, new jobless claims, the Philadelphia Fed business outlook, and the leading index will be released. Real export figures in Switzerland; business confidence in France; in the United Kingdom, the Bank of England's bank rate will be announced; in the eurozone, the ECB's deposit facility rate, refinancing rate, and marginal lending facility will be communicated. See the full calendar here.

  • Dollar index: 98,535
  • Gold: $4,335
  • Crude Oil (BRENT): $59.74 (WTI) $55.93
  • United States 10 years: 4.13%
  • BITCOIN: $87,390

In corporate news:

  • Standard General founder Soo Kim is in talks to buy or invest in Warner Bros. Discovery's television networks, according to the Financial Times.
  • Boeing and the SPEEA union have paused contract negotiations until January 5 for engineers from Spirit AeroSystems following its acquisition.
  • Robinhood has facilitated 11 billion event contracts in sports betting, while Coinbase is entering prediction markets via a partnership with Kalshi.
  • Eli Lilly is cutting the price of its diabetes and weight-loss drugs Mounjaro and Zepbound by over 20% in Canada, effective December 29.
  • Micron forecasts quarterly earnings nearly double Wall Street expectations and reports a 57% increase in Q1 sales, driven by tight AI-related memory chip demand, with shares up 12%.
  • The FTC is investigating Instacart's AI-powered Eversight pricing tool after reports of price discrepancies for identical grocery items.
  • Elliott Investment Management has taken a $1B+ stake in Lululemon, advocating for Jane Nielsen to become CEO.
  • Johnson & Johnson received FDA approval for Rybrevant Faspro, a subcutaneous lung cancer treatment for patients with EGFR-mutated non-small cell cancer.
  • Apple will allow alternative app stores on iPhones in Japan under new competition laws, reducing App Store fees and enabling outside payment options.
  • OpenAI is in talks to raise up to $100B at a $750B valuation, possibly eyeing a 2026 IPO, and has launched app submissions plus a directory for ChatGPT.
  • Delta Air Lines president Glen Hauenstein will retire in February but remain as an advisor through 2026.
  • Amazon, Walmart, and Alphabet are being pushed by SOC Investment Group to explain how Trump's immigration policies might impact their operations.
  • Ford canceled an EV battery deal with LG Energy Solution, causing LGES shares to drop over 7%.
  • Goldman Sachs has appointed Brian Cayne as head of its software banking practice.
  • Nvidia CEO Jensen Huang denied rumors of funding OpenAI amid recent market speculation.

Analyst Recommendations:

  • American Express Company: Autonomous Research upgrades to outperform from neutral and raises the target price from USD 385 to USD 433.
  • Americold Realty Trust, Inc.: Baird downgrades to neutral from outperform and reduces the target price from USD 16 to USD 13.
  • Edwards Lifesciences Corporation: JP Morgan upgrades to overweight from neutral with a price target raised from USD 90 to USD 100.
  • Enphase Energy, Inc.: Goldman Sachs upgrades to neutral from sell with a target price of USD 29.
  • Federal Realty Investment Trust: JP Morgan upgrades to overweight from neutral with a price target raised from USD 107 to USD 114.
  • Lennar Corporation: RBC Capital downgrades to underperform from sector perform and reduces the target price from USD 106 to USD 95.
  • Lineage, Inc.: Baird downgrades to neutral from outperform and reduces the target price from USD 45 to USD 39.
  • Merck & Co., Inc.: BMO Capital Markets upgrades to outperform from market perform and raises the target price from USD 82 to USD 130.
  • Public Storage: JP Morgan downgrades to neutral from overweight and reduces the target price from USD 316 to USD 301.
  • Regency Centers Corporation: JP Morgan downgrades to neutral from overweight and reduces the target price from USD 81 to USD 76.
  • Rivian Automotive, Inc.: Baird upgrades to outperform from neutral and raises the target price from USD 14 to USD 25.
  • Sealed Air Corporation: Baird downgrades to neutral from outperform and reduces the target price from USD 45 to USD 42.15.
  • Albemarle Corporation: RBC Capital maintains its outperform recommendation and raises the target price from USD 120 to USD 159.
  • Coinbase Global, Inc.: Cantor Fitzgerald maintains its overweight recommendation and reduces the target price from USD 459 to USD 320.
  • Elf Beauty: JP Morgan maintains its overweight recommendation and reduces the target price from USD 137 to USD 103.
  • Fmc Corporation: Fermium Research LLC maintains its hold recommendation and reduces the target price from USD 22 to USD 16.
  • Insmed Incorporated: Wolfe Research maintains its outperform recommendation and reduces the target price from USD 229 to USD 167.
  • Micron Technology, Inc.: Piper Sandler & Co maintains its overweight recommendation and raises the target price from USD 200 to USD 275.
  • Servicenow, Inc.: HSBC maintains its buy recommendation and reduces the target price from USD 1332 to USD 266.40.