Investors have been fixated on the prospect of a Federal Reserve rate-cut next week but the stock market may be focusing on the wrong central bank.

The Bank of Japan has hinted at a rare rate-hike later this month, which would take the festive shine off December trading.

It was a rough start to the month on Monday, with stocks tumbling and Bitcoin feeling deep pain. Some on Wall Street blamed comments by Bank of Japan governor Kazuo Ueda, who suggested an interest-rate hike was coming on December 19.

A BOJ rate-hike is uncommon, as is the impact from another central bank on U.S. markets. The country had negative interest rates for almost a decade before finally bringing official borrowing costs to 0.5% in January.

Ultra-low rates in Japan have encouraged the country's heavyweight investors to look for returns globally with a popular "carry trade," where they borrow yen at low rates to invest in higher-yielding U.S. Treasuries.

Higher Japanese rates threaten to lure investors back home, seeing them sell Treasuries and push U.S. bond yields higher, as happened on Monday.

This comes at a bad time for American investors, who have been betting on the Federal Reserve to cut interest rates on December 10 -- futures markets imply odds of that near 90% -- thus lowering bond yields and boosting stocks.

Yields could be in for a bit of a see-saw, and with the Fed in a quiet period ahead of next week's rate decision, there are few voices to reassure investors of the positive outlook for stocks.

Alongside a relative absence of obvious market catalysts this week, there are risks that investors let nerves take over, and that would be a mistake.

While BOJ moves matter, they will take time to fully filter through to markets. The Fed, on the other hand, can deliver almost immediate relief to stocks if it cuts rates next week -- and could even set up the fabled Santa Rally through year's end.

-- Jack Denton

***What's Ahead for Markets in 2026? From "Liberation Day" tariffs to torrid rallies in AI stocks and gold, this year has been full of surprises. Join us on Dec. 11 at noon for discussions with investment strategists and money managers about the outlook for the economy and markets in 2026 -- and how to position your portfolio for success. Sign up here.

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***

Nvidia's Synopsys Stake Could Help Shake Competitive Concerns

Nvidia is taking a $2 billion stake in Synopsys, the largest provider of electronic design automation software used to design semiconductors, in a move that could help the AI chip giant shake off competition concerns. The arrangement could see artificial intelligence play a bigger role in industrial design and engineering.

   -- Nvidia faces growing competitive pressure, "leaning hard" on a variety of 
      sales mechanisms to adapt, said Seaport Research analyst Jay Goldberg. He 
      noted that Nvidia invested $6 billion in private companies this year with 
      commitments for another $17 billion, not including a deal with OpenAI 
      that could add $100 billion. 
 
   -- Some of that competitive pressure is coming from Alphabet's Google, which 
      has Tensor Processing Units designed with Broadcom that are less 
      expensive to use than Nvidia's AI graphics processing units. Google 
      stands to take market share as companies spend to build their AI 
      platforms. 
 
   -- Nvidia CEO Jensen Huang said the Synopsys stake harnesses Nvidia's 
      accelerated computing and AI "to reimagine engineering and design." The 
      arrangement isn't exclusive, and both companies can work with other 
      companies. 
 
   -- Nvidia could argue that these investments in private companies will pay 
      for themselves as companies raise outside money to buy Nvidia systems, 
      Goldberg wrote. But the Synopsys transaction highlights that the scope of 
      the effort "is growing considerably," he said. 

What's Next: Nvidia and Synopsys will work together on AI engineering and developments related to physical AI. They see opportunities to connect the physical and digital worlds through virtual versions of real-life assets for industries including semiconductors, robotics, aerospace, automotive, energy, and healthcare.

-- Adam Clark, George Glover, and Janet H. Cho

***

U.S.-U.K. Drug Deal Is a Sign Tariffs Are Headed Lower

Monday's preliminary agreement between the U.S. and the U.K. related to drug tariffs is the latest indication that the Trump administration may be losing latitude to impose tariffs, according to Veda Partners' Henrietta Treyz. Analysts have been waiting for updates on possible sectoral tariffs on drugs and chips.

   -- The U.S. will exempt U.K.-origin pharmaceuticals, drug ingredients, and 
      medical technology from sectoral tariffs, and the U.K will pay net 25% 
      more for new medicines. The U.S. won't target U.K. drug pricing practices 
      in Section 301 trade-related investigations during President Donald 
      Trump's term. 
 
   -- Sectoral tariffs are already in place against auto parts, furniture, and 
      copper. But Treyz says Monday's deal bolsters her view that drugs and 
      chips may not see tariffs soon, especially as the administration grapples 
      with the 2026 midterm elections. Treyz sees it as a material shift from 
      the first quarter. 
 
   -- The Supreme Court's looming decision on the sweeping tariffs Trump 
      imposed using emergency powers is also at play here. Analysts have 
      expected the administration to lean more heavily on sectoral tariffs or 
      Section 301 if the Court invalidates the so-called "reciprocal tariffs." 
      Treyz puts 65% odds on the Court going against Trump. 
 
   -- The U.K. was the first to sign a trade deal with Trump. Treyz says it 
      isn't clear that Monday's agreement means that others like India or South 
      Korea still finalizing deals will get pharmaceuticals exempted or get 
      tariff relief. India's chemical exports could be a tariff target, she 
      said. 

What's Next: Costco Wholesale has joined dozens of larger companies seeking to preserve a right to refunds for tariffs it already paid. It filed the case in the U.S. International Trade Court because refunds aren't guaranteed. Just one-third of Costco's sales in the U.S. come from imports.

-- Reshma Kapadia and Anita Hamilton

***

Energy Pipelines Are In a Building Boom. What Investors Should Know.

North America is in the midst of a record pipeline-building boom, with companies laying hundreds of miles of new pipes across the U.S. and Canada. Similar booms have led to messes in the past. A decade ago, pipeline companies got caught up when an oil bust caused producers to stop drilling.

   -- U.S. companies are spending big this year to move fossil fuels to the 
      Gulf Coast for shipment overseas, and to expand natural-gas pipelines to 
      serve power plants for new data centers. Northeast pipelines are 
      expanding in a region where little fossil fuel infrastructure has been 
      built in the past decade. 
 
   -- In Canada, pipeline companies have built new routes to export fuel to 
      Asia. In all, Parag Sanghani, a portfolio manager at Dallas investment 
      firm Westwood Group, says companies are expected to plow $53 billion into 
      growth projects this year, up from $49 billion in 2019, the prior peak. 
 
   -- Much of the expansion is to supply the liquefied natural-gas terminals in 
      Texas and Louisiana that are sending LNG to Europe and Asia. Kinder 
      Morgan, which is building pipelines to supply those terminals, projects 
      that U.S. natural-gas demand could jump by more than 25% above 2024 
      levels by 2030. 
 
   -- Some of the pipeline expansion is being driven by data center expansions. 
      Energy Transfer, for instance, is building natural-gas pipelines to three 
      Oracle data centers, two of which are in Texas. Other companies, like 
      Oneok, are looking to transport fuels like gasoline. 

What's Next: Oil prices are expected to stay low next year, which could weigh on pipeline company stocks. Sanghani thinks investors interested in the industry should focus on natural-gas pipeline companies over companies that transport oil or other liquids.

-- Avi Salzman

***

These Stocks Could Join the S&P 500 in Reshuffle

Four very different companies could be about to join the S&P 500 when the benchmark index undergoes a quarterly rebalancing this month. Any additions likely will be announced late Friday.

   -- Building materials company CRH, data-center equipment maker Vertiv, 
      biotech Alnylam Pharmaceuticals, and alternative investment manager Ares 
      Management are the top candidates for admission, according to a list 
      drawn up by KBW analyst Shreyank Gandhi. 
 
   -- The four companies are among the largest not in the S&P 500. S&P Dow 
      Jones Indices, which oversees the index, often taps such corporations for 
      additions. Other possible additions are Carvana, Ferguson Enterprises, 
      Cheniere Energy, Coupang and Strategy based on their lofty market values. 
      Another potential addition is SoFi Technologies, according to Gandhi. 
 
   -- The S&P 500 index is rebalanced each quarter and that action is often 
      accompanied by additions and deletions. There have been index changes at 
      every rebalancing except one since the start of 2023. The only period 
      without a change was the second quarter of this year. 
 
   -- The minimum market value for new additions to the S&P 500 index is $22.7 
      billion. S&P Dow Jones Indices says little about why certain companies 
      make it into the S&P 500 and reasons for those not making the cut 
      assuming they meet index criteria. 

What's Next: Some companies won't be celebrating come Friday. Companies with the smallest market values in the S&P 500 are vulnerable to getting demoted to the S&P mid-cap index or even the small-cap benchmark. The smallest members of the S&P 500 index now include Mohawk Industries, LKQ and Molina Healthcare.

-- Andrew Bary

***

Shopify Handles Cyber Monday Tech Snafu. Shoppers Flocked Online.

Online shopping helped drive success for retailers on Black Friday, so the optimism was running high heading into the biggest e-commerce day of the year, which is Cyber Monday. But some retailers using Shopify's platform ran into snafus yesterday when it experienced tech issues. Shopify called it a partial outage.

   -- It warned that merchants may have trouble logging into point-of-sale and 
      mobile platforms and reaching Shopify Support. Later, Shopify said it 
      identified and fixed an issue with its login authentications and was 
      "seeing signs of recovery." Dozens of merchants had posted screenshots of 
      login error messages during Cyber Monday. 
 
   -- Adobe data suggests that U.S. shoppers spent about $30 billion online 
      from Thanksgiving through Sunday, plus a record $14.2 billion on Cyber 
      Monday, for a total weekend spend of more than $40 billion. In-store 
      sales rose 1.7% on Black Friday, according to Mastercard SpendingPulse. 
 
   -- Retailers were hoping to motivate price-sensitive consumers to spend 
      early. Average online discounts were about 30%, Adobe said, above 
      forecasts. Jefferies analyst Randal Konik said 53% of the 54 retailers it 
      tracks increased promotions compared with last year. 
 
   -- Dana Telsey, CEO of Telsey Advisory Group, said innovation in products 
      and in-store entertainment helped stimulate demand over the weekend. 
      Target lured shoppers with giveaways to the first 100 people as doors 
      opened on Friday. Macy's offered a few limited-time, in-store-only 
      discounts on Friday. 

What's Next: The current pace of spending still points to solid growth, wrote Michael Baker, an analyst at D.A. Davidson, who maintained his forecast for total holiday sales -- the period ranging from Nov. 1 through Dec. 31 -- to increase between 3% and 4% from last year, roughly in line with forecasts.

-- Sabrina Escobar, Nate Wolf, and Janet H. Cho

***

-- Newsletter edited by Liz Moyer, Callum Keown, Rupert Steiner

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

December 02, 2025 06:55 ET (11:55 GMT)

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