US Open: Wall Street moves higher as oil slides 🗽 Synopsys shares jump on HSBC upgrade

U.S. index futures are trading higher on Friday as Wall Street heads toward the end of a highly volatile week dominated by a sharp rise in Treasury yields. Sentiment has improved slightly amid lower oil prices and hopes for diplomatic progress surrounding Iran and the Strait of Hormuz. Nevertheless, elevated yields, rising financing costs and a higher probability of another Fed rate hike remain the main sources of risk for the market.

• At the open, the S&P 500 is up 0.2%, the Nasdaq 100 is gaining 0.2%, while futures tied to the Dow Jones Industrial Average (DJIA) are higher by around 130 points, or 0.15%. The DJIA is heading for its fourth consecutive weekly decline and was down 0.6% through Thursday’s close. The S&P 500 is up around 0.7% for the week, while the Nasdaq has gained approximately 1.5%.

• Shares of internet infrastructure giant Akamai Technologies are up more than 19% after the company announced a multi-year agreement with Anthropic. Fastly and Synopsys shares are also trading higher.

• Oil prices are falling amid hopes for a potential diplomatic resolution to the conflict with Iran. According to Reuters, U.S. and Iranian negotiators in New York are exploring the possibility of a phased agreement that could lead toward an end to the conflict in the Middle East.

• WTI crude futures are down almost 2%, while Brent is losing around 1% and trading near $99 per barrel.

• Pressure remains visible in the bond market. The yield on the 10-year U.S. Treasury rose on Thursday to its highest level since 2007, while the 30-year yield reached its highest level since 2004. They currently stand at around 5.18% and 5.48%, respectively.

• The rise in yields was driven by hawkish comments from Fed Governor Michael Barr, persistently high energy prices linked to the war in Iran, and a strong PMI report.

• Fed funds futures are pricing in around a 66% probability of a rate hike in October.

• The average rate on 30-year U.S. mortgages has risen to 7.45%, the highest level since 2024, increasing the risk of further pressure on household financing costs. Morgan Stanley expects higher borrowing costs to weigh on consumption, particularly spending on goods.

• Treasury Secretary Scott Bessent said earlier that the U.S. and China had agreed to extend their trade truce by another two months, while investors are also closely following Xi Jinping’s visit to the United States. U.S. Trade Representative Jamieson Greer said additional details on U.S.-China trade negotiations are expected to be released on Monday.

US500 chart, D1 interval

Source: xStation5

Company news

• Scholastic – Shares of the children’s book publisher are down more than 10% following the release of its fiscal first-quarter results. The company reported an adjusted loss of $3.63 per share, compared with a loss of $2.52 per share a year earlier, while revenue declined 4% year over year to $216.8 million.

• Synopsys – Shares are up more than 3% after HSBC upgraded the stock from “Hold” to “Buy.” Analyst Frank Lee said the company’s new business model could position Synopsys as one of the beneficiaries of the rapid expansion of the AI market.

Synopsys receives the highest price target on Wall Street. HSBC sees shares reaching $700

HSBC upgraded Synopsys from “Hold” to “Buy” while raising its price target from $490 to $700, currently the highest target on Wall Street. With the shares trading at around $425, this would imply upside of roughly 65%, although such an aggressive valuation requires equally ambitious earnings assumptions to materialize.

The key change concerns HSBC’s view of the company’s future profitability. The bank rolled its valuation framework forward from fiscal 2026 to fiscal 2027 and applied a price-to-earnings multiple of 35x to its projected EPS of $20.01. Importantly, HSBC’s earnings forecast is around 13% above consensus and the highest among Wall Street estimates. As a result, the $700 price target is based primarily on the assumption that Synopsys will grow earnings faster than the broader market currently expects.

Another important part of HSBC’s thesis is Synopsys’ shift toward a business model with a greater contribution from royalty-based revenue, which could improve scalability and increase the share of high-margin, recurring revenue. At the same time, the development of agentic artificial intelligence could increase demand for EDA tools used to design increasingly complex semiconductor chips. The combination of structural semiconductor growth and potentially improving revenue quality is therefore central to HSBC’s more optimistic valuation framework.

Results confirm improving momentum, but Synopsys’ valuation leaves little room for error

The fundamental arguments behind the growing analyst optimism have been partly confirmed by the company’s latest results. In fiscal Q3 2026, Synopsys reported adjusted EPS of $3.91 versus expectations of $3.67, while revenue reached $2.48 billion compared with the $2.44 billion consensus. The company also raised its full-year outlook, reinforcing expectations for faster earnings growth in 2027.

Positive sentiment is not limited to HSBC. Baird recently upgraded Synopsys to “Outperform” and raised its price target to $560, while Morgan Stanley upgraded the stock to “Overweight,” citing greater confidence in the Ansys integration and a recovery in the Design IP segment. Benchmark, meanwhile, maintained its “Buy” rating. Additional support comes from very high gross margins of around 83% and upward revisions to earnings forecasts from a number of analysts.

Valuation remains the main risk. At the current share price, Synopsys trades at elevated multiples, meaning further upside will increasingly depend not only on the expansion of the AI and EDA markets, but also on whether that growth translates into faster EPS growth and stronger momentum in the Design IP segment. In practice, the market is increasingly valuing Synopsys not simply as a stable software supplier to the semiconductor industry, but as one of the potential structural beneficiaries of the next stage of the AI boom. That increases both the upside potential and the stock’s sensitivity to any earnings disappointment.

Synopsys shares chart (SNPS.US), D1 interval

Despite analysts’ optimism, the shares are still trading below the EMA200, shown by the red line, although today’s breakout has brought the stock back toward this key resistance level. The historical high is located near $630 per share, meaning the stock would need to rise by around 50% from current levels to reach a new all-time high.

Source: xStation5