Market Update
- Broad weakness as more mega cap earnings roll in
- Commodi-tility
- Treasury yields drop on soft labor data
- Bitcoin’s Free….Free-Fallilng…
- Check out some of the recent ICE Data/Content:
- Inside The ICE House
- Episode 511: Marsh CIO Paul Beswick on Brand Transformation and Scaling AI Across the Organization
- ETF Central: Goldman Sachs Asset Management Chief Transformation Officer Bryon Lake
- ICE First Look at Mortgage Performance: December - Increased Refinance Activity Drives Mortgage Prepayments Back Toward 3.5-Year High
- Market Story Lines
MAC Desk Commentary:
Tech weakness continued yesterday as semis and memory names joined software’s slide. AMD traded sharply lower following earnings, which took the semis/memory group down with it. The ICE Semis index fell over 4%. Software was again under pressure but rallied in the second half of the day to finish down 1.8% but well off its lows. After trading below the 50d moving average ~6875 the S&P showed a little bounce towards the end of the day to push back above before ending essentially right on it. The underlying metrics were more positive, however as the equal-weight rose over 1%. Materials, Energy, Real Estate and Healthcare sectors all rose 1%, with Financials right behind.
Alphabet’s earnings last night set the table for today’s action. The Ask Jeeves killer beat estimates with giant numbers across the print, including the capex guide. The company expects to double it, from ~$90B in 2025 to $175B - $185B, versus consensus of ~$115B. That $65B difference between the guide and consensus is about what Exxon spent on capital expenditures this year. Plus last year.
The expected spending is enough to purchase about 40 million Super Bowl tickets, or enough for all of Massachusetts and Washington to watch their teams play Sunday, plus 60% of New York to go and root against both. The stock opened down 6%, was as low as down 8% before rallying almost all the way back to unchanged. Recall that Microsoft sold off 10% and AMD nose-dived 17% after their earnings while Meta rose 10%, before giving back all of it over the next week. Amazon steps to the plate tonight.
The S&P opened down 0.7% and reached as low as -1.5%, currently down about 1%. The weakness today is broader than recent sessions as the equal-weight and small caps bracket the S&P, though again profitable small caps are outperforming.
Looking at the sectors, Comm Services is middle of the pack- Meta and Alphabet are cancelling each other out, media is lower but telecom and Netflix are higher. Tech is a slight laggard with software still under pressure and hardware and select semis names lower. Materials (chemicals, miners) and Discretionary are the worst off today. Auto retail, apparel, travel and leisure are all lower while Amazon falls 5% ahead of earnings. Staples is the only sector firmly in the green, up modestly though performance is mixed across the sector.
Dovish labor data this morning is pushing yields lower. Challenger job cuts came in well above last month, at 180k versus 36k and more than doubled last January’s 50k. It’s also the highest January print since 2009. There’s a few caveats to the report. January usually sees a month-over-month bump, and a lot of the cuts came from UPS (30k) and Amazon (16k). Healthcare slashed 17k jobs, the most since April 2020. Initial jobless claims also rose from last week, from 209k to 231k and were above estimates. Continuing claims also rose but were slightly below expectations. JOLTS job openings declined versus last month and missed estimates, while Private Layoffs and Discharges rose 70k from last month, to 1.696M. Transportation/warehousing (103K) saw the biggest increase in layoffs.
Treasury yields were around unchanged but began to fall after the Challenger print and continued lower after claims and JOLTS data. Despite the drop in yields the Dollar is stronger on most of the major crosses.
Government Yields
- US 2yr -8bps to 3.49%, 5yr -8bps to 3.75%, 10yr -7bps to 4.21%, 30yr -6bps to 4.86%
- USD index: +$0.21 to $97.70
European indices finished lower. The ECB held rates unchanged, as expected as did the Bank of England. Some of the names that got smoked on the Anthropic AI news earlier this week are seeing a little bounce- Wolters Kluwer, SAP and RELX among them. Autos and banks were among the worst groups.
The Nikkei and Japanese tech followed yesterday’s US price action lower. A 30y auction was relatively strong. Japan’s elections are on Sunday, in which new PM Takaichi hopes to consolidate her party’s (LDP) position. TSMC announced it will pivot on its plans for a new manufacturing plant in Japan. Originally intended to produce chips for markets like autos and industrials, the manufacturer will instead produce leading-edge (AI) chips there due to the overwhelming demand delta between the two markets. China was mainly lower. The Nikkei reported that computer makers including HP and Dell are looking into sourcing memory chips from Chinese producers due to the supply crunch and skyrocketing prices. Looks like its just for products in non-US markets but highlights many of the current global issues from financial to geopolitical. President Trump had a call with Chinese President Xi yesterday morning, laying some groundwork before the two meet in April. Trade, military, Ukraine and Taiwan were all discussed but at high levels. Beijing is beginning to retaliate after a Panamanian court voided CK Hutchinson’s contract to operate two ports on the canal, according to Bloomberg. The flare up is part of the broader focus on South America by the US government (Argentina, Venezuela, Cuba, etc).
Commodi-tility (MAC-desk trademarked) continues this morning. Silver is down 10% and sitting around its 50d ma ~$75. It’s traded in a $20 range today, $70-$90. Gold is doing a little better, down 2%. Like a Tom Petty lyric, Bitcoin is free falling. We called out the $70k yesterday and it broke below that and is quickly approaching $65k. It’s in a ~50% drawdown since October. Strategy reports tonight in what should be an interesting read on the state of Bitcoin. Ethereum is breaking big round numbers too, now sub-$2000. Crude is down ~3% with some positive developments in Russia-Ukraine and Iran situations, as well as soft labor data.
Earnings:
- After-Market: AFL, ALGN, ALL, ARM, ATEN, AVB, BKH, CCI, CCK, CLB, COHR, CPAY, DGII, EG, EGP, EQH, ELF, ESS, FMC, FORM, FR, GL, GOOGL, HP, KLIC, MAA, MC, MCK, MCRI, MET, MUSA, MWA, NOV, OHI, ORLY, PTC, QCOM, RAL, REXR, RNR, RRX, SITM, SNAP, STE, SYM, TTMI, UGI, VCTR, WEX
- Pre-Market (Thrs): AB, ABG, AGCO, ARES, ARW, BMY, BTU, CAH, CARR, CI, CMS, COP, EL, ENR, FCFS, HAE, HII, HSY, ICE, IDCC, IQV, ITT, KKR, LIN, LNC, LQDT, MDU, MMS, MTSI, OMCL, OWL, PBH, PTON, RL, ROK, SNA, TPR, WEC, WMG, XEL, XPO
- After-Market (Thrs): AFRM, AMZN, AOSL, BE, BILL, BYD, COTY, CPT, CUZ, DLR, DOCS, EHC, EQR, ESE, FLS, FTNT, G, GEN, HUBG, ILMN, KN, MCHP, MOH, MPWR, MSTR, MTD, NVST, NWS/a, PCTY, PECO, PI, POST, POWI, PTEN, QLYS, RBLX, RDDT, REG, RGA, SYNA, UNM, VRSN, VTR, WERN
Economic Data:
US:
- Challenger job cuts: 108.435k vs prior 35.553k
- Initial claims: 231k vs 212k cons, prior 209k
- Continuing claims: 1844k vs1850k cons, prior 1819k
- JOLTS Openings: 6.542M vs 7.2M cons, prior 6.928M
- Layoffs and discharges: 1.762M vs prior 1.701M
- EIA Nat Gas inventories: -360Bc vs -347Bcf cons, prior -242Bcf
- Australia Trade Balance: 1.0% vs prior -4.0%
- Germany Factor Orders m.m: 7.8% vs -2.2% cons, prior 5.7%
- Europe Retail Sales m.m / y.y: -0.5% / 1.3% vs -0.2% / 1.6% cons, prior 0.1% 2.4%
- UK Interest rate decision: Unchanged as expected
- ECB Interest rate decision: Unchanged as expected
- Mexico rate decision: Unchanged as expected
