Good morning,
 
US equities were mixed yesterday following Tuesday’s Tech and momentum-driven weakness. The S&P 500 fell slightly while the equal-weight rose 0.7% and Russell 2000 rose 0.4%. Treasuries saw a strong bid especially at the long end (down ~10bp) and gold, oil and bitcoin also had notable declines.  Tech tried to rally earlier in the session but faded as we hit the afternoon, though it managed to close off its lows. Six sectors were higher with Industrials, Utilities, Discretionary and Healthcare leading. Energy, Tech and Comms Services lagged.   
 
Futures traded higher overnight ahead of the deluge of data this morning (PCE, Final GDP, Claims, etc). They moved higher following the prints but are coming the best levels. Overall, the data showed resilient consumer spending, elevated (though not out of hand) inflation and a solid labor market.
 

 
 
Micron was the big earnings story after the close as the company blew away estimates and provided exceptionally strong guidance. The stock is up 17% in the pre-market.  The results unequivocally show the supply-demand imbalance in memory as AI continues to drive demand across industries: auto, consumer, robotics, etc.  Management sees industry tightness lasting beyond 2027, while discussion of 16 SCAs (Strategic Customer Agreements) addressed the durability of that demand and revenue.
 
Over to the data. Headline PCE was more or less in line with consensus, rising 0.4% versus last month and 4.1% versus last year- the highest since April 2023. Core was right inline as well (0.3% / 3.4%). Goods rose 0.4%, easing from 0.7% last month, while Services rose 0.5%. Personal Income was solid rising from last month and stronger than expected. Personal spending rose as well, a bit more modestly, and came in above estimates as well. After the prior GDP estimate was revised lower from 2.0% to 1.6%, the Final Q1 GDP reading was revised back up to 2.1%, primarily due to downwardly revised imports, partially offset by lowered consumer spending. Weekly claims fell while Continuing claims rose a bit, but still very muted.
 
Treasury yields were flat to slightly higher ahead of the data but fell on the news especially at short end (2Y -4bp). The US Dollar Index moved lower as yields came in.
 

• US 2yr -4bps to 4.11%, 5yr -3bps to 4.15%, 10yr -2bps to 4.38%, 30yr -1bps to 4.83%
• USD index: -$0.06 to $101.33

 
Crude is down about 1%. WTI has fallen below $70. Metals are higher with gold and silver seeing modest gains after a week under pressure. Bitcoin and Ether are trying to hold modest gains and Bitcoin trying to hold $60K. Discussion around miner economics is increasing as production costs have exceeded block revenue for many, which could be forcing BTC selling from their reserves.
 

 
Japan’s Nikkei ended two days of declines by ripping more than 4% overnight. Tech names rode Micron’s earnings tailwinds, including memory peer Kioxia (+12%), which also announced plans for an ADS listing in April/May next year. Advantest (+15%), Tokyo Electron (+8%) and SoftBank (+8%) also ripped higher. South Korea’s KOSPI jumped 5% overnight with SK Hynix up 13%. the China’s markets were mixed, with the Hang Seng under pressure again while Shanghai posted a modest gain. The chasm between tech hardware and software/consumer-facing tech remains wide. Alibaba fell over 4%, dragging down Hang Seng Tech after Anthropic brought the latest round of AI model “adversarial distillation” accusations.  European equites are higher with major indexes up over 0.5%. No surprise seeing tech names among the best performers (ASML +5%, Infineon +4%). German consumer confidence crept higher but was below consensus. France also ticked higher.
 

 
Earnings:

• After-Market (Wed): FUL, JEF, MLKN, MU, WS
• Pre-Market: AYI, BB, CMC, DRI, MKC, SNX, WGO, WSE
• After-Market: FDXF

 
Economic Data:
US:

• PCE m.m / y.y: 0.4% / 4.1% vs 0.5% / 4.1% cons, prior 0.4% / 3.8%
  • Core PCE m.m / y/y: 0.3% / 3.4% vs 0.3% / 3.4% cons, prior 0.3% / 3.3%
• GDP q/q (Final): 2.1% vs 1.6% prior revision
• Durable Goods m.m: -4.5% vs -4.5% cons, prior 8.5%
• Ex-Transports: 1.3% vs 0.6% cons, prior 1.4%
• Non-defense, Ex-aircraft: 1.6% vs 0.6% cons, prior -0.7%
• Personal Income / Spending m.m: 0.7% / 0.7% vs 0.4% / 0.6% cons, prior 0.0% / 0.5%
• Jobless claims: 215K vs 225K cons, prior 226K
• Continuing claims: 1821K vs 1800k cons, prior 1800k
• 10:30am Natural Gas inventories
• 11:30am KC Fed Manufacturing Index
• 1:00pm 1yr auction
• 3:40pm Fed Williams speech
• 4:30pm Fed Balance sheet

 
Global:

• Australia Unemployment rate: 4.4% vs 4.4% cons, prior 4.5%
• Germany GfK Consumer Confidence: -29.2 vs -27.6 cons, prior -29.7
• France Consumer Confidence: 84 vs 83 cons, prior 82