Market Update

Good morning and Happy Friday,
 
Yesterday the S&P 500, Dow and Russell 2000 all hit record closing highs, overcoming early weakness concentrated in Tech. Small caps and the S&P equal-weight outperformed and cyclicals were the strongest sectors (Materials, Financials, Industrials >1%). This morning S&P futures are hugging unchanged, a little off their highs in a tight range.   
 

 
Fed speakers have emerged from their media blackout. Schmid published his dissent statement and Paulson, Hammack and Goolsbee are speaking this morning. Goolsbee noted that a drop in inflation should be detectable Q1. He expects the unemployment rate to be pretty stable and projects more rate cuts than the median expectation for next year. Paulson underscored the importance of brining inflation down to 2%. In other D.C. news, President Trump issued an executive order calling for the SEC to review proxy advisors, calling out ESG and diversity policies in particular.
 
Looking at earnings, Broadcom is following Oracle’s path, trading lower following earnings last night as results didn’t reach sky high AI expectations. Lululemon is up 10% in the pre-market after its results. Regarding consumer trends, management commented that consumers are trading down. Housing-related names are trading higher despite less-than-robust commentary. Building products supplier Quanex is ripping higher (+30%). Despite cautious words for 2026, management noted “the underlying fundamentals for the residential housing market remain positive”. Restoration Hardware is trading modestly higher. Earnings commentary included the company is navigating “the worst housing market in almost 50 years.” Costco is flat after beating estimates.
 
 The yield curve is steepening again, inline with other sovereigns, as the short end is flat while the 30y climbs several bp. The US Dollar Index is modestly higher.
 

• US 2yr -1bps to 3.54%, 5yr +1bps to 3.74%, 10yr +2bps to 4.18%, 30yr +4bps to 4.84%
• USD index: +$0.09 to $98.44

European indexes are marginally higher. UK GDP contracted in October, similar to the month prior, and missed estimates for modest growth. The FTSE 100 is trading around flat, well off its highs. Japanese equities closed the week strongly as the major indexes popped >1%, though the Nikkei stalled again after reaching 51k. Japan’s 2025 supplemental budget is set to be approved by next week, which will then shift focus to the 2026 general budget, as well as next week’s BOJ meeting. Chinese equities closed higher as well, following takeaways from the Central Economic Work Conference (CEWC) release. According to analysts, stimulus is likely to be measured while domestic demand and housing market stability are primary targets.  
 

 
Yesterday saw most of the metals complex post sharp gains while Brent crude declined and briefly traded below $61. Oil is flat this morning while precious metals continue to move higher. Bitcoin and ETH are flat as well. According to a Bloomberg report, Coinbase will announce its prediction market and equity tokenization platforms next week.
 

 
 
Economic Data:
US:

• Fed Speakers: Paulson (8:00am), Hammack (8:30am), Goolsbee (10:35am)
• 1:00pm Rig Count

Global:

• Germany CPI (Nov, Final): 2.3% y.y, unchanged from preliminary
• UK GDP Oct m.m: -0.1% vs. 0.1% cons., prior -0.1%  
• UK Industrial Production m.m: 1.1% vs. 0.7% cons., prior -2.0%
• China New Loans: CNY 390B vs. prior CNY220B