Market Update

Good morning,
 
US markets were mixed last week with the S&P 500 ending up 1.6% helped by the renewed AI optimism following Oracle’s booking announcement. However, other areas of the market were not quite as enthusiastic as the economic data continued to show hints of stagflation.  The overnight session was just about as exciting as last night’s football game, that is unless you’re a big fan of field goals. However, things have gotten a bit more interesting as we approach the opening bell with Elon Musk’s ~$1B purchase of Tesla (+8%) and President Trump’s comments about China negotiations helping sentiment. S&P futures are currently up ~0.3% while Russell 2k futures are up slightly more than that.
 
Ahead of the negotiations taking place in Madrid, China opened an anti-dumping investigation into US analog chip companies (ADI/NXPI/ON/TXN all down >1.5%) on Saturday. Overnight China’s State Administration also declared that Nvidia (-1.5%) violated anti-monopoly laws. The negotiations extended into a second day which just concluded. President Trump took to social media saying that the meeting has gone very well, suggested a deal for TikTok had been reached and said he would be speaking with President Xi on Friday. On a separate note he also advocated for US companies to stop reporting earnings on a quarterly basis. USTR Greer and Treasury Secretary Bessent have just started to give a read out of the meetings.
 
The major catalyst of the week is the FOMC rate decision on Wednesday. Stephen Miran’s Senate confirmation will take place today and if confirmed he will be able to take part in that meeting, I’d imagine he is furiously working on his economic projections for the SEP but those may be easy to identify. The CBO has updated its estimates for the impact of Trump policies cutting 2025 growth to 1.4% from 1.9% but increasing 2026 estimates to 2.2% from 1.8% while increasing PCE estimates increased for 2025 and 2026 to 3.1% and 2.4%, respectively. The only US economic data on today’s calendar was the Empire Manufacturing which turned negative for the first time since June with sharp declines in new orders. The employment component was about flat but on a positive note prices paid and received both moderated. Treasury yields which were modestly higher overnight are now down ~3bps across the curve. The USD index is down ~0.2% trading just under $97.
Markets in Asia were mixed overnight with Japan closed for holiday. Major indices in China/Hong Kong closed on either side of unchanged. The economic data continues to disappoint with industrial production and retail sales both missing expectations while home prices continue to decline all of which is sparking more speculation of stimulus. European indices have been rallying throughout the session. France is outperforming despite the Fitch downgrade after the close on Friday (which was largely expected). Yields in the region are also modestly lower though France and Italy spreads are widening slightly.
 

 
Commodities are mixed. Oil prices are modestly higher. Metals have improved over the last couple of hours with gold back to unchanged while copper is modestly higher. Ag is pulling back giving back some of Friday’s post WASDE report rally. After a big rally last week, the crypto complex is pulling back with Bitcoin off ~1% trading just under 115k. Ethereum is down ~2.5%, Solana is down 3.5% and Fartcoin is down ~8%.
 
The calendar for the rest of the day is pretty quiet. ECB President Lagarde will be speaking this afternoon. Tomorrow retail sales, industrial production and the NAHB housing market index will be released. Also keep in mind this week is Triple Witch expiration, and the quarterly index rebalances.
 
Other Asset Classes:

• US 2yr -3bps to 3.53%, 5yr -3bps to 3.60%, 10yr -3bps to 4.04%, 30yr -2bps to 4.66%
• USD index: -$0.22 to $96.93
• Oil prices - ICE Brent: +0.2% to $67.14, WTI: +0.5% to $63.00, Nat Gas: -0.2% to $2.94
• Gold: +0.0% to $3,686.70, Silver: -0.4% to $42.64, Copper: +0.3% to $4.67
• Wheat: -0.1% to $5.14, Corn: -1.0% to $4.26, Soybeans: +0.0% to $10.47, Cotton: -0.4% to $0.67
• VIX: +0.17 to 14.93
• Bitcoin: -1.0% to ~114.8k

 
Economic Data:

• US:
  • NY Empire Manufacturing: vs. 5 cons, prior 11.9
• Global
  • China Industrial Production: 5.2% vs. 5.8% cons,. prior 5.7%
  • China Retail Sales: 3.4% vs. 3.8% cons., prior 3.7%
  • China House Prices: -2.5% prior -2.8%
  • China FAI: 0.5% vs. 1.4% cons. prior 1.6%
  • Germany wholesale prices: -0.6% m/m vs. 0.2% cons., prior -0.1%
  • India Inflation: 0.5% y/y vs. 0.3% cons., prior -0.6%
  • 2:30 ECB Lagarde