Market Update

Good morning.
 
Hey look, it’s snowing again. Yesterday US equites rebounded from Monday’s hypothetical thought-experiment AI-Doom-triggered weakness (see Citrini Research post). The S&P and the equal-weight gained 0.8% while the Russell added over 1% in a broad rally. The IGV software ETF rebounded 2% after Monday’s 5% drop. Big Tech was mostly higher. AMD gained 9% after a new deal supplying AI chips to Meta could see the later eventually take a 10% stake in the former. Yields were flat to slightly higher. Helping matters was Anthropic’s event that was more about partnerships than total economic disruption, allowing beaten up areas to catch a breadth, at least for the moment. The Pentagon, however, is threatening to use its national security powers to assess the company’s technology.  
 
The POTUS SOTU last night feels like it just wrapped up and was basically a non-event for markets. Ahead of Nvidia, Snowflake and Salesforce earnings tonight, futures are trading higher and near best levels. With yesterday’s close right around the 50d ma, futures are pointing to the S&P opening above the level today, above 6900. Workday’s earnings disappointed and the stock is down ~10% in the pre-market, signaling that software is likely to remain under heavy scrutiny. In more AI news, CoreWeave is looking to raise ~$9B to finance a buildout for Meta. That follows Meta’s deal with AMD announced yesterday. And aluminum giant Alcoa is looking to sell several industrial sites to data center operators/builders to capitalize on the buildout boom.
 
 
 

 
Tonight’s earnings will be heavily scrutinized for insight into AI demand and the future prospects of software in this rapidly changing landscape. Before that though, HP’s earnings beat on the top and bottom lines but highlighted ramping margin pressure from chip and memory prices that will likely push full year results toward the lower end of guidance- another major market theme. The stock is down ~5% in the pre-market. Lowe’s is trading lower following its earnings, as the home retailer continues to highlight a difficult housing market.  
 
Treasury yields are ~2bp higher as equities firm up. The US Dollar Index is modestly higher as well. It’s a light economic calendar with a few Fed speakers
 
Government Yields

• US 2yr +2bps to 3.47%, 5yr +2bps to 3.62%, 10yr +1bps to 4.05%, 30yr +2bps to 4.70%
• USD index: +$0.07 to $97.84

European equities are trading higher, with the Euro STOXX 600, FTSE 100 and France’s CAC hitting record highs with a relatively light macro calendar. Consumer Confidence in Germany slipped modestly while France was slightly higher. Bank earnings looked positive with Lion Financial up 8%, HSBC up ~5% and Banco Santander up 4%. Japan closed sharply higher overnight with the Nikkei adding over 2%. Rare earth policy is becoming a bigger issue as the country looks to cut dependence on China, much like the US. Dovish BOJ candidates have lowered expectations for rate hikes and put some pressure on the Yen. China’s markets were higher as well. Germany Chancellor Mertz and a group of 30 German companies are visiting China to discuss trade and economic relationships between the two countries. Australia’s headline CPI was a little hotter than expected but sub-readings were in line.
 

 
Crude is up ~1% after yesterday’s decline saw it finish at the lows of the day as it moves around with the Iranian situation. The post-market API data showed a big 11.4M build. The DOE data is out later today and the next talks between the US and Iran are tomorrow. Precious metals are higher, with gold up modestly while silver is up 4%. Copper is also higher. Ag is flat to slightly lower. The European Commission has proposed to suspend, for one year, most favored nation (MFN) duties on imports of several key nitrogen fertilizers and inputs for their production. Crypto is higher as Bitcoin bounces off $65k and Ether tries to regain $2k. Circle is up sharply on earnings in the pre-market.
 

 
Earnings:

• After-Market (Tues): AII, AMC, AXON, BXC, CAVA, CSGP, CWH, ECG, EOG, EVH, FSLR, FVR, GDDY, GIC, GMED, GPOR, HPQ, LCID, LTC, MATX MELI,, MOS, MTDR, O, PARR, PSTL, REZI, RRC, RVLV, SEI, SILA, SKT, SPXC, SUI, TALO, TREX, UIS, UVE, VLRS, VRE, WDAY, ZETA
• Pre-Market: AOMR, APG, AROC, ASPN, AVA, Bayer AG, BKV, BXSL, CLDT, CRCL, CTRI, Diageo, DIN, DOLE, FSS, HAYW, HIPO, HNI, HOV, HSBC, LAW, LOW, LXFR, MANU, MDLN, OC, PNW, PSKY, STWD, SWX, TBLA, TJX, TPH, TTD, UWMC, VLN, YOU
• After-Market: , AGL, AHT, AI, ALKT, CAPL, CBZ, CHE, CHMI, CPK, CRGY, CRM, CSV, CWT, DBRG, EE, EFC, EPR, FIHL, FSK, GMRE, GNL, GPRK, GRBK, HBB, HCI, IBTA, IMAX, INN, IONQ, JOBY, KGS, KNTK, LB, LXU, MEG, MIAX, NGVT, NOG, NPKI, NSA, NTNX, NU, NVDA, ORA, OUT, PEB, PR, PRSU, PSTG, RCUS, RDW, SARO, SDRL, SM, SMA, SNOW, TDOC, TKO, TTD, TTI, UHS, UMH, USPH, VAC, VICI, VTOL, WHD, WSR, WTRG, XPER, XZO, ZIP, ZM, ZVIA

 
Economic Data:
US:

• API Crude Inventories: 11.4M vs 1.85M cons, prior -0.609M
• Mortgage applications: -4.7% vs prior -2.7%
  • Refis: 4.1% vs prior 7.1%
• Fed Speakers: Barkin, Musalem
• 10:30am EIA Crude Inventories
• 1:00pm 5y Auction
• 4:30pm Fed Balance Sheet

 
Global:

• Japan PPI: 2.6% y.y vs 2.6% cons, prior 2.6%
• Australia CPI m.m / y.y: 0.4% / 3.8% vs 0.3% / 3.7% cons, prior 1.0% / 3.8%
• Germany GfK Consumer Confidence: -24.7 vs -23.1 cons, prior -24.2
• France Consumer Confidence: 91 vs 90 cons, prior 90
• Europe Final CPI y.y: 1.7% vs 1.7% preliminary
• Germany 15y auction