Market Update
- Focusing all fire on software
- Growth getting smacked, Value holding
- Metals bouncing after recent selloff; Crypto breaking down
- Yields relatively tame
- 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:
Yesterday, after opening slightly lower, major US indices rallied throughout the session breaking a modest three-day pullback. Cyclical sectors moved higher after a much stronger than expected ISM Manufacturing survey. The S&P 500 closed up ~0.5% while the Dow Jones Industrial Average, small and midcap indices were all up ~1%. Industrials and consumer staples, led by big box retailers, outperformed. Energy was the worst performing sector down 2% as oil prices fell amidst easing Iran concerns. The metals complex, which got throttled on Friday, closed modestly lower but well off the worst levels. Gold and silver bounced off their respective 50d ma’s. On the other hand, Crypto couldn’t get off the mat after the weekend selloff, with Bitcoin hovering ~78k and Ethereum ~2.3k.
Today things started well with a strong Asian session, but European equities faded from their highs. US markets followed Europe’s lead as futures were at highs but then started to come in as we neared the Opening Bell. The S&P 500 began to slip just after trading began and continued fading for the rest of the morning. News of an update to Anthropic’s AI offering to include plug-ins for areas like Legal and Finance is diffusing across the market and adding to the broadside hits software names have absorbed over the past 6 months. As we go to print the S&P 500 is down ~1.5%, hovering just above its 50d ma. However, once again we’re seeing a difference below the surface and across the landscape. The equal-weight and small caps are outperforming. The real difference is in the Growth/Value factor. Large cap growth names are down 2% while value is flat. Small cap growth is also significantly trailing Small Value.
Tech is easily the worst-performing sector. Semis are lower after several earnings reports (NXP -10%) and software is getting lit up again with the Anthropic news. The weakness in Tech is expanding as we move toward the close. Just in time for AMD to report after the close.
Energy is reversing yesterday’s weakness as oil bounces, though the price action is relatively mild. News that the US shot down an Iranian drone that approached the USS Abraham Lincoln strike group in the Arabian Sea didn't push prices too much. Reports are out that the US is planning to issue general licenses to permit companies to pump oil in Venezuela. That’s added to a bunch of other geopolitical news: US-Iran talks taking place Friday, Russia breaking its no-retaliation pledge, India potentially halting Russian oil purchases. Exxon is higher despite a downgrade to Underperform. Consumer Staples is also a leader, with food and beverage names following Pepsi’s lead higher after its earnings, in which the company stressed pricing and affordability. That includes plans to cut prices by up to 15% on items. Materials and Utilities are also seeing across the board strength.
Consumer Discretionary is down but not as bad as Tech. Travel names are mostly lower led by the platforms, possibly on similar AI disruption concerns, and apparel is struggling too. Communication Services is also a laggard. The mega caps are lower but it’s the rest of the group taking the biggest hits- media, entertainment and advertising all down. Real Estate is also broadly lower, with rates backing up. Financials are down but most of the pressure is focused on data providers as the group also comes under the Anthropic battery pressure from the Anthropic news (SPGI, FDS, MSCI down 7-10%, and not alone).
Despite the moves across other assets, Treasury yields weren’t doing that much with a lack of economic data, but have started to get a bid in the back half of the day. The to the partial government shutdown today’s economic data (JOLTS Job Openings) has been cancelled along with Friday’s BLS Employment Report. The House is expected to vote on a funding bill today but it’s not a slam dunk. The USD index is pulling back after the recent bounce. Tomorrow’s data will include the ADP employment report, Treasury refunding details, ISM Services and final S&P services PMIs and EIA crude inventories.
- US 2yr -2bps to 3.56%, 5yr -2bps to 3.83%, 10yr -1bps to 4.27%, 30yr -2bps to 4.90%
- USD index: -$0.19 to $97.31
European indices gave back opening gains with major indices closing flat-to-slightly lower. It was a very strong session in Asia with the Nikkei up ~4% closing at a new all-time high but was outdone by South Korea’s Kospi index which was up ~7% after falling 5% yesterday. The Reserve Bank of Australia hiked rates by 25bps, which was expected, but highlights the diverging paths of central banks around the globe.
The commodities bid is back but not quite better than ever. Oil prices were moving modestly higher after yesterday’s selloff. The drone news caused another push higher. ICE Brent is up ~1%. Nat gas has stabilized after dropping ~20% yesterday. The metals complex is bouncing back. Gold is up ~6% at ~$4,950 while silver was up ~15% but cut that gain in half, up about 8% currently to ~$83. Ag is mixed with wheat down modestly. Still no love for crypto as Valentine’s Day quickly approaches. Actually, it's more like hate. Bitcoin and Ethereum are down 7-10%. Bitcoin better call Alex Honnold for pointers as it slips from a precarious hold of the one year lows at $75k. The White House meeting between crypto and bank trade groups didn’t yield much in the way of a breakthrough with the administration telling both side to work on a compromise by the end of the month. The holdup largely revolves around stablecoin yields.
- After-Market: AFG, AMD, AMGN, APAM, ATO, BDN, CB, CBT, CLX, CMG, COLM, CRUS, CSL, CTVA, DOX, EA, EGHT, EMR, ENPH, HMN, HRB, IAC, J, JKHY, KREF, LITE, LUMN, MDLZ, POWL, PRU, RNR, SKWS, SONO, SMCI, THG, UFI, VLTO, WRFD
- Pre-Market (Wed): ABBV, ADNT, AVY, AZTA, BG, BSX, CDW, CME, CMI, COR, CTSH, EFX, EVR, FLEX, FOX/a, FTV, GEHC, IEX, JCI, KMT, LEA, LLY, NYT, NVO, NVS, ODFL, PFGC, PSX, REYN, SLGN, SWK, TECH, TKR, TROW, UBER, VSH, VVV, YUM
- After-Market (Wed): 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
Economic Data:
US:
- LMI Logistics Managers Index: 59.6 vs prior 54.2
- 4:30 API Crude Inventories
- JOLTS Job Openings Canceled due to government shutdown
- Australia Central Bank Hikes rates by 25bps to 3.85%
- South Korea inflation m.m / y.y: 0.4% / 2.0% v. 0.4% / 2.1% cons, prior 0.3% / 2.3%
- France CPI m.m: -0.3% vs. -0.1% cons., prior 0.1%
