NYSE MAC Desk
Market Update

At least it’s Friday,
 
Following the post Fed drubbing there was a half-hearted bounce attempt early yesterday which faded into the close with most major indices ending slightly lower. The Dow Jones Industrial Average did close slightly higher breaking the longest losing streak since 1974.  It has been a rough week for US equity indices which have underperformed their counterparts in Asia and Europe. Coming into today the S&P 500 is down 3% while the S&P 400 midcap and Russell 2k are both off over 5%. This week’s losses have completely wiped out the previous post-election gains. The weakness continued overnight with slight losses in Asia while most European indices were down >1%.  With a government shutdown looming S&P futures continued to trade lower overnight down ~1% at the lows, but those losses have been cut in half since the US economic data was released. Personal income, spending and PCE all came in slightly below expectations which is Fed friendly. Treasury yields have moved lower with the 2 and 10yr yields both down 7bps. That reverses all of the post Fed move higher at the front end though the 10yr yield is still higher which has left the spread at its widest level since 2022. S&P futures are both down ~0.6% while Russell futures are down 0.4%.
 
I think there are multiple factors that have been driving this week’s weakness outside of the hawkish Fed commentary, which I didn’t really think was all that different but just highlighted the uncertainty in the current environment. Coming into the Fed meeting there was already significant weakness beneath the surface. There was some hope that the Fed meeting would be a clearing event helping to re-solidify the rally heading into a positive seasonal time period for markets into the end of the year. As that didn’t materialize there was a round of risk reduction with some investors throwing in the towel heading into a period of time where liquidity begins to dry up. That coupled with the fact that it is options expiration with major indices cutting through strikes likely added to some of the downside. In addition, the situation in Congress has highlighted the fact that with slim GOP margins it is going to be difficult to push through President elect Trump’s agenda in 2025 weighing on sentiment.
 
Quickly looking at the data. Personal income came in a tenth below expectations up 0.3% half the pace of last month’s increase. Personal was also a tenth light at 0.4% in line with last month’s reading. Moving to the PCE headline and core also came in a tenth below estimates both for the month and on an annual basis up 0.1%. YoY the readings were 2.4% and 2.8% respectively. Chair Powell had suggested that these numbers would look good so this was not too surprising, but it does help to take some of the edge off. After the open the final U of Mich. Sentiment survey will be released.
 
Commodities are mixed with the USD pullback helping post data. ICE Brent is down 0.75% to 72.30. US natural gas prices are up ~2%. Gold is bouncing up 0.7% while copper is slightly higher. Ag commodities are modestly higher. Bitcoin retested the early December low overnight ~92k before bouncing. It is still down ~2.5% trading just under 95k.
 
Much of the focus has remained on the failure of the stop gap funding bill with the House expected to vote on a new proposal today. Nike and US Steel are trading down after lowering guidance. FedEx is up in the pre-market after announcing it would spin off FedEx Freight. Within healthcare Novo Nordisk is trading sharply lower after its GLP1 study disappointed which is helping Eli Lilly rally.
 
Rember today is Triple Witch Expiration and the S&P quarterly index rebalances. Expect volumes and volatility to pick up into the close. September’s closing auction was the largest in history with nearly 3.1B shares trading.
 
Global Markets
Asia:
Japan's Nikkei: -0.3% (-2.0% for the week)
Hong Kong's Hang Seng: -0.2% (-1.3% for the week)
China's Shanghai Composite: -0.1% (-0.7% for the week)
India's Sensex: -1.5% (-5.0% for the week)
South Korea's Kospi: -1.3% (-3.6% for the week)
Australia's ASX All Ordinaries: -1.2% (-2.7% for the week)
 
Europe:
STOXX Europe 600: -1.7% (-3.6% week-to-date)
Germany's DAX: -1.7% (-3.7% week-to-date)
U.K.'s FTSE 100: -1.0% (-3.4% week-to-date)
France's CAC 40: -1.3% (-2.8% week-to-date)
Italy's FTSE MIB: -1.4% (-4.5% week-to-date)
Spain's IBEX 35: -0.9% (-3.6% week-to-date)
 
Sectors/Other Asset Classes:
Government Yields

• US 2yr -6bps to 4.26%, 5yr -9bps to 4.34%, 10yr -7bps to 4.51%, 30yr -3bps to 4.71%
• USD index: -$0.45 to $107.71
• Oil prices - ICE Brent: -0.8% to $72.29, WTI: -0.9% to $68.74, Nat Gas: +1.9% to $3.65
• Gold: +0.6% to $2,624.90, Silver: -0.0% to $29.41, Copper: +0.2% to $4.08
• Wheat: +0.2% to $5.44, Corn: +0.7% to $4.44, Soybeans: +1.1% to $9.74, Cotton: -0.2% to $0.68
• VIX: -0.20 to 23.89
• Bitcoin: -2.4% to ~95.0k

Tariffs:

• President Trump threatens the EU with tariffs if it doesn’t narrow the deficit with “large scale” purchases of US oil and gas - FT
• Mexico announced a 35% increase in tariffs on manufactured goods from China and a 15% increase on textiles

Economic Data:

• US:
  • Personal income: 0.3% vs. 0.4% cons,. prior 0.6%
  • Personal spending: 0.4% vs. 0.5% cons,. prior 0.4%
  • PCE: 0.1%/2.4% m.m/y.y vs. 0.2%/2.5% cons., prior 0.24%/2.3%
  • Core-PCE: 0.1%/2.8% m.m/y.y  vs. 0.2%/2.9% cons., prior 0.27%/2.8%
  • 10:00 U of Mich. Sentiment (final)
• Global
• Germany PPI: 0.5%/0.1% m.m/y.y vs. 0.3%/-0.3% cons., prior 0.2%/-1.1%