Market Update

Good morning and Happy Friday,
 
This morning’s soundtrack continues to play Billy Joel and Queen on a loop as equities remain under pressure. We’re looking at a 1% decline at the Open according to S&P futures, which would put the cash index below support at the 50d ma. Tech and momentum names are continuing to see some of the steepest declines in the pre-market. Equities were under pressure yesterday and Tech took some of the biggest shots as another MOMO unwind hit the market. Retail favorites and the more speculative areas were smoked. Healthcare, Energy and Staples were the best performing sectors. Despite the equity declines, Treasuries declined as well, pushing yields up 3-5bp. Fed Speak has been leaning hawkish, causing markets to rethink a cut in December. It’s not one specific source but pressure from multiple vectors that’s generating the weakness. An overarching theme though is greater scrutiny around AI, including both the economics and investor positioning. Questions about further rate cuts and lingering uncertainly should SCOTUS strikes down the tariffs plus a messy restarting of federal data disclosures (more below) are also weighing on markets.
 

 
Unlike yesterday, Treasuries are getting a bid from the risk-off move, pushing yields down ~4bp. The US Dollar Index is flat, with the yen strengthening with haven flows. 

• US 2yr -4bps to 3.57%, 5yr -4bps to 3.67%, 10yr -4bps to 4.09%, 30yr -2bps to 4.69%
• USD index: -$0.00 to $99.05
• VIX: +2.25 to 22.25

European equites are sharply lower with Tech and Financials among the worst performers. UK yields are jumping, with the longer tenors up ~10bp as the government rethinks fiscal plans. Germany yields meanwhile are largely flat. Asian stocks followed yesterday’s US weakness and closed sharply lower.  Growth and tech were hit across the region. The Nikkei and Hang Seng dropped ~2%, Shanghai fell 1%. Data out of China disappointed, with Industrial Production and Fixed Asset Investment missing estimates and falling from the prior month. Comments from the National Bureau of Statistics (NBS) signaled stimulus measures weren’t likely. China’s unreported gold purchases could be 10x the official figures, according to an FT article. South Korea was a notable laggard as SK Hynix fell ~9%.  
 

 
The cross-asset nature of the unwind is apparent looking at commodities.  Precious metals are down 3-5% as are Bitcoin and Ether. Gold is heading back toward $4000 while Bitcoin falls below $95k, well off its ~125k high in October. On the other hand, crude is up ~1% after a Ukraine drone strike on Russian oil facilities, though its off its earlier highs after retreating back under its 50d ma.   
 

 
We got several updates on federal data releases, summarized here:

• October CPI remains a question mark
• 11/26 @ 8:30am Q3 GDP second estimate
• 11/26 @ 10am October Personal Income/Spending, PCE
• 12/19 @10am November Personal Income/Spending, PCE
• 12/19 @ 8:30am Q3 GDP third estimate

Earnings/Corporate Updates:

• After-Market (Thrs): AMAT, BZH, FIGR, LAZR, STUB
• Pre-Market: ETHZ, SR

 
Economic Data:
US:

• Fed Speakers
  • 10:05am Schmid (@ Energy and the Economy conference)
  • 2:30pm Logan (@ Energy and the Economy)
  • 3:20pm Bostic
• 10:30am EIA Nat Gas inventory

           
Global:

• China Industrial Production y.y: 4.9% vs. 5.5% cons., prior 6.5%
• China Fixed Asset Investment YTD: -1.7% vs. -0.8% cons, prior -0.5%
• China Retail Sales: 2.9% vs. 2.7% cons, prior 3.0%
• EU Trade Balance: €19.4B vs. prior €1.9B
• EU employment change q.q: 0.1% vs. 0.1% cons., prior 0.1%
• EU GDP 2^nd estimate y.y: 1.4% vs. 1.3% preliminary