Market Update

Good morning and Happy Friday,
 
Huge congratulations to the US Women’s Hockey Team on their overtime win to take home the Gold yesterday. It was a helluva game with Canada and Megan Keller’s game winner is now legendary. The US Men’s team plays Slovakia at 3:10pm today while Canada takes on Finland a little after the Opening Bell in the semifinals, which is also when we could potentially get a ruling from the Supreme Court on the IEEPA tariff case as they get back into session.
 
US equities finished broadly lower yesterday with modest losses across indexes, though the Russell 2000 ended higher. Financials, especially credit plays, saw notable weakness on announced asset sales from several Blue Owl funds as well as a sharp sell-off in Klarna following earnings. Utilities was the best performing sector and Industrials also saw gains, led by strong earnings reactions to Deer and Quanta. Ramping prospects of a US military strike on Iran loomed over the market as well, keeping oil and the Energy sector bid. President Trump put the country on the clock, saying strikes would come in 10-15 days without meaningful nuclear agreement.
 
Equity futures faded from their early morning highs ahead of the data today- PCE, GDP as well as options expiration- but started to reverse back up just before the print. The hotter PCE and softer GDP sent futures to their lows, however, but we’re trying to bounce as we near the Open. 
 
 
 
Both headline and core December PCE were a touch higher than expected (both at 0.4% m/m vs 0.3% estimate) and up from the prior month. Note that this is December data, so it’s not a robust snapshot of current conditions. Goods inflation drove the increase and point to tariff flow-through. Motor vehicles and parts, home furnishings, recreational goods, clothing and footwear and off-premise foods saw some of the biggest increases.  For services, food and recreation saw large increases. The hotter PCE print and increases in tariff-related areas comes after this week’s FOMC minutes noted that “Participants generally expected that the effects of tariffs on core goods prices would likely start to diminish this year”, along with more commentary about potential rate hikes from some participants. Preliminary Q4 GDP missed by a sizable amount: 1.4% vs 3.0%, expectedly falling from Q3’s 4.4% rate. The government shutdown appears to have had a large impact, as government spending contributed about -1%. Consumer spending was solid but stepped down from last quarter.  Gross private domestic investment (fixed investments) was strong, rising 3.8%, helped by a significant improvement in residential spending (from -7.1% to -1.5%). Treasury yields were a few basis points lower before the prints but jumped back to their highest levels after the data, currently flat to up 2bp. The US Dollar Index hasn’t moved much, currently a bit higher. 

• US 2yr +1bps to 3.47%, 5yr +1bps to 3.65%, 10yr +0bps to 4.07%, 30yr +0bps to 4.71%
• USD index: +$0.03 to $97.89

In earnings moves, miners Newmont and Anglogold are down 1-2% in the pre-market. Chemicals maker Chemours is down ~10% after results, pulling back after a 40% run since the beginning of the month, while AdvanSix is up 5%. In tech Akamai is down ~10% while LegalZoom and Dropbox are down ~3%.  
 
Crude is slightly lower, pausing after this week’s 5% gain as the Iran situation remains front and center. Metals are higher, looking to end the week in the green after moving sideways for most of it. Bitcoin and Ether are flat to down with both testing their 8-day average after consolidating off lows for most of February.  
 

 
European markets are modestly lower. Flash Manufacturing PMIs improved overall in the region, with Germany seeing a stronger bounce. Hong Kong markets came back from the Lunar New Year overnight, finishing down 1% with big tech notably weak (Baba, Baidu), but mainland China remained closed. Japanese markets were lower by ~1% as well, ahead of a Monday holiday. CPI was about inline with expectations and stepped down from last month while flash PMIs increased from last month. A ramp up in infrastructure spending was a key focus of new PM Takaichi’s policy speech to parliament.  
 

 
Earnings:

• After-Market: AKAM, ALRM, AMH, AMN, AXTI, CARG, CC, CENX, CWST, DBX, ED, EIG, EXR, FND, GLPI, HLIT, IRTC, LNT, LZ, NEM, OLED, OPEN, PK, PTCT, SEM, SFM, ST, TNDM, TXRH, WSC
• Pre-Market: ASIX, AU, CMDB, DNOW, OIS, PPL, TD, WU

 
Economic Data:
US:

• Q4 GDP: 1.4% vs 3.0% cons, prior 4.4%
• PCE m.m / y.y: 0.4% / 2.9% vs 0.3% / 2.8% cons, prior 0.2% / 2.8%
  • Core m.m / y.y: 0.4% / 3.0% vs 0.3% / 2.9% cons, prior 0.2% / 2.8%
• Personal Income m.m: 0.3% vs 0.3% cons, prior 0.3%
• Personal Spending: 0.4% vs 0.4% cons, prior 0.5%
• 9:45am Fed Bostic
• 9:45am Flash PMIs
• 10:00am Final Univ Michigan sentiment
• 10:00am New Home Sales
• 1:00pm Rig Count
• Building Permits

Global:

• Flash PMIs:
  • Australia Manufacturing: 51.5 vs prior 52.3
  • Australia Services: 52.2 vs prior 56.3
  • Japan Manufacturing: 52.8 vs prior 51.5
  • Japan Services: 53.8 vs prior 53.7
  • India Manufacturing: 57.5 vs prior 55.4
  • India Services: 58.4 vs prior 58.5
  • France Manufacturing: 49.9 vs 51.0 cons, prior 51.2
  • France Services: 49.6 vs 49.2 cons, prior 48.4
  • Germany Manufacturing: 50.7 vs 49.5 cons, prior 49.1
  • Germany Services: 53.4 vs 52.3 cons, prior 52.4
  • UK Manufacturing: 52.0 vs 51.5 cons, prior 51.8 
  • UK Services: 53.9 vs 53.5 cons, prior 54.0
  • EU Manufacturing: 50.8 vs 50.0 cons, prior 49.5
  • EU Services: 51.8 vs 51.9 cons, prior 51.6
• UK Retail Sales y.y: 4.5% vs 2.8% cons, prior 1.9%
• Germany PPI y.y: -3.0% vs -2.1% cons, prior -2.5%
• Japan CPI y.y: 1.5% vs 1.6% cons, prior 2.1%
• Core: 2.0% vs 2.0% cons, prior 2.4%