Market Update

Happy Friday (the 13^th),
 
Yesterday the combination of rising oil prices and private credit concerns sent equity markets lower with most major US indices down between 1.5% - 2%. The industrials sector was the worst performing within the S&P 500 as the persistent weakness in airlines started to bleed into aerospace companies. Freight/rail companies that traded well coming out of earnings season started to break to the downside as well. Financials continue to be under pressure as the headlines about redemptions, beget more redemption requests, creating a negative feedback loop. The leader board was littered with energy, chemical, fertilizer and defense companies. Utilities were in the green despite the front end of the Treasury yield curve moving higher. There was a flattening of the curve with 2yr yields up ~9bps. Markets continued to price out the expectations for rate cuts with the odds for 1 cut through the end of the year slightly better than a coin flip.  
 
S&P futures were modestly higher overnight but directionally have pretty much been trading tick for tick with oil prices. Oil prices are down ~1.5% off the overnight highs. The Treasury announced an additional 30-day reprieve of Russian oil sanctions.  Prices took another leg lower a bit before 9:00 after the FT reported France and Italy were the most recent countries to open talks with Iran in hopes of securing safe passage through the Strait. This morning Hegseth had a press briefer where he warned of another heavy day of strikes. He believes Iran’s Supreme Leader is alive but injured.
 
There was a ton of US economic data released at 8:30. Personal income came in a tenth below estimates while spending was a tenth above adding to the affordability crunch. PCE/core PCE were inline with expectations up 2.8%/3.1% on an annual basis. Q4 GDP estimate was revised lower to 0.7% from 1.4% mostly related to the government shutdown but consumer spending also moved down to 2% from 2.4%. Durable goods orders came in below estimates but there were positive revisions. Capital goods orders, a proxy for business spending,  which have held up well came in flat well below the 0.5% estimate. Minimal reaction to the economic data on equity futures but Treasury yields which were moving lower overnight ticked down modestly. The USD index is modestly higher breaking above $100. As we approach the open S&P futures are near the overnight high up ~0.5%.
 
 

 
Government Yields

• US 2yr -4bps to 3.70%, 5yr -4bps to 3.84%, 10yr -2bps to 4.25%, 30yr -0bps to 4.88%
• USD index: +$0.29 to $100.04

 
Markets in Asia were down between 1% - 2% overnight. USTR Greer and Treasury Secretary Bessent will meet with China’s Vice Premier He Lifeng in Paris this weekend. European indices opened lower but have been grinding higher throughout the session now in the green. Industrial production in the UK and EU came in below estimates.
 
 
 
Commodities are mostly lower. The metals complex was under pressure overnight but has recouped a good portion of those losses. Ag is mixed. Crypto is trying to get some upside momentum after showing some relative strength compared to equities over the last few days. Bitcoin is ~73k about 1k away from last week’s high. Ethereum is up ~4% at 2,150.
 

 
On the corporate front Adobe (-8%) is under pressure after disappointing results and announcing a CEO transition. Meta (-1.5%) will delay the release of its Avocado AI model until at least May. After the open JOLTS job openings and the preliminary U of Mich Sentiment will be released.
 
Earnings:

• After-Market (Thrs): ADBE, GDOT, KFS, LEN, PEW, PD, RBRK, S, TTAN, ULTA, ZUMZ
• Pre-Market: BKE, DOUG, EEX, RLX

Economic Data:
US:

• Personal spending: 0.4% vs. 0.3% cons., prior 0.4%
• Personal income: 0.4% vs. 0.5% cons., prior 0.3%
• PCE: 0.3%/2.8% vs. 0.3%/2.9% cons, prior 0.4%/2.9%
• Core PCE: 0.4%/3.1% vs. 0.4%/3.1% cons, prior 0.4%/3%
• Q4 GDP (revision): 0.7% revised from 1.4%
• Durable goods/ex-transports: 0%/0.4% vs. 1.2%/0.5% cons., prior revised to -0.9% from  -1.4%/0.9%
• Capital goods orders: 0% vs. 0.5% cons., prior 0.6%
• 10:00 JOLTS Job Openings
• 10:00 U of Mich Sentiment

Global:

• Germany wholesale prices: 0.6% vs. 0.4% cons,. prior 0.9%
• UK Industrial Production: -0.1% vs. 0.2% cons., prior -0.9%
• UK GDP: 0.8% vs. 0.9% cons., prior 0.7%
• EU Industrial Production: -1.5% vs. 0.6% cons,. prior -0.6%
• Canada Employment Change: -83.9k vs. 10k cons., prior -24.8k
• Canada Unemployment: 6.7% vs. 6.6% cons,. prior 6.5%