Market Update

DOW 47,782 (+221), S&P 500 6,849 (+8), Russell 2000 2,530 (+3), NYSE FANG+ 16,533 (-95), ICE Brent Crude $61.80/barrel (-$0.14), Gold $4,229/oz (-$8), Bitcoin ~92.3k (-319)

• Markets modestly higher ahead of the Fed 
• Value outperforms growth
• Yields pullback 
• The start of a year end rally?
• Check out some of the recent ICE Data/Content:
• Inside The ICE House
  • Episode 502: Author & Entrepreneur Brad Feld on Mentorship, Leadership, & Building Better Ecosystems
  • ICE Mortgage Monitor: Mortgage Refinance Retention Hits Multi-year High as Falling Rates Spur Activity Among Recently Originated Loans
  • ETF Central: Former CNBC Senior Markets Correspondent Bob Pisani
  • Market Story Lines

MAC Desk Commentary:
Happy Fed Day,
 
It feels like today is the day investors have been waiting for, hoping that the removal of this overhang will unleash a rally into the end of the year. Since Thanksgiving the S&P 500 has been marking time trading in a pretty tight 100pt range (6.8k - 6.9k) just below the all-time high. There is a slightly positive bias ahead of this afternoon’s decision with small caps adding to the recent outperformance. As we head to print, the S&P 500 is up 8pts to 6,848 (+0.1%), the Dow is up 234pts to 47,794 (+0.5%), while the Russell 2k is up 3pts to 2,530 (+0.1%).
 


Since NY Fed President Williams’ speech on November 21^st market have priced in a 25bps cut. However, if you listened to the commentary from other Fed officials over the last month it is clear that coming to that consensus won’t be as easy as a KAT slam dunk. By the way congrats to the Knicks, enjoy your trip to Vegas. Speaking of cats, the number of dissents today, which are also widely expected, will be a litmus test for just how good of a cat herder Fed Chair Powell is. Along with the rate decision at 2:00 the updated Summary of Economic Projections will be released but since we still haven’t seen much of the Q4 government economic data those forecasts will likely be taken with a grain of salt. That said investors will comb through that report for signaling, but it will likely just highlight the divide on the Committee. In the September SEP the median 2026 DOT projected one additional rate next year (in addition to today) but 8 of 19 officials projected no additional cuts with the projection for rates ranging between 2.5% - 4%. Fed Chair Powell will lead three more meetings before his term ends next year and markets are currently pricing in about a 50% chance of a cut over that timeframe.



Since the start of December Treasury yields, particularly at the long end of the curve have been moving higher with the 10yr up ~20bps to 4.2%. It is hard to pinpoint what exactly is driving that move higher, but it does seem to be a confluence of factors.  It is not just a US phenomenon as global yields are moving higher as investors sense the globally coordinated easing cycle is near the end. The bond weakness is particularly pronounced in Japan as the BOJ is expected to hike rates potentially as early as next week. Refocusing back on the US, economic data has been better than feared. In addition, the looming Supreme Court decision on tariffs could re-spark concerns about deficits.  And there is also some chatter around the perceived loss of Fed independence with Kevin Hassett reportedly moving into pole position to replace Chairman Powell. 
 
The only economic data this morning was the Q3 Employee Cost index which came in slightly better than expectations. Treasury yields were moving slightly higher overnight but a bid has emerged throughout the morning pushing yields down ~3bps across the curve retracing some of the recent move. The USD index is down ~0.25% trading just under $99 and its declining 200d ma (~99.20). Today the Bank of Canada left rates unchanged at 2.25% as expected.

• US 2yr -3bps to 3.59%, 5yr -3bps to 3.76%, 10yr -3bps to 4.16%, 30yr -3bps to 4.78%
• USD index: -$0.28 to $98.92

Most global markets traded modestly traded lower overnight. China inflation data was mixed. CPI was up 0.7% y/y after a 0.2% reading last month, hitting the highest level since January driven by an increase in food prices. However, PPI fell more than expected down 2.2% y/y. The Hang Seng bounced 0.4% after falling >1% in back-to-back sessions helped by a bounce in tech stocks. The Shanghai Composite closed down ~0.2%. Chips remain a hot topic as there are reports that Alibaba and Bytedance are looking to place large orders for the recently approved Nvidia H200 chips. European indices traded in a tight range closing on either side of unchanged.



Commodities are mixed. Oil prices continue to drift lower down for the third consecutive day. Inventory data was delayed again. After pulling back $1 from Friday’s high US natural gas prices are bouncing modestly after tagging its 50/100d ma’s. Precious metals are mixed gold is slightly lower, silver continues its recent outperformance but is off the best levels. However,  platinum and palladium are both down ~3% reversing yesterday’s rally. Copper is modestly higher reversing some of this week’s losses. Ag is mixed. Yesterday the crypto complex rallied sharply as some short positions were reportedly stopped out as Bitcoin reclaimed its 20d ma (~91.4k) for the first time since the 10/10 flash crash. It has pulled to ~92k from its high of 94.6k yesterday. Ethereum is outperforming holding on to the bulk of yesterday’s gains and testing its 50d ma at 3,330.  



Within equity markets we mentioned the small cap outperformance earlier. There is also clear outperformance in value versus growth and some of the popular thematic baskets are under pressure (nuclear, quantum, rare earths etc.). Ahead of today’s other big catalyst, Oracle’s earnings, the AI trade is also under some pressure. Within the S&P 500 info tech and Utilities are both down ~0.5%. Comm services is also down a similar amount with Meta under pressure again related to its AI strategy and Netflix remaining under pressure amidst the ongoing Warner Bros. saga. Industrials are outperforming helped by GE Vernova (+>10%) after the company issued very strong guidance at its investor event. Freight and logistics stocks are continuing the recent outperformance sending the Dow Jones Transport index to fresh YTD highs (see Chart). Consumer discretionary is outperforming with broad based strength helped by some positive commentary about the consumer from American Express. Financials and healthcare are both recouping some of yesterday’s headline related weakness.





Keep an eye out for the NYSE MAC Desk Fed Recap later this evening.

Economic Data:
US:

• Mortgage apps: 4.8% w.w prior -1.4%
  • 30yr rate - 6.33% prior 6.32%
• Employee Cost Index Q3: 0.8% vs. 0.9% cons., prior 0.9%
• Oil Inventories - delayed again
• 2:00 FOMC Policy Decision & Summary of Economic Projections
• 2:30 Press Conference

Global:

• China CPI: 0.7% vs. 0.7% cons., prior 0.2%
• China PPI: -2.2% vs. -2% cons., prior -2.1%