Market Update

DOW 49,314 (-276), S&P 500 6,958 (-19), Russell 2000 2,631 (-5), NYSE FANG+ 15,762 (-79), ICE Brent Crude $65.77/barrel (+$1.90), Gold $4,618/oz (+$3), Bitcoin ~92.8k (+1871)

• S&P pulls back after the open
• Earnings season has begun, again
• CPI largely in line, with prior months a mess
• PPI, Home and Retail Sales, Beige Book and Fed Speak tomorrow
• Check out some of the recent ICE Data/Content:
• Inside The ICE House
  • Episode 508: Chipotle CEO Scott Boatwright on 4,000 Restaurants and Keeping Customers Craving More
  • ICE First Look at Mortgage Performance: Seasonal and Calendar Factors Drive Rise in November Delinquencies
  • ETF Central: NYSE 2025 ETF Wrap-Up: Trends, Takeaways, and What's NextMarket Story Lines

MAC Desk Commentary:
Due to internal meetings we're publishing the daily note earlier than usual today and will have an abbreviated note in the morning tomorrow.   
 
Yesterday, with major banks set to kick off the latest earnings season and markets looking towards today’s CPI print, US equities edged higher, overcoming pressure early in the session. That pressure was triggered by the weekend news of the DOJs investigation into Fed Chair Powell and the central bank construction project. Treasury yields ticked up slightly but the 10yr auction was strong. However, geopolitical tensions are broadening from Venezuela, to Russia, Iran, and yes, Greenland. Metals were sharply higher. Financial firms got hit on a potential move by the administration to cap credit card interest rates.
 
After the close President Trump threatened 25% tariffs on any country doing business with Iran, which would include China. Trump is also seeing significant blowback from the DOJ investigation into Powell. Blackrock’s Rick Rieder will interview with Trump on Thursday for the Fed chair position, and maybe the new General Contractor on the Fed remodeling job. This morning Trump said that Microsoft “will make major changes beginning this week” to keep its skyrocketing power demands from impacting consumer prices. Right on cue, the company released its 5-point plan that includes paying high-enough electricity rates to cover costs so they aren’t passed on to consumers. We think this is an important development to watch as we hit the mid-term election cycle. Not only the focus on the skyrocketing electricity demands from the AI buildout, but also how these companies keep the buildouts on track, and the administration's focus on addressing affordability concerns into the elections.  
 
December’s CPI is the headliner for data today and it was basically an inline print. The inability to produce a regular CPI for October and November due to the shutdown muddies the analysis, however. Overall, it leans cooler and probably helps the dove’s case but isn't really changing the narrative much. The underlying data had some mixed takeaways. Food prices jumped 0.7% m.m (+3.1% y.y) while tariff-related categories were mixed: appliances -4.3% m.m, TVs -0.6%, computers -1.3%, toys -0.5%, while household furnishings rose 0.5%, footwear 1.1% and apparel 0.6%. Electricity prices nudged lower but are still up ~7% y.y. 

Futures jumped on the news but quickly came off the initial highs. The S&P 500 opened about flat but saw pressure build as the morning rolled on. We're currently off the lows as we attempt to bounce and the the equal-weight, mid and small caps are outperforming, trading around slightly higher. 

 

Industrials, Utilities and Energy are leading. Energy is following oil higher on global risks, especially Iran. Industrials are also broadly higher, continuing the cyclical bounce to start the year. Staples picked up steam after Alphabet started to come in a little bit after a strong start, bringing Comm Services down from its highs (Alphabet with some follow-through from yesterday's news that Apple chose its AI to power Siri). Financials and Discretionary are lagging. JP Morgan is down following earnings this morning and card and payment names continue to come under pressure following the interest rate cap news. Weakness in travel names is hitting Discretionary. Healthcare was weighed down by biopharma and med devices but has recovered to around flat.  



Treasury yields dropped on the CPI print but reversed some of that move and are down around 1-2bp across the curve. Markets now expect the next rate cut in June, after Powell’s term is over. The US Dollar Index is up and testing the 50d ma just below 99.

• US 2yr -2bps to 3.52%, 5yr -2bps to 3.74%, 10yr -1bps to 4.17%, 30yr -1bps to 4.83%
• USD index: +$0.28 to $98.91

The earnings cycle has come back around again. JP Morgan, Bank of New York Mellon and Delta Air were the major reporters this morning. For JPM, 2026 Net Interest Income was guided slightly above consensus. Credit reserves increased but it looks like nearly all of it was due to the company taking over the Apple credit card business. CEO Jamie Dimon’s often measured commentary wasn’t overly cautious versus historical standards. “The U.S. economy has remained resilient. While labor markets have softened, conditions do not appear to be worsening. Meanwhile, consumers continue to spend, and businesses generally remain healthy”, however, “markets seem to underappreciate the potential hazards—including from complex geopolitical conditions, the risk of sticky inflation and elevated asset prices.” Delta Air reported a mixed quarter with 2026 EPS guidance below the Street while noting that "2026 is off to a strong start with top-line growth accelerating on consumer and corporate demand.”  
 
Japan shot higher after returning from Monday’s holiday, reacting to news that new PM Takaichi would dissolve Japan’s lower house and call snap elections next month, leading to gains for her party there and solidifying support for her policies. That drove expectations of fiscal expansion and yen weakness and put a bid in equities, with tech names strong. Finance Minister Katayama told reporters both he and Treasury Secretary Bessent were concerned about the yen’s recent weakness. China was mixed to lower with Hong Kong tech names an area of strength. Trump’s Iranian tariff comments could lead to a weakening of the US-China trade détente. The US is close to a deal with Taiwan to lower tariffs from 20% to 15%. European indices are flat to slightly lower with a dearth of economic data. Another round of French political uncertainty may be brewing around the budget.



Brent crude is up again today after holdings its 100d ma yesterday and has risen from $60 on January 7 to >$65 currently. Metals are mixed with outperformance from silver again, up another 3%. Ag is lower and crypto is strengthening as the day moves on, with Bitcoin up 2%.




Economic Data:  
US:

• CPI y.y: 2.7% vs 2.7% cons., prior 2.7%; 0.3% m.m, in line with consensus
  • Core: 2.6% vs 2.7% cons., prior 2.6%; 0.2% m.m vs cons. 0.3%
• NFIB Small Business Survey: 99.5 vs 99.5 cons., prior 99.0
• ADP weekly report: +11.75 jobs/week vs +41k jobs /week prior
• New Home Sales Sept / Oct: 0.738M / 0.737M vs prior 0.711M / 0.738M 
• Fed Musaelm, Barkin
• 1:00pm 30y auction
• 4:00pm Fed Barkin speech
• 4:30pm API crude inventories

Global:

• None