Market Update

Good morning and Happy Friday,
 
As we await a potential tariff decision from SCOTUS, S&P futures are trading higher, stepping up to their best levels following a seemingly goldilocks monthly payroll report, at least on the headline numbers. Yields were up about 2bp across the curve but came in slightly after a longer look at the data.
 

 
Nonfarm payrolls rose 50k in December, a bit below last month and expectations but not enough to create greater concern about deteriorating conditions. And on the other hand, it certainly wasn’t a robust print. Helping matters was a lower unemployment rate (4.4% vs. 4.5% prior) but that came at the expense of a slightly lower participation rate. Average Hourly earnings moved a little higher. The underlying data, however, paints a less sanguine picture. Health care and social assistance, leisure and hospitality drove the increase (+86k). Goods-producing jobs declined 21k (construction/manufacturing -19k). Retail trade fell 25k.
 
Government Yields

• US 2yr +1bps to 3.50%, 5yr +0bps to 3.73%, 10yr +0bps to 4.17%, 30yr +0bps to 4.84%
• USD index: +$0.05 to $98.74

Yesterday Tech and Healthcare weakness masked strength across the broader market. While the S&P 500 ended flat, 9 of 11 sectors were higher, while the equal-weight and Russell 2000 were up around 1%. Energy led with oil gaining, while consumer stocks showed broad strength with some positive earnings reactions (Constellation) and upgrades (Gap, Ceasars). Treasuries saw some selling, pushing yields up 2-3bp after solid economic data. Commodities saw performance flip as oil rose while metals sold off.
 
A few headlines that are generating interest. Yesterday, after previously announcing his desire to limit investor ownership of single-family homes, President Trump said he ordered “representatives” (Fannie Mae and Freddie Mac) to buy $200B of mortgage-backed securities to help bring down home ownership costs. That would bring the entities’ MBS ownership to their allowable cap. Meta announced agreements with Oklo, TerraPower and Vistra for up to 6.6GW of nuclear energy by 2035. Vistra and Oklo are up sharply in the pre-market and the broader nuclear group is higher as well while Meta is flat. Overnight a story in the Nikkei highlighted the incredibly tight supply dynamics in the memory chip market, including surging prices and increasing dearth of general-purpose memory for PCs and smartphones as suppliers allocate to more lucrative AI segments.
 
European equites are trading higher. Germany got another piece of good macro data as Industrial Production rose more than expected, which followed a strong factory orders print.  European Retail Sales beat expectations. Japanese equities ended the first full week of 2026 on a strong note. The Nikkei rose 1.6% overnight to finish the week up over 3%. Much of the gain came from an 11% advance from Fast Retailing after the company issued positive guidance. November household spending showed a sharp increase and was well above consensus. Chinese equities were higher as well with CPI and PPI prints firming from last prior month. AI startup MiniMax surged 109% in its Hong Kong IPO. The China-Japan relationship continues to be a rocky one. Rare earth exports to Japan will be restricted broadly as part of the recent “dual-use” ban and not limited to defense companies. Earlier reports had created some confusion about the status.
 

 
Brent is adding to yesterday’s gains while US gas continues its decline. Metals are bouncing back with silver, palladium and cooper leading the way. Rio-Tinto confirmed its having preliminary discussions with Glencore over a potential merger, and President Trump is scheduled to meet with oil executives today to discuss Venezuela. Ag is mostly lower. Crypto is as well with Bitcoin and Ethereum down ~1%.
 

 
Economic Data:
US:

• Nonfarm Payrolls: 50k vs. 60k cons., prior revised to 56k from 64k
• Unemployment Rate: 4.4% vs. 4.5% cons,. prior revised to 4.5% from 4.6%
  • Participation Rate: 62.4% prior 62.5%
• Average Hourly Earnings: 0.3% vs. 0.3%/3.6% cons., prior revised to 0.2% 0.1%/3.5%
• Average Weekly Hours: 34.2 vs. 34.3 cons., prior 34.3
• Building Permits: 1.412ml vs. 1.35ml cons., prior 1.33ml
• Housing Starts: 1.246ml vs. 1.33ml cons., prior 1.307ml
• 10:00 U of Mich Sentiment
• 1:00 Rig Count
• Fed Speakers: 10:00 Kashkari 1:35 Barkin

Global:

• China CPI: 0.8% y/y vs. 0.9% cons., prior 0.7%
• China PPI: -1.9% vs. -2% cons., prior -2.2%
• Germany industrial production: 0.8% vs. -0.4% cons., prior 2%
• EU Retail Sales: 0.2% vs. 0.1% cons,. prior 0.3%
• Canada Employment: 8.2k vs. -5k cons,. prior 53.6k
• Canada Unemployment: 6.8% vs. 6.6% cons,. prior 6.5%