Market Update

Happy Friday,
 
Today is the final major liquidity event of 2025 with Triple Witch Expiration and the Quarterly index rebalances. Equity markets bounced back yesterday helped by a better-than-expected CPI report, strong Micron earnings and reports of a big funding round for OpenAI which eased concerns around the AI infrastructure buildout. The S&P 500 closed up nearly 1% reclaiming its 50d ma (~6,765), which acted as support during the session, but is still down 0.8% for the week. US futures are trading on either side of unchanged with DOW futures underperforming slightly after Nike (>-10%) results disappointed.
 

 
The big catalyst overnight was the BOJ rate decision with the central bank raising rates by 25bps as expected. It said rates would continue to move higher but didn’t provide guidance as to timing with Governor Ueda saying, “The pace at which we adjust our rate will depend on the state of the economy and prices.” This has put some upward pressure on global yields. The 10yr JGB was up 6bps breaking above 2%. However, the Yen is falling >1% trading ~157.30 just below recent lows.
 
This morning on a CNBC interview NY Fed President Williams suggested that the decline in CPI and increase in unemployment were both likely overstated by 0.1%. He said the data is broadly consistent with recent trends and reiterated that he believes the central bank is well positioned to see how the data evolves, that he believes the policy rate is still mildly restrictive and saying he doesn’t have a “sense of urgency” on changing policy. Treasury yields didn’t really react to any of the commentary currently up 2-3bps across the curve.
 

• US 2yr +3bps to 3.49%, 5yr +3bps to 3.69%, 10yr +2bps to 4.15%, 30yr +2bps to 4.83%
• USD index: +$0.15 to $98.24

 
Global markets were mixed overnight. Markets in Asia moved higher but like major US indices are still down for the week. On the flip side European indices are hovering around unchanged but are higher for the week. Inflation data in Germany came in a touch better than expected while UK Retail Sales disappointed.
 

 
Commodities are mostly higher. Oil prices are trying to hold just above the YTD lows. ICE Brent is up just under 1% breaking back above $60. Nat gas is down nearly 1% off >5% for the week. Metals are mostly higher adding to a strong week. Ag is hovering around unchanged. Crypto is bouncing back recouping much of yesterday’s losses but is still lower for the week.
 

 
There has been a handful of earnings announcements since the close. The reports were mixed but most of the stocks are moving lower (CAG, FDX, LW, NKE). Healthcare will be in focus Biomarin is buying Amicus Therapeutics for nearly $5B. In addition, the White House is expected to announce “incredible deals that will lower prices of drugs and pharmaceuticals” at 1:00. Existing home sales and final U of Mich Sentiment will be released at 10:00. Be on the lookout for some additional volatility and for volumes to increase as we approach the close. Goldman said this will be the biggest expiration on record with >$7T of notional options expiring.  
 
Economic Data:
US:

• 10:00 Existing Home Sales
• 10:00 Final U of Mich Sentiment

Global:

• Japan core inflation: 3% vs. 3% cons,. prior 3%
• BOJ hikes rates by 25bps to 0.75%
• China Foreign Direct Investment: -7.5% prior -10.3%
• Germany PPI: 0% vs. 0.1% cons., prior 0.1%
• UK Retail Sales: -0.1% vs. 0.4% cons., prior -0.9%