Market Update

Good morning and Happy Friday,
 
The major US indexes closed higher yesterday though off their best levels. The Russell 2000 outperformed again, as did the S&P equal-weight. The Tech sector, a laggard on the week, saw modest outperformance following Taiwan Semi’s earnings update. Goldman Sachs, Blackrock and Morgan Stanley reversed the early trend of negative post-earnings reactions in the Financial sector. Econ data was generally solid, including the weekly jobs numbers, helping to push yields higher. Moderating Iranian tensions moved crude lower. And of course, John Harbaugh is coming to the Meadowlands.  Futures are modestly higher this morning, having traded in relatively tight range overnight.   
 

 
Earnings after the close yesterday included JB Hunt, State Street, Regions Financial M&T Bank and PNC. All are trading lower in the pre-market except for PNC as the general weakness in financials post-earnings continues. JB Hunt noted the freight market “feels fragile” but it seems there are some puts and takes across segments. Regions Bank commented that “We see improving underlying trends in the nation's economy”. In power market news, the administration and northeast states have agreed to create a new wholesale auction for tech companies to source electricity for new power plants. IPPs are trading lower by 5-7%.  
 
White House economic advisor and Fed Chair candidate Kevin Hasset downplayed the investigation into the Federal Reserve, saying it was just a request for information and expects “nothing to see” on Fed building cost overruns. Treasury yields are modestly higher again today after backing up yesterday. The Dollar is slightly lower.
 

• US 2yr +1bps to 3.57%, 5yr +2bps to 3.78%, 10yr +2bps to 4.19%, 30yr +2bps to 4.82%
• USD index: -$0.09 to $99.04

European equities are lower on a light day for economic data in the region. France continued to underperform, with luxury retail names lower. Greenland remains a key topic and the world will descend on Switzerland for the World Economic Forum next week. Japan’s Nikkei ended the week with a modest decline overnight, though that still left solid gains for the week. Spiking sentiment around election dynamics and the BOJ’s positioning for potential FX intervention are the main topics for markets. The BOJ’s rate decision (expected to hold) is next week. China was lower today with regulators continuing to implement constraints on perceived speculative behavior. After increasing margin requirements in some markets, some exchanges are being told to remove high frequency trading servers out their data centers in the latest move. Q4 GDP will be released Monday.  The US and Taiwan signed a trade deal yesterday. The preliminary structure of the deal was reported earlier. Taiwan’s tariff rate will drop from 20% to at most 15% with exemptions for companies like TSMC that are investing in the US. TSMC will build more factories in Arizona.
 

 
Brent crude is bouncing a little after sliding yesterday. European nat gas however is adding to its sharp gains this week on low temperatures and storage and export flows. Precious metals are under pressure down 3-5%. Yesterday silver rallied after a sharp drop but today its heading back towards those lows. President Trump announced he would hold off on new tariffs on critical minerals, but would look to negotiate agreements with foreign nations to ensure supply of various minerals and metals, which is causing markets to move around. Ag is mixed and Bitcoin and Ethereum are around unchanged as markets digest the political environment and the CLARITY act.
 

 
Economic Data:
US:        

• NY Fed Services Activity: -16.1 vs prior -20.0
• 9:15am Industrial Production
• 10:00am NAHB Housing Index
• 1:00pm Rig count
• Fed Speakers: Collins (10:50am), Bowman (11am), Jefferson(3:30pm)

Global:

• Germany Dec CPI y.y (final): 1.8% vs 1.8 preliminary, prior 2.3%
• Italy Dec CPI y.y (final): 1.2% vs 1.2% preliminary, prior 1.1%