Market Update

Good morning,
 
On the final trading day of January, there is white smoke coming from Constitution Avenue. President Trump nominated Kevin Warsh to replace Fed Chair Powell. He had been in pole position on prediction markets for the last couple of weeks before Rick Rieder jumped to the top of the leader board for a couple of days. The process to get him confirmed could be tricky as some key Republican Senator Thom Tillis, who sits on the Senate Banking Committee has publicly vowed to block any nominees until the DOJ investigation is resolved. Warsh has called for the Federal Reserve to more aggressively cut rates but is known as an inflation hawk, a critic of QE and has called for a “regime change” including the central bank to work closer with Treasury.
 
Equity futures began to move lower last night as press reports suggested the announcement was imminent. S&P futures were down ~1% at the lows but cut those losses more than in half before turning a bit lower again after PPI came in well ahead of estimates. There is some steepening of the yield curve but nothing dramatic with the front end down ~2bps while the long end is up a similar amount. The USD index is bouncing up ~0.35% to ~$96.50. This is weighing on the metals complex which has moved sharply lower (gold -5%, silver ->10%, copper -3%). There were some warning signs of the impending volatility yesterday with gold dropping from >5,500 to ~5,100 in a 30-minute window wiping out ~$2.5T in market capitalization akin to the combined size of Bitcoin and Ethereum. Crypto has also remained under pressure with Bitcoin down >2% trading around $82.5k, holding above the November low ~80.5k.
 
 

 
Government Yields

• US 2yr -1bps to 3.55%, 5yr -0bps to 3.82%, 10yr +2bps to 4.25%, 30yr +2bps to 4.88%
• USD index: +$0.37 to $96.51
• VIX: +1.01 to 17.89

 
Outside of the Warsh headlines the focus has been on earnings. Apple had solid results driven by iPhone strength particularly in China while margin guidance is being well received. Semis and equipment supplier earnings have been strong though the bar is clearly high leading to a mixed response.  SanDisk (+>20%) is the big upside standout. The oil majors are modestly lower after their earnings. Verizon is up ~5% with 2026 guidance and net adds ahead of the street. Deckers is up >10% after a beat and raise quarter. In financials, Visa and American Express are both modestly lower despite solid results.
 
Asian markets were mostly lower overnight while Europe is moving modestly higher. In Japan Tokyo CPI was cooler than expected while retail sales and industrial production came in below expectations. The Hang Seng fell ~2% cutting WTD gains in half while the Shanghai Composite also moved lower. European indices have been moving higher throughout the session. Q4 EU GDP came in ahead of estimates while inflation data in Germany came above expectations.
 

 
We covered the big movers in commodities markets earlier. After moving higher yesterday oil prices are hovering around unchanged recouping overnight losses. Natural gas Is up ~3%. Ag is mixed.
 

 
Earnings:
After-Market: AAPL, ABCB, AJG, AX, BZH, CVLG, DECK, DLB, DXC, EMN, FHI, FPH, HIG, IVR, KLAC, MTX, OLN, ORC, PFSI, PMT, RHI, RMD, SNDK, SNDR, SXI, SYK, V, WDC, WY
Pre-Market: ALV, AON, APD, AXP, BBU, BEN, BEP, CHD, CHTR, CL, CVX, FLG, HTH, JHG, MOG, REGN, SOFI, STEL, VZ, WT, XOM
Economic Data:
US:

• PPI/core (Dec): 0.5%/0.7% vs. 0.2%/0.2% cons,. prior 0.2%/0%
• 9:45 Chicago PMI
• 1:00 Rig Count

 
Global:

• South Korea: 1.7%/-0.3% m.m/y.y vs. 0.5%/-2.1% cons,. prior 0.6%/-1.4%
• Tokyo CPI: 1.5% prior 2%
• Japan Retail Sales: -2% prior 0.7%
• Japan industrial production: -0.1% vs -0.4% cons,. prior -2.7%’
• Germany import prices: -0.1% vs. -0.4% cons., prior 0.5%
• Germany inflation: 2.1% vs. 2% cons,. prior 1.8%
• Q4 EU GDP: 0.3% vs. 0.2% cons, prior 0.3%