Stock futures remained relatively unchanged early Thursday, with Wall Street approaching new record highs. This stability in futures followed a Wednesday session where the S&P 500 reached an intraday record high. The stock market’s positive momentum is being driven by optimism surrounding potential tax cuts and deregulation under President Donald Trump, along with indications of robust economic growth. Investors are also anticipating updated economic data, with initial jobless claims set to be released before the market opens, followed by Kansas City Fed manufacturing data later in the day.

European stocks opened with mixed results on Thursday, following a week of positive momentum. Sportswear brand Puma experienced a significant drop, with shares falling by 19% in early trading after missing full-year 2024 profit expectations and announcing cost-cutting measures. This contrasted sharply with competitor Adidas, which reported 19% growth in fourth-quarter top-line figures earlier in the week.

Asia-Pacific markets showed mixed performance on Thursday. Hong Kong’s Hang Seng index declined by 0.65%, while China’s CSI 300 saw a gain of 1.01%. To support the struggling stock market, Chinese financial regulators urged large state-owned mutual funds and insurers to increase their share purchases. Australia’s S&P/ASX 200 rose by 0.61%, whereas South Korea’s Kospi and Kosdaq fell by 1.24% and 1.13%, respectively. Japan’s Nikkei 225 and Topix indices both experienced gains, with the Nikkei 225 up by 0.79% and the Topix by 0.53%. Meanwhile, the Bank of Japan is holding a policy meeting, where Governor Kazuo Ueda has indicated a potential rate hike.

Economic Calendar

Earnings Calendar

Notable reports for Thursday before the bell include ALK, AAL, AUB, BANC, ELV, FBP, FSV, FCX, CATX, GE, MCK, NTRS, PPBI, RCI, TECK, TCBI, UNP, VLY, & WNS. After the bell reports include ASB, COLB, CSX, CUBI, EWBC, FFBC, GBCI, ISRG, SLM, SSB, & TXN.

News & Technicals’

Warner Bros. Discovery’s CNN is set to lay off hundreds of employees on Thursday as it shifts its focus towards a global digital audience. This move comes as CNN restructures its linear TV lineup and expands its digital subscription offerings. The layoffs aim to reduce production costs and streamline teams, according to sources who requested anonymity. Similarly, NBC News is also planning job cuts later this week, although the exact number remains unclear. Both organizations delayed these decisions until after the U.S. presidential inauguration. The media landscape is evolving, with fewer viewers tuning into linear TV and more people consuming news via streaming services and social media.

Microsoft’s head of business development, Chris Young, is resigning after approximately four years in the role, as disclosed in a regulatory filing on Wednesday. Young played a key role in orchestrating Microsoft’s acquisition of Activision Blizzard and was a member of the senior leadership team, reporting directly to CEO Satya Nadella. Despite no successor being named yet, Young’s departure marks a significant change in the company’s leadership. In the 2024 fiscal year, he was one of Microsoft’s highest-paid employees, earning total compensation of $12 million.

In the third quarter of 2024, the proportion of active credit card holders making only minimum payments reached a record high of 10.75%, the highest since data collection began in 2012. Additionally, the share of cardholders more than 30 days past due increased to 3.52%, up from 3.21%, marking a rise of over 10%. Despite this uptick in delinquency rates, the current level remains significantly lower than the 6.8% peak observed during the 2008-09 financial crisis, suggesting that the situation has not yet reached critical levels.

The U.K. Competition and Markets Authority (CMA) has announced dual investigations into Apple and Google to determine if they possess “strategic market status” within their mobile ecosystems. These ecosystems encompass the operating systems, app stores, and smartphone-based browsers that form the foundation of the two tech giants’ software. The probes are being conducted under the new Digital Markets, Competition and Consumers Act (DMCC), a U.K. law aimed at curbing anti-competitive practices in digital markets.

Though we are approaching new record highs and market enthusiasm is raging, keep in mind the extension that very high valuations in stock prices. If selling were to begin, we could easily see some quick piling on as traders rush to the door to protect profits.  That said, with record highs so close I would not rule out a strong push to get the new high for the record book before a pull back begins.  Plan your trading risk carefully.

Trade Wisely,

Doug

S&P 500 and Nasdaq-100 futures rose on Wednesday, driven by Netflix impressive results. The earnings season continues with anticipated reports from Procter & Gamble and Johnson & Johnson, while Halliburton and GE Vernova are also set to release their results. Additionally, former President Trump announced a significant joint venture named “Stargate” with OpenAI, Oracle, and Softbank, aiming to invest at least $500 billion in AI infrastructure in the United States.

European stocks opened higher on Wednesday, reflecting the positive sentiment seen in global markets since the start of the week. The U.K.’s FTSE index edged up by 0.1%, Germany’s DAX increased by 0.7%, and France’s CAC 40 gained 0.1%. The pan-European Stoxx 600 also rose by 0.3%. Notably, Adidas shares surged by 5.96% by 8:51 a.m. London time, following the company’s announcement of a 19% sales growth in its fourth-quarter results on Tuesday. Meanwhile, the U.K. reported borrowing £17.8 billion ($21.9 billion) in December, marking an increase of £10.1 billion compared to December 2023 and the highest budget deficit recorded for December in four years.

Asia-Pacific markets experienced a mixed trading session on Wednesday. Hong Kong’s Hang Seng index saw a significant drop of 1.72%, while mainland China’s CSI 300 fell by 0.93%. In contrast, India’s Nifty 50 managed a slight rebound, gaining 0.28% after hitting its lowest point since last June. Australia’s S&P/ASX 200 rose by 0.33%, and Japan’s Nikkei 225 and Topix indices increased by 1.58% and 0.87%, respectively. South Korea’s Kospi and Kosdaq also performed well, with the Kospi adding 1.15% and the Kosdaq rising by 0.86%. Additionally, Korean companies are contemplating relocating their production plants from Mexico to the U.S. in response to Trump’s protectionist policies.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include ABT, ALLY, APH, BKU, CMA, CBSH, FNB, GEV, HAL, JNJ, OFG, PG, TEL, TXT, TRV & UCB. After the bell reports include AA, CACI, CADE, CP, CATY, CLS, DFS, HXL, KMI, KMX, NBHC, PLXS, RLI, SLG, STLD, WCN, & WSBC.

News & Technicals’

Kevin O’Leary expressed interest in a proposal by Trump for U.S. owners to acquire a 50% stake in a platform, though he noted that current laws make such a deal unlikely. On Tuesday, Trump mentioned he would consider the possibility of Tesla CEO Elon Musk or Oracle Chairman Larry Ellison purchasing TikTok.

The president of the European Central Bank, Christine Lagarde, emphasized the need for Europe to be prepared for potential trade tariffs from newly inaugurated U.S. President Donald Trump. In a statement to CNBC on Wednesday, Lagarde noted that Trump had criticized the EU for being “very, very bad” to the U.S. and warned of impending tariffs. However, she also acknowledged that Trump’s decision not to impose blanket tariffs on his first day in office was a “very smart approach.”

President Donald Trump announced that his team is considering a 10% tariff on China, which could be implemented as early as February 1. Speaking to reporters at the White House on Tuesday evening, Trump cited China’s role in sending fentanyl to Mexico and Canada as the reason for the proposed tariff. He also mentioned that he had a phone conversation with Chinese President Xi Jinping on Friday, discussing fentanyl and trade. According to the Chinese readout, Xi emphasized the importance of cooperation and described the economic relationship between the two countries as mutually beneficial.

Stripe has confirmed the layoff of 300 employees, which accounts for approximately 3.5% of its workforce, primarily affecting the product, engineering, and operations departments. Despite these cuts, the payments company, valued at around $70 billion in private markets, plans to expand its headcount by 10,000 by the end of the year, representing a 17% increase. According to a memo from Chief People Officer Rob McIntosh, Stripe is “not slowing down hiring.” Business Insider initially reported on the layoffs and the memo.

Emotions are high and chase is on with the Netflix impressive results engaging the fear of missing out from traders.  Remember to follow your rules, avoiding already very extended stocks and plan carefully to protect current gains should a pullback begin.  Exuberance is contagious so the rally may continue but also remember it’s the last one in door that gets the worst of the punishment.

Trade Wisely,

Doug

Stock futures rose on Tuesday as Donald Trump began his second term as president with a series of executive orders, however no tariffs for the moment. A positive market reaction followed Trump’s statement that he was not yet ready to impose universal tariffs. Wall Street’s attention is now on whether Trump will deliver on his pro-business promises, particularly his calls for looser regulations, which had previously boosted banking stocks after his election win in November. Other elements of the “Trump trade,” such as small-cap stocks, oil stocks, and bitcoin, are expected to be highly sensitive to the direction of his administration’s policies.

European stocks opened with mixed results on Tuesday. Orsted shares plummeted by 15% following the announcement of a fourth-quarter loss of 12.1 billion Danish Krone ($1.7 billion) related to its U.S. offshore wind turbine projects. European automakers Stellantis and BMW also saw declines due to concerns over potential U.S. tariffs. In the U.K., private sector wages increased by 6% in the three months leading up to November compared to the previous year, according to the Office for National Statistics. However, the agency also reported a 0.1% drop in November payroll figures compared to October, indicating a weakening labor market.

Asia-Pacific markets showed mixed but mostly positive movements on Tuesday as investors awaited further policy clarity from U.S. President Donald Trump. Australia’s S&P/ASX 200 saw a gain of 0.66%, while South Korea’s Kospi experienced a slight decline of 0.08%. In Japan, the Nikkei 225 rose by 0.32% to close at 39,027.98, and the Topix edged up by 0.08% amid volatile trading. Hong Kong’s Hang Seng index increased by 1.02%, and Mainland China’s CSI 300 Index saw a modest rise of 0.08%. Investors are also keeping an eye on upcoming central bank meetings, with the Bank of Japan’s policy meeting scheduled for January 23-24, where Governor Kazuo Ueda has hinted at potential rate hikes, and Singapore’s Monetary Authority set to meet on Friday.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include MMM, SCHW, CBU, DHI, FBK, FITB, KEY, EDU, ONB, PEBO, PGR, & PLD. After the bell reports include AGYS, CNI, COF, FULT, HWC, IBKR, CASH, NFLX, PNFP, PGRS, RBB, STX, SFNC, UAL, WTFC, & ZION.

News & Technicals’

Costco Teamsters, representing 18,000 employees nationwide, announced that 85% of its members voted in favor of strike action. With the current contract set to expire on January 31, a strike could significantly disrupt Costco’s daily operations. This potential strike also poses a risk to Costco’s public image, which has been bolstered by its reputation for positive worker treatment and support for diversity and inclusion initiatives. The union has scheduled a final week of negotiations with Costco, as mentioned in a recent X post. Last week, the Teamsters conducted practice pickets in various locations, including San Diego and Long Island, New York, to prepare for a possible strike.

President Donald Trump announced on Monday that tariffs of up to 25% could be imposed on Mexico and Canada as early as February 1st. He cited concerns over the number of people crossing the border as a reason for these potential levies. Trump labeled Canada as “a very bad abuser” and indicated that the tariffs would be broad-based rather than targeted at specific essential items. This announcement underscores Trump’s intensified focus on trade and his plans to implement widespread duties on U.S. trading partners, though the exact timing and scope had previously been uncertain.

European business leaders have shared mixed reactions to Donald Trump’s first day in office. Some are optimistic, believing that Trump’s administration could revitalize America’s economic spirit by reducing regulations, increasing energy supply, and fostering a more market-driven environment. One leader expressed that Trump could be a significant boost for business, but also emphasized the need for businesses to balance the interests of various stakeholders, including employees, and to address issues like diversity, equity, inclusion (DEI), and sustainability. Others, however, have adopted a more cautious stance, awaiting further developments before forming a definitive opinion.

Chinese Vice Premier Ding Xuexiang emphasized that there are “no winners” in a trade war, as China faces potential tariffs from the newly inaugurated administration of Donald Trump. Speaking at the World Economic Forum in Davos, Switzerland, Ding warned that protectionism is counterproductive and reiterated that a trade war benefits no one. His address echoed sentiments from Chinese President Xi Jinping’s 2017 Davos speech, which occurred just days before Trump began his first term. Ding’s remarks highlight China’s concerns about the economic impact of Trump’s trade policies.

The quick fluctuation in the value of the dollar highlights the tariff uncertainty.  Although there are no tariffs now, he suggested he is thinking of 25% increases maybe on the way the first of February.  Also keep in mind with earnings ramping up we should plan on higher-than-normal volatility.  Plan your risk carefully.

Trade Wisely,

Doug

S&P 500 futures climbed on Thursday, following the benchmark index’s best performance since November, driven by a favorable inflation report and strong bank earnings. Investors are eagerly awaiting further economic insights, with the December retail sales report anticipated to show a 0.5% increase, slightly down from November’s 0.7% rise, according to Dow Jones estimates. Additionally, weekly jobless claims are expected to be released. Earnings reports from Morgan Stanley and Bank of America are also on the docket, concluding the earnings season for major banks.

European markets experienced a positive surge on Thursday, driven by impressive performances in the luxury and technology sectors. Luxury stocks soared, particularly those of Cartier, which reported strong results. This uplift was mirrored in the shares of France’s LVMH, Kering, and Christian Dior, all of which saw gains of around 8%. Retailers such as Moncler, Burberry, Swatch, and Hermes also performed well, clustering at the top of the Stoxx index. Technology stocks rose by 1.87%, with chip companies like ASM International and Be Semiconductor benefiting from better-than-expected earnings from Taiwan Semiconductor Manufacturing Company.

Asia-Pacific markets saw a positive trend on Thursday, with most indices recording gains. Korea’s central bank maintained its benchmark interest rate at 3%, defying expectations. This decision seemed to bolster investor confidence, as the Kospi rose by 1.23% and the Kosdaq by 1.77%. The Korean won, however, weakened slightly, trading at 1,456.91 against the US dollar. In Japan, the Nikkei 225 edged up by 0.33%, while the Topix dipped marginally by 0.09%. Hong Kong’s Hang Seng index climbed 1.08%, and China’s CSI 300 saw a modest increase of 0.11%. Meanwhile, Australia’s S&P/ASX 200 advanced by 1.38%, despite a slight uptick in the unemployment rate to 4% in December from 3.9% in November.

Economic Calendar

Earnings Calendar

Notable reports for Thursday before the bell include BAC, FHN, IIIN, MTB, MS, PNC, UNH, & USB. After the bell reports include OZK, & JBHT.

News & Technicals’

British oil major BP announced on Thursday its plan to cut thousands of jobs as part of a significant cost-cutting initiative. The company informed staff that approximately 4,700 roles would be impacted by the proposed changes, constituting a large portion of this year’s anticipated reductions. Additionally, BP plans to reduce its contractor numbers by 3,000. These measures aim to lower costs, following CEO Murray Auchincloss’s statement last year that BP intends to achieve at least $2 billion in cash savings by the end of 2026.

Target raised its fourth-quarter sales forecast on Thursday, attributing the increase to a surge in holiday shopping both in-store and online, especially during major discount days. The retailer now expects comparable sales to grow by about 1.5%, an improvement from its previous projection of flat growth. This metric includes sales from Target’s website and stores open for at least 13 months. Despite the positive sales outlook, Target did not revise its profit forecast, suggesting that the boost in sales was driven by promotional deals. The company anticipates fourth-quarter earnings per share to range between $1.85 and $2.45.

The Biden administration announced an executive order on cybersecurity on Thursday, introducing new standards for companies selling to the U.S. government and requiring greater transparency from software providers. This move follows several high-profile ransomware attacks on entities like Change Healthcare, Colonial Pipeline, and Ascension health care system. Additionally, Microsoft revealed in 2023 that Chinese attackers had breached U.S. government officials’ email accounts, leading to a critical federal report and subsequent changes at the company. Under the new order, software vendors must prove their development practices are secure, with evidence to be posted on a government website for the benefit of all software users, as stated by Neuberger.

Although we have seen some strong big bank earnings, the regional banks appear to be struggling a bit this morning.  Continue to expect wild volatility and remember we have three day weekend just around the corner with the inauguration that could easily create some bumpiness due tot the big changes that are expected.

Trade Wisely,

Doug

 US Stock futures rose as investors prepared for the first of two, key inflation reports this week. The producer price index (PPI), which tracks wholesale inflation, is scheduled for release at 8:30 a.m. ET. Economists surveyed by Dow Jones expect the headline PPI to have increased by 0.4%, with the core PPI, excluding food and energy, anticipated to rise by 0.3%. In the earnings arena, major banks are set to kick off the fourth-quarter earnings season. JPMorgan Chase, Citigroup, Goldman Sachs, and Wells Fargo will report their results on Wednesday, followed by Morgan Stanley and Bank of America on Thursday.

European markets traded higher, reversing the recent negative sentiment in the region. However, investors remain cautious, closely monitoring borrowing costs for core European economies as bond yields stay elevated. The oil and gas sectors led the losses, declining by 0.7% after BP announced that its fourth-quarter profit would be impacted by up to $300 million due to weakening refinery margins. Retail stocks also faced challenges, with JD Sports plummeting to the bottom of the Stoxx 600 after lowering its profit guidance.

Asia-Pacific markets experienced a general upward trend, with notable gains in several key indices. Hong Kong’s Hang Seng index surged by 1.9%, and mainland China’s CSI 300 saw an impressive rise of 2.63%. In contrast, Japan’s markets were the exception, as the Nikkei 225 fell by 1.83% and the Topix decreased by 1.16%. South Korea’s Kospi closed with a modest increase of 0.31%, while the small-cap Kosdaq performed better, adding 1.39%. Australia’s S&P/ASX 200 also ended the day positively, up by 0.48%. Meanwhile, investors are keeping a close eye on India’s rupee, which has weakened to a record low against the U.S. dollar.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include PGR.  After the bell reports include APLD, & CVGW.

News & Technicals’

According to a report by Bloomberg News on Monday, the Chinese government is considering a plan for Elon Musk to acquire TikTok’s U.S. operations to prevent the app from being effectively banned. This contingency plan is one of several options China is exploring as the U.S. Supreme Court deliberates on whether to uphold a law requiring ByteDance, TikTok’s China-based parent company, to divest its U.S. business by January 19. If the deadline passes without compliance, third-party Internet service providers would face penalties for supporting TikTok’s operations in the U.S. Under the proposed plan, Musk would manage both X, which he currently owns, and TikTok’s U.S. business. However, Chinese officials have not yet made a final decision on whether to proceed with this plan.

Two Robinhood broker-dealers, Robinhood Securities LLC and Robinhood Financial LLC, have agreed to pay a combined $45 million in penalties to settle administrative charges by the Securities and Exchange Commission (SEC). The SEC found that the firms violated over ten securities law provisions related to their brokerage operations. These violations included failing to report suspicious trading promptly, not implementing adequate identity theft protections, and inadequately addressing unauthorized access to their computer systems. Additionally, Robinhood Securities was cited for failing to provide complete and accurate securities trading information, known as blue sheet data, to the SEC for more than five years.

A global sell-off in bond markets is intensifying, raising concerns about government finances and the potential for higher borrowing costs for consumers and businesses worldwide. Bond yields have been climbing globally, with the U.S. 10-year Treasury yield reaching a new 14-month high of 4.799% on Monday. In the UK, 30-year gilt yields are at their highest since 1998, and the 10-year yield has hit levels not seen since 2008. Japan, which has been working to normalize its monetary policy after ending its negative interest rates regime last year, saw its 10-year government bond yield rise above 1%, the highest in 13 years, on Tuesday. In the Asia-Pacific region, India’s 10-year bond yields rose the most in over a month on Monday, nearing two-month highs at 6.846%. Similarly, yields on New Zealand and Australia’s 10-year benchmark government bonds are also near two-month highs. Meanwhile, China’s 10-year bond yield dropped to a record low this month, leading the central bank to suspend its government bond purchases last Friday.

On Tuesday, Los Angeles firefighters prepared for intense winds that could exacerbate two massive wildfires, which have already claimed two dozen lives, destroyed entire neighborhoods, and burned an area equivalent to the size of Washington, D.C. Meteorologist David Roth from the National Weather Service’s Weather Prediction Center warned of potential hurricane-force winds reaching 75 mph (120 kph) from early Tuesday, with gusts between 50-70 mph expected through Wednesday. Over 8,500 firefighters battled the blazes from both the air and ground, successfully preventing the fires from spreading overnight. Los Angeles City Fire Chief Kristin Crowley cautioned residents, stating, “This setup is about as bad as it gets. We are not in the clear.”

With the beginning of earnings season tomorrow and the combined influence of the key inflation reports, PPI today and CPI plan for significant price volatility.  Today also keep a close eye on the bond yields as they provide some strong clues to overall market direction.

Trade Wisely,

Doug

US stock futures declined on Monday as investors continued to offload shares of key technology companies that have been driving the recent bull market. This sell-off has been fueled by a surge in bond yields, particularly the 10-year Treasury yield, which reached its highest level since late 2023. Investors are anticipating the start of the fourth-quarter earnings season, hoping it will bring some stability to the volatile markets. Several major banks, including Citigroup, Goldman Sachs, and JPMorgan Chase, are scheduled to report their earnings on Wednesday, while Morgan Stanley and Bank of America will release their results on Thursday.

The pan-European Stoxx 600 index traded lower this morning, with most sectors experiencing declines. Investors in the region are closely monitoring eurozone and U.K. government bond yields, which climbed to fresh multi-month highs last week. Market focus will also shift to the U.S. December consumer price index release on Wednesday morning, following the release of the December producer price index report on Tuesday. These key economic data points will provide further insights into the trajectory of inflation and potential monetary policy decisions.

Asia-Pacific markets experienced a downturn on Monday. Mainland China’s CSI 300 index declined by 0.27%, likely influenced by a record low for China’s 10-year bond yield this month. Hong Kong’s Hang Seng Index also saw a decrease of 0.73%. In India, the Nifty 50 and BSE Sensex indices fell by 0.95% and 0.80%, respectively, ahead of the anticipated release of inflation data later in the day. South Korea’s Kospi and Kosdaq indices closed lower, with losses of 1.04% and 1.35%, respectively. Australia’s S&P/ASX 200 index also experienced a decline of 1.23%. Japan’s markets were closed for a holiday.

Economic Calendar

Earnings Calendar

Notable reports for Monday before the bell we have no noteworthy reports. After the bell reports include KBH.

News & Technicals’

U.S. Treasury yields climbed higher on Monday as investors braced for key inflation data releases. The 10-year Treasury yield, which had surged to its highest level since November 2023 following a stronger-than-expected jobs report on Friday, continued to rise by one basis point to 4.784%. Similarly, the 2-year Treasury yield saw an increase of three basis points, reaching 4.421%. This upward trend in U.S. Treasury yields aligns with a broader global rise in bond yields, reflecting a growing expectation among traders that interest rate cuts will occur at a slower pace this year. This cautious outlook is primarily driven by the anticipation that the U.S. Federal Reserve will proceed carefully, navigating a complex economic landscape characterized by both potential economic strength and lingering uncertainties.

The U.S. government announced new restrictions on the export of artificial intelligence chips and technology, aiming to maintain American dominance in AI by controlling its global spread. These regulations will limit AI chip exports to most countries while granting unrestricted access to U.S. AI technology for close allies. The measures, designed to prevent China, Russia, Iran, and North Korea from accessing advanced computing power, will also cap the number of AI chips that can be exported to other nations. This move reflects a broader strategy to concentrate advanced AI development within the U.S. and its allies.

In a recent podcast interview, Meta CEO Mark Zuckerberg criticized Apple for its perceived lack of innovation and the imposition of “random rules” on its platform. While acknowledging the iPhone’s significant impact in making smartphones ubiquitous, Zuckerberg expressed frustration with Apple’s current approach. He argued that Apple has not introduced any groundbreaking innovations since the iPhone’s initial release, essentially “sitting on it” for two decades. Furthermore, Zuckerberg criticized Apple for implementing arbitrary rules that hinder competition and innovation within the tech ecosystem

Blue Origin was forced to abort the inaugural launch of its New Glenn rocket on Monday due to a last-minute technical issue with the vehicle. This setback significantly impacts Blue Origin’s efforts to compete with SpaceX in the satellite launch market. The company decided to stand down the launch attempt to address the identified subsystem issue, which would have exceeded the available launch window. Blue Origin is now evaluating potential dates for the next launch attempt. The ambitious mission aimed to achieve a significant milestone by landing the first-stage booster on the offshore ship Jacklyn in the Atlantic Ocean for future reuse while propelling the second stage into orbit.

Although stock futures declined this morning, we are looking at a substantial oversold situation in the short term. Start watching for clues of a modest relief rally but keep in mind all the uncertainty we face in the days ahead that anything is possible.  Expect significant volatility throughout the week.

Trade Wisely,

Doug

U.S. stock futures were pointing higher on Wednesday morning, offering yet another premarket pump after a tough Tuesday. The previous session saw a decline across major averages, triggered by stronger-than-anticipated growth in the U.S. services sector. The Institute for Supply Management’s services index for December revealed a significant acceleration in activity, accompanied by a concerning rise in prices. These fueled fears of persistent inflation, casting doubt on the anticipated path of interest rate cuts by the Federal Reserve. Market attention now shifts to the upcoming release of the ADP private payrolls report and jobless claims data, both scheduled for Wednesday morning. Later in the day, the minutes from the Fed’s December meeting are expected to provide further insights into the central bank’s policy outlook.

European markets displayed resilience on Wednesday morning, trading higher despite disappointing news. German industrial orders unexpectedly fell in November, initially causing some market jitters, particularly in the auto sector. However, the broader market sentiment remained positive, with most sectors experiencing gains. Notably, financial services stocks saw a significant increase of almost 1%. The auto sector, after an initial dip, recovered and was trading 0.3% higher later in the morning. Market participants are now eagerly awaiting the release of European consumer confidence and economic sentiment data later in the day, which could further influence market direction.

Asia-Pacific markets experienced mixed trading on Wednesday. The Hang Seng Index fell by 0.83%, and mainland China’s CSI 300 closed 0.18% lower. The Chinese onshore yuan reached a 16-month low of 7.3316 against the US dollar. In Japan, the Nikkei 225 dipped 0.26%, and the Topix lost 0.59%. Conversely, South Korea’s Kospi rose by 1.16%, and the Kosdaq Index increased by 0.19%. Notably, shares of South Korean tech giant Samsung Electronics surged 3.43% despite a worse-than-expected profit forecast for the fourth quarter.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include AYI, ACI, ANGO, HELE, MSN, RDUS, & UNF. After the bell reports include GBX, JEF, & PENG.

News & Technicals’

U.S. Treasury yields remained largely unchanged in early Wednesday trading as investors braced for key economic data releases. The benchmark 10-year Treasury yield held steady near its highest level in over eight months, reached on Tuesday. The 2-year Treasury yield also saw minimal movement. Market participants are keenly awaiting the release of the Federal Reserve’s December meeting minutes at 2 p.m. ET, particularly for insights into the central bank’s future policy direction, especially after the unexpected hawkishness displayed in the “dot plot” during their last meeting. Additionally, the ADP private payrolls report, scheduled for release later in the morning, is expected to provide a preview of the official jobs report from the Bureau of Labor Statistics due out on Friday.

Ann Altman, sister of OpenAI CEO Sam Altman, has filed a lawsuit alleging sexual abuse by her brother between 1997 and 2006. The lawsuit claims the abuse caused severe emotional distress and mental anguish. In a joint statement, Sam Altman, his mother, and his brothers denied the allegations.

The aviation industry faces another challenging year with Boeing’s delivery delays and persistent supply chain issues. The anniversary of a 737 Max incident, where a door panel detached, has reignited concerns about Boeing’s safety and quality standards. While Boeing has implemented changes like mandatory training and increased inspections, aviation consultant Mike Boyd argues these measures are insufficient. He believes the entire board of directors should have been replaced, highlighting the deep-rooted nature of the company’s problems.

China’s onshore yuan hit a 16-month low against the dollar on Wednesday, reaching as low as 7.3316. This decline coincides with rising Treasury yields, which strengthened the dollar. Despite China’s efforts to boost consumption through updated policies, the yuan has weakened for five of the past six trading days, depreciating over 0.44% since December 31st.

Trade Wisely,

Doug

U.S. stock futures remained relatively stable following consecutive gains in tech. A report from the Washington Post suggesting that President-elect Donald Trump’s tariff plan would be less extensive than anticipated initially boosted stocks, though Trump later refuted this in a Truth Social post. Cameron Dawson, chief investment officer at NewEdge Wealth, warned of potential market volatility throughout the year, citing high valuations and investor positioning as key factors. She emphasized that the elevated expectations for 2025 could lead to erratic price movements. Investors are also awaiting the Job Openings and Labor Turnover Survey due on Tuesday and the ADP private payrolls report scheduled for Wednesday.

European equities saw a modest rise as money markets largely ignored a regional inflation uptick and maintained their expectations for European Central Bank interest-rate cuts. Euro-zone consumer prices increased by 2.4% year-over-year in December, up from 2.2% in November, aligning with the median estimate from a Bloomberg poll. This rise was primarily driven by energy costs, which saw their first increase since July, according to Eurostat. Meanwhile, the broader market is dealing with the potential for escalating trade tensions after Donald Trump denied reports that he might ease plans for comprehensive tariffs upon his return to the White House.

Japan’s Nikkei 225 surged by 1.97%, driven by a rally in tech stocks, making it the leading performer among its regional peers. The Topix also saw a significant increase of 1.1%. South Korea’s Kospi edged up by 0.14%, while Australia’s S&P/ASX 200 rose by 0.34%. In contrast, Hong Kong’s Hang Seng index fell sharply by 1.43%, even as China’s CSI 300 climbed by 0.72%. The spotlight was on Hong Kong-listed tech stocks after the U.S. Defense Department designated Chinese tech giant Tencent Holdings and battery maker CATL as “Chinese military companies.”

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include APOG, LNN, & RPM. After the bell reports include AIR, AZZ, CALM, & SLP.

News & Technicals’

On Tuesday, U.S. Treasury yields remained relatively stable as investors awaited key economic data that could provide new insights into the state of the economy and labor market. This week, several important economic reports are scheduled for release, with a particular focus on the labor market. The ISM’s latest PMI report for the services sector and the Job Openings and Labor Turnover Survey (JOLTs) are both due on Tuesday, with economists surveyed by Dow Jones expecting the JOLTs report to show 7.7 million job openings. Investors are closely monitoring this data as it could influence their views on the potential outlook for monetary policy, especially interest rates. This comes after the central bank indicated in December that fewer interest rate cuts might be forthcoming ahead of its next meeting on January 28-29. The Federal Reserve is widely expected to keep rates unchanged, with traders last pricing in a 93% chance of steady interest rates, according to CME Group’s FedWatch tool.

Annual inflation in the euro zone increased for the third consecutive month, reaching 2.4% in December, according to Eurostat on Tuesday. This preliminary figure matched the forecast by economists polled by Reuters and represented a rise from the revised 2.2% in November. Core inflation remained steady at 2.7% for the fourth month in a row, aligning with economists’ expectations, while services inflation slightly increased to 4% from 3.9%. Germany, the euro zone’s largest economy, saw a higher-than-expected inflation rate of 2.9% in December, as reported separately this week. In contrast, France’s inflation rate was 1.8% last month, falling short of the 1.9% predicted by a Reuters analyst poll.

Shares of Tencent Holdings plummeted nearly 8% in Hong Kong after the U.S. Department of Defense added the Chinese tech giant to its list of “Chinese military companies.” Battery maker CATL, a supplier for automakers like Ford and Tesla, was also included on the list. According to the National Defense Authorization Act of 2024, the DoD will be barred from directly procuring goods or services from these entities starting in June 2026, and indirectly from June 2027. Vincent Su, a senior equity analyst at Morningstar, noted that CATL’s inclusion on the list could deter U.S. customers from purchasing the company’s energy storage system (ESS) batteries in the future.

In response to the 2023 ruling and the backlash against diversity, equity, and inclusion (DEI) programs, McDonald’s has become the latest major company to alter its approach. Following the lead of Walmart, John Deere, and Harley-Davidson, which scaled back their DEI initiatives last year, McDonald’s announced on Monday that it will retire specific diversity goals for senior leadership. Additionally, the company plans to end a program that encouraged its suppliers to implement diversity training and increase minority representation within their leadership. McDonald’s will also pause “external surveys,” though it did not provide further details. This move aligns with similar actions by other companies, such as Lowe’s and Ford Motor, which have also suspended their participation in an annual survey.

Trade Wisely,

Doug

On Monday, S&P 500 futures saw a slight increase as investors anticipated upcoming jobs data in a shortened trading week. This week, which concludes the first five trading days of January, began with some uncertainty and ongoing concerns about the Federal Reserve’s interest rate projections. The New York Stock Exchange will be closed on Thursday to honor the passing of former President Jimmy Carter. The December jobs report, scheduled for release on Friday, is expected to be one of the final significant data points before the Federal Reserve’s meeting at the end of the month.

European markets edged higher on Monday, driven by gains in chip firms, despite a volatile start to the year for stocks. The day was relatively quiet in terms of data and earnings releases, with investors awaiting Spanish business activity and German inflation figures. Dutch chip companies were standout performers, with ASML rising 4.2%, ASM International up 4.3%, and BE Semiconductor Industries gaining 2.3%. Additionally, Taiwan Semiconductor Manufacturing Co. saw a robust performance in Asia, with its Taiwan-listed shares climbing 4.65% to reach an all-time high.

Asia-Pacific markets experienced a mixed performance as investors evaluated business activity data from several key economies in the region. China’s central bank announced over the weekend its plan to adopt a “moderately loose” monetary policy in 2025 to stimulate growth. This announcement coincided with a slight decline in China’s CSI 300 index by 0.16% and a 0.48% drop in Hong Kong’s Hang Seng index. Japan’s markets also saw declines, with the Nikkei 225 falling by 1.47% and the Topix index decreasing by 1.02%. Conversely, South Korea’s markets showed positive movement, with the Kospi rising by 1.91% and the small-cap Kosdaq increasing by 1.73%.

Economic Calendar

Earnings Calendar

Notable reports for Monday before the bell include CMC. After the bell reports there are no notable reports today.

News & Technicals’

On Sunday, President Joe Biden signed the Social Security Fairness Act, a bipartisan law aimed at increasing Social Security benefits for public sector workers such as teachers, firefighters, and police officers who also receive pension income. This legislation repels the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), which have been in effect for over 40 years. As a result, more than 2.5 million Americans will receive a lump sum payment of thousands of dollars to compensate for the shortfall in benefits they should have received in 2024, according to Biden.

Taiwan’s Foxconn, the world’s largest contract electronics manufacturer, exceeded expectations by reporting its highest-ever revenue for the fourth quarter. The company’s revenue surged by 15.2% to reach 2.13 trillion New Taiwan dollars ($64.72 billion), according to a statement released on Sunday. This impressive growth was driven by robust demand for AI servers, which bolstered the performance of Foxconn’s cloud and networking products division. Notably, Foxconn’s clientele includes prominent AI chip firm Nvidia, contributing to the strong revenue figures.

Volkswagen and Xpeng have agreed to open their respective super-fast charging networks to each other’s customers in China, as part of a newly signed memorandum of understanding. The two companies will also explore the possibility of co-branded super-fast charging stations. This collaboration is part of Volkswagen’s broader strategy to strengthen its presence in China, which includes investing in Xpeng and launching an aggressive schedule for electric vehicle releases.

On Monday, U.S. Treasury yields increased as investors looked forward to a series of key jobs data releases throughout the week. The 10-year Treasury yield rose by over 1 basis point to 4.614%, while the 2-year Treasury yield saw a slight increase of less than 1 basis point, reaching 4.281%. This movement in yields reflects investor anticipation of important jobs data in another shortened trading week.

We have a shortened trading week due to the closure on Thursday and the upcoming jobs data are likely crucial to future direction of the indexes. As the big push in big tech this morning, keep a close eye on the T2101 indicator.  We need to see an increase in breadth to accompany the move or the bears could whipsaw the gap open. 

Trade Wisely,

Doug

Following the Federal Reserve’s revised outlook for interest rates, trading became highly volatile, leading to a panic during the regular session. Jeff Buchbinder, LPL Financials’ chief equity strategist, attributed Wednesday’s market slump to “stretched positioning and sentiment,” which made stocks susceptible to a selloff. He noted that the significant rise in inflation expectations and the consequent bond selloff provided a convenient trigger. With the tech sector’s support waning, no other groups were able to compensate for the gap. Investors are now eagerly awaiting the GDP report, with futures indicating a cautious rebound.

European markets experienced significant declines, mirroring global trends. The Swedish Riksbank announced a 25-basis-point rate cut, while Norway’s central bank opted to keep its policy rate unchanged but hinted at potential rate reductions starting in March 2025. The Bank of England is also set to discuss its monetary policy decisions later in the day. Amid these developments, shares of British public services provider Serco Group rose by approximately 6.77%, whereas French broadcaster Canal+ saw its shares drop by 10.39%. Investors are closely watching these central bank actions and their implications for the broader market.

Asia-Pacific stocks and currencies experienced a decline amid a broader market sell-off. This downturn followed the Bank of Japan’s decision to maintain its policy rate at 0.25% for the third consecutive meeting. In reaction to this decision, Japan’s Nikkei 225 fell by 0.69%, and the Topix decreased by 0.22%. South Korea’s Kospi index dropped 1.95%, while the Kosdaq index declined 1.89%. Australia’s S&P/ASX 200 saw a 1.7% drop, Hong Kong’s Hang Seng index fell by 0.36%, and China’s CSI 300 index managed a slight increase. Investors are closely monitoring these developments as they reassess their positions in the market.

Economic Calendar

Earnings Calendar

Notable reports for Monday before the bell include CAN, KMX, CTAS, CAG, DRI, FDS, LW, & PAYX. After the bell reports include AVO, FDX, & NKE.

News & Technicals’

The Federal Open Market Committee (FOMC) voted 11-1 on Wednesday to reduce the federal funds rate to a range of 4.25%-4.5%. Cleveland Fed President Beth Hammack was the sole dissenter, advocating for maintaining the current rates. Despite the rate cut, Fed Chair Jerome Powell emphasized that interest rates are still significantly restraining economic activity and indicated that the Fed plans to continue cutting rates. However, Powell noted that further rate cuts would depend on more substantial progress in reducing inflation. The new quarterly forecasts revealed that several officials now anticipate fewer rate cuts next year compared to their earlier projections, and they expect slower progress on inflation in 2025. Additionally, Powell addressed a question regarding the Fed’s potential response to possible tariffs from the Trump administration.

Micron Technology shares plummeted by 15% following the release of disappointing guidance for the second quarter. Despite this, the company reported in-line revenue results and exceeded quarterly earnings expectations, with adjusted earnings per share of $1.79 on revenue of $8.71 billion, surpassing analysts’ forecasts of $1.75 per share. Year to date, Micron’s shares have risen by 22%, although this lags behind Nasdaq’s 29% gain. In its earnings report, Micron emphasized growth opportunities in data centers and artificial intelligence ventures, particularly those involving Nvidia’s processors.

On Thursday, the 10-year U.S. Treasury yield increased slightly, rising over one basis point to 4.516%, following the Federal Reserve’s indication that fewer rate cuts might be expected next year. This rise came after the yield surpassed 4.5% in the previous session; a level often associated with heightened market volatility. In contrast, the 2-year Treasury yield fell by more than two basis points to 4.331%. According to the CME FedWatch tool, the likelihood of another rate cut at Fed’s first policy meeting in January has dropped to below 10%. Investors are closely monitoring these developments as they reassess their expectations for future monetary policy.

During his annual “Direct Line” Q&A session with Russian citizens on Thursday, President Vladimir Putin acknowledged that inflation is a significant issue in Russia and that the economy is overheating. He described inflation as an “alarming signal” and emphasized that both the government and the Russian central bank are working towards achieving a “soft landing” for the economy. Despite these challenges, Putin expressed confidence in the overall performance of the economy, projecting a growth rate of 3.9-4% for the year.

Jeremy Siegel, professor emeritus of finance at the University of Pennsylvania’s Wharton School, described the recent stock sell-off on Wall Street as “healthy.” He explained that the Federal Reserve’s cautious outlook on future rate cuts served as a “reality check” for investors. Siegel noted that the market had been in a “runaway situation,” and the Fed’s stance reminded investors that interest rates would not drop as low as they had hoped when the easing cycle began. He remarked that the market’s previous optimism was excessive, making the sell-off unsurprising. Siegel also predicted that the Fed would likely reduce the number of rate cuts next year, possibly implementing just one or two reductions.

As we attempt to achieve a relief rally keep in mind the revised outlook for interest rates will keep price volatility challenging and option prices higher than normal for a while so plan carefully.  Today we have another big day of market-moving economic data that will kick off with the GPD report so buckle up it could be another very bumpy day.

Trade Wisely,

Doug