Feb 8th Morning Note
S&P 500 inches closer to 5,000 mark
The S&P 500 added 0.82% in yesterday's session reaching an all-time high of 4995pts, shy of the 5,000 mark. This was despite concerns about regional banks and commercial real estate. Interestingly, the odds of a March cut in the Fed Funds futures market increased to 21% from 15%, due to these concerns. Fed officials have said they want to see more evidence on the inflation side, it’s clear that markets are still pricing in a risk that they may end up needing to move quicker than that. By contrast in Europe, the chance of imminent rate cuts from the ECB was pared back, with the chance of a cut at the next meeting in March down to just 12% this morning, the lowest since October.
On the regional banks front, New York Community Bancorp experienced a dramatic shift, initially dropping to an intraday low of -14.29%, but later rallying to close with a gain of +6.67%. This notable volatility began with the company's downgrade by Moody’s from Baa3 to Ba2. The subsequent recovery was fueled by a Bloomberg report indicating that the bank was considering selling some of its assets. The 10Y US treasuries rallied around the US open due to the regional bank concerns. However, that reversed later in the session, with the 10Y yield moderately up on the day (+2.1bps to 4.12%) despite a solid 10Y auction.
Last night in Asia, several key developments significantly influenced market dynamics. Notably, China exhibited signs of deflation, as January's consumer prices fell by -0.8% year-on-year, surpassing the expected -0.5% decline. This marks the sharpest decrease since the 2009 global financial crisis. Additionally, producer prices dropped by -2.5%, close to the -2.6% anticipated. In response, Asian equities posted mixed performance - CSI 300 was roughly flat, the Shanghai Comp up 0.71%, and the Hang Seng Index in Hong Kong experienced significant losses, declining by -1.22%.
Other news:
China Is Oversupplied With Commodities as Deflation Persists BBG
US Initial Jobless Claims Drop for the First Time in Three Weeks BBG
Ozempic Maker Novo Gets Calls From ‘Scared’ Food CEOs BBG
How Jack Dorsey’s Plan to Get Elon Musk to Save Twitter Went South BBG
Google releases ‘Gemini’ in new effort to cash in on generative AI FT
‘Meme-lord’ Litquidity reveals his true identity FT
Maersk warns oversupply to hit profits and plays down Red Sea boost RTRS
Arm shares soar as AI-fueled boom brightens growth prospects RTRS
Coach parent Tapestry raises 2024 profit forecast on China demand recovery RTRS
Investors Are Almost Always Wrong About the Fed WSJ
The Confusingly Strong Economy Told in Three Stories WSJ