Jan 19th Morning Note
Stocks firm despite rates indicating higher for longer
Equities finished modestly higher yesterday (SPX +0.3%, Nasdaq +0.6%, Russell 2000 +0.2%), while VIX declined from 0.5pt to 13.6. Most of the heavy lifting was done by tech, specifically, MegaCap tech with AAPL rising 3.3% on BAML research analyst upgrade. On the macro side, more data is pointing to higher for longer as March rate cut is a toss-up now from a high probability of 79% last Friday. The 10Y yield has bounced back to 4.14% from 3.70% seen on Dec 27th. Hawkish data (initial jobless claims, retail sales, UK CPI) and hawkish Fed support this narrative.
This morning, futures (SPX +0.4%, Nasdaq +0.7%) are firm with Taiwan chipmaker performance helping tech sentiment.
Day ahead:
Data: University of Michigan Sentiment, 1yr inflation, and 5-10yr inflation at 10:00 EST for January. The recent pull-back in oil prices could soften 1y inflation expectations. More focus should be on 5y-10y inflation expectations where consensus expects a slight uptick to 3%.
Fedspeak: Fed’s Goolsbee will be on CNBC today - he is the most dovish member of the FOMC. Daly will speak twice today and Barr speaks on bank regulation at 1PM
Other News:
Congress averts shutdown, extending government spending into March (WSJ)
A hot debt market is slashing borrowing costs for riskier companies (WSJ)
An odd assortment of bed-fellows come out against proposed bank capital rules (NYT)
US prepares rule forcing banks to tap Fed's Discount Window (BBG)
Big Tech rally heats up, sparking overcrowding fears (BBG)
China's stock rout accelerates as foreign investors exit (FT)
China vows to rein in capacity in EV market (FT)
China's aging population threatens switch to new economic growth model (RTRS)