AI Optimism is continuing to drive S&P 500 higher
The US equities are extending their gains this morning with S&P up ~22pts (0.5%) and Nasdaq comp up ~100pts (0.7%) on no major macro news. Ongoing bullish sentiment, specifically in Tech is doing most of the heavy lifting as seen on Friday. The S&P 500 closed at a new all-time high of 4,840pts on Friday. AI optimism after TSMC and SuperMicro reported strong demand for chips has led to a broader rally in the Tech complex especially MSFT (above $400) and NVDA (above $600).
Notably, equities have defied higher Treasury yields and rate-cut odds decreasing. The yields on the 2Y and 10Y Treasury bonds have increased by 13bps and 22bps, respectively, since the year started. The odds of a March cut have also dropped to 44% from a high of 79% on Jan 12th. In the near term, these factors have become irrelevant for investors as a broader theme remains that the Central Banks will be pivoting to easing monetary policy this year. Speaking of Central Banks, we have 8 Central Bank decisions this week (4 in G10), and Fed next week (Fed speakers blackout this week).
Pivoting to China, it was another brutal day for Hang Seng (-2.3%) and Shanghai Comp (-2.7%). It is currently the most hated and cheap market in the world as monetary stimulus measures are fading. Sentiment also dampened further after Reuters reported China ordered indebted local governments to halt some infrastructure projects, citing sources. Overnight, China's mortgage-linked 1y and 5y LPR rates were kept unchanged, which led to losses in property names.
On the macro calendar, we have US 4QGDP, PCE, along with notable earnings to watch for, apart from major Central Bank decisions (ECB, BoC, BoJ).
On the politics front, Ron DeSantis dropped out of the Republican nomination race on Sunday ahead of the NH primary, endorsing Trump.
Other news:
FAA calls for more Boeing 737 checks after bolt findings (Yahoo)
Bank of Canada to keep rates on hold as stubborn inflation delays cut (RTRS)
China moves to support yuan as stock markets tumble (RTRS)
Underdog Nikki Haley Gets One-on-One Race With Donald Trump (WSJ)
More Workers Want to Change Jobs but Now Face Tougher Odds (WSJ)
Do not get on the wrong side of PickleBall players and their courts (WSJ)
Earn an extra yield on your holding by selling your proxy vote (WSJ)
Labor supply helped tame inflation and it might not have much more to give (WSJ)
The US seems to be dodging recession. What could go wrong? (NYT)
US corporate bond markets are "on fire" (FT)
Has the 'easy money' already been made in bonds? (BBG)
Q4 GDP to crown vigorous second half (BBG)