Oil prices surge to two-week winning streak as Iran supply fears grip markets
Trump went with the safe choice for a new Fed chair. Kevin Warsh has served on the Fed and will work well within the organization, and is seen as someone dedicated to keeping the Fed’s independence. That said, the bet for a Fed rate cut in June, Warsh’s first open market meeting after Powell steps down, has risen to 49%, and bets for a 2nd cut in ’26 are also on the rise.
Interest rates are actually on a modest rise today. While the US 2-year is flat, the 10-year is up 2bps to 4.25%, the 30-year +3bps to 4.88%. The yield curve is steepening. International yields are flat, including Japan. The US dollar index is up 0.5% to 96.7.
In a bit of a reverse rally, gold dipped briefly below $5K overnight, over 10% lower than the high just this week, though still up for the week, and +15.8% for the month. Red-hot silver saw an even bigger correction, falling over 13% to below $100/oz, now slightly red for the week, though still up 29% for the month. Momentum buyers are bailing out, but the fundamentals that have taken the metals so far are still in place; demand for physical delivery remains high. Platinum is also down 13%, now down 16.7% for the week, up 2.5% for the month.
In other commodities, copper is down 2.8%, leaving it up 2.6% for the month, still up 36% in 6 months. Crude oil has climbed above $65.50/bbl, natural gas is higher, back above $4/mcf, and gasoline is flat at $1.95/gal.
Crypto saw a major correction with Bitcoin trading as low as $81.2K, clawing back to $83K, as new regulations keep getting delayed, and silver and gold have become the vehicle for investors concerned about fiat currencies.
The PPI for December jumped from 0.2% to 0.5%, leaving y-o-y at 3.0%. Core PPI from 0.0% to 0.7%, leaving 3.3% y-o-y. PPI ex food/energy/transport was +0.4% for Dec, +3.5% y-o-y. On a positive note, Chicago PMI for January, forecast to rise less than a point from December’s adjusted 42.7, jumped to 54.0, the highest since Nov’23, indicating strong economic growth.
In earnings news, Apple (AAPL) had solid beats top and bottom and gave good guidance, but the shares are down 1.1% today (-6.0% YTD, +7.5% LTM). The uncertainty of how Apple will participate in the AI boom is hurting them. Visa (V) had modest beats top and bottom, but the number of transactions disappointed. The shares are down 2.2% (-7.6% YTD, -5.5% LTM).
As the trading day continues, Tech is negative, but the Magnificent 7 is slightly positive, primarily due to Tesla (TSLA) being up 4.8% on rumors that Elon Musk might merge Tesla with SpaceX into a holding company before the SpaceX IPO, to consolidate his ownership interests.
It’s been a volatile month, but still in the green. The trend remains positive.