Quiver Quantitative - In the recent market wrap, bond yields have experienced a notable increase amid skepticism over the Federal Reserve's aggressive rate cut speculations. This shift comes as Wall Street resumes trading after the US holiday, with eyes keenly set on Federal Reserve policy updates. The speculation that the Fed may ease rates as early as March has led to a surge in US stock optimism, reaching its highest level since 2021, as indicated by a Bank of America Corp (NYSE:BAC). survey. Despite this, fresh data on jobs and inflation, particularly the unexpected drop in producer prices, suggest an 80% probability of rate cuts starting in March. However, Fed officials continue to advocate for a more measured approach to rate reductions this year.
Ipek Ozkardeskaya, a senior analyst at Swissquote, expresses caution, suggesting it might be premature for central banks to cut interest rates. In the US, factors such as resilient growth, a healthy job market, and sustained fiscal spending leading up to the presidential election do not necessitate an immediate Fed rate cut. Meanwhile, the S&P 500 lost momentum following last week’s gains. Goldman Sachs (GS) reported better-than-expected earnings due to a revenue jump in its equities-trading unit, contrasting with Morgan Stanley’s (MS) traders who underperformed, impacting the firm's profits. Treasury (TLT) 10-year yields crossed 4%, and the dollar reached a one-month high.
Market Overview: -Stocks dip as optimism for early Fed rate cuts fades. -Bond yields climb on renewed hawkish concerns. -Dollar strengthens, cryptocurrencies show mixed movement.
Key Points: -Wall Street grapples with resilient economic data and cautious Fed pronouncements. -Despite analyst downgrades, companies expected to beat earnings forecasts, but overall -growth remains stagnant. -Events like China's GDP, Eurozone CPI, Fed Beige Book, and central bank speeches key for gauging policy trajectory.
Looking Ahead: -Markets await further clues on Fed's timeline for easing, with focus on economic data and central bank rhetoric. -Republican presidential primary debate and Davos discussions add fuel to the fire.
In corporate news, significant developments have caught the market's attention. The US Supreme Court's decision to not consider Apple (NASDAQ:AAPL) appeal in an antitrust lawsuit targeting its App Store could have serious revenue implications for the tech giant. Meanwhile, Microsoft (NASDAQ:MSFT) CEO Satya Nadella expressed his confidence in the governance of OpenAI, underscoring the importance of consistency and good governance in their partnership, without any intent to exert increased control.
Key events in the upcoming week include economic data releases from China, the Eurozone CPI, US retail sales, and several Fed and ECB officials' speeches. Investors will also watch the ECB’s account of its December policy meeting and the Republican presidential primary debate in New Hampshire. Market movements saw the S&P 500, Nasdaq 100, Dow Jones, and Stoxx Europe 600 all experiencing declines. The Bloomberg Dollar Spot Index rose, while major currencies like the euro, pound, and yen weakened against the dollar. In cryptocurrencies, Bitcoin saw a marginal decline, while Ether recorded a slight increase. Bond yields on 10-year Treasuries rose, and commodity prices, including crude oil and gold, fell.
This article was originally published on Quiver Quantitative