Market Wrap 2026-01-12

Market Wrap 2026-01-12

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Today's US Market Wrap — Key Points

• Stocks rose, Treasury yields flattened, Dollar strengthened, oil & gold up.
• Mixed US jobs report; consumer sentiment improved; Iran tensions rising.
• US earnings, CPI, retail sales, & potential tariff ruling next week.

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• SNAPSHOT: Stocks increased, Treasury yields flattened, crude oil rose, the Dollar strengthened, and gold prices increased.
• REAR VIEW: The Non-Farm Payroll (NFP) report was mixed, with job growth slower than anticipated but the unemployment rate decreasing after a downward revision. The Supreme Court did not issue a ruling on the US Trump tariff case. The University of Michigan (UoM) consumer sentiment improved. Japan's Prime Minister is considering dissolving the Lower House. Federal Reserve (Fed) officials Bostic remains concerned about inflation, while Barkin described job growth as modest. EU members approved the EU-Mercosur trade deal. Tensions with Iran are escalating.
• COMING UP: Holiday: Japanese Holiday (Coming of Age Day). Data releases: New Zealand Institute of Economic Research (NZIER) Business Confidence, Westpac Consumer Confidence Change. Speakers: European Central Bank (ECB) official de Guindos; Fed officials Bostic, Barkin, and Williams. Supply: US 3- and 10-year notes.
• WEEK AHEAD: Key events include US Earnings, US CPI, US Retail Sales, UK GDP, and China Trade.
• WEEKLY US EARNINGS ESTIMATES: The financial sector will begin earnings season, with reports due from JPMorgan Chase & Co. (JPM), Bank of America Corporation (BAC), Wells Fargo & Company (WFC), The Goldman Sachs Group, Inc. (GS), Morgan Stanley (MS), and Citigroup (C).

MARKET WRAP

Stocks were bid up to conclude the week, with the Nasdaq showing strong performance after underperforming on Thursday. Gains were broad-based. The Equal Weight S&P 500 index increased by 0.6%, and most sectors closed higher, with materials and utilities outperforming. Materials were supported by metal prices, while utilities were boosted by gains in Vistra (VST) and other nuclear power stocks after Meta Platforms, Inc. (META) signed a power agreement with Vistra. Treasury notes flattened, with front-end yields rising after the NFP report. Long-end yields decreased after the Supreme Court did not rule on the Trump IEEPA tariffs, but may potentially rule on the issue next Wednesday. The NFP report indicated 50,000 jobs were added in December, below the forecast of 60,000, but the unemployment rate declined more than expected. The report did not suggest an immediate threat to the labor market, leading to the unwinding of any expectations for a January rate cut. In foreign exchange markets, the Dollar strengthened after the NFP report, while the Yen lagged due to reports that Japan's Prime Minister Takaichi is considering a snap election in February following strong approval ratings. Takaichi's LDP party is only a few seats short of a majority in the Lower House, and gaining seats would give her more control of the government. The Yen sold off, while Nikkei futures rallied on the possibility of looser fiscal policy. Oil prices increased as US tensions with Iran grew, and precious metals saw notable gains amid ongoing volatility. Base metals also saw gains. Next week, attention will focus on US CPI, Retail Sales, Treasury supply, potential tariff rulings from the Supreme Court, and the start of the Q4 2025 earnings season.

US

US NFP: The December employment report showed 50,000 jobs added to the economy, below the consensus estimate of 60,000 but within analyst forecast ranges and near the upper end of the Fed's breakeven estimate of 0-50,000. The unemployment rate decreased to 4.4% from 4.5%, which was revised down from 4.6%, below the forecast of 4.5%. The report did not significantly alter the Fed's narrative and largely confirms a hold at the January meeting, as it shows no sharp deterioration in the labor market. With inflation still above target, the Fed has room to pause. Average hourly earnings increased 0.3% month-over-month, in line with forecasts, accelerating from the prior 0.2% (revised up from 0.1%). On a yearly basis, earnings rose 3.8%, accelerating from the prior 3.5% and above the 3.6% forecast. Regarding the NFP prints, Fed Chair Powell suggested that headline prints are likely being overstated by about 60,000 per month, implying an actual print of -10,000. Meanwhile, the two-month net revisions were -76,000, although the October data was subject to sharp one-time government job losses. Analysts at ING highlight that job growth is also very concentrated, with 41,000 of the 50,000 jobs from private education and health care services. Since January 2023, this sector has accounted for 55% of the 5.2 million jobs added, government jobs accounted for 20%, and leisure and hospitality contributed 18%. Tech, construction, manufacturing, business services, financial services, retail, transport, and logistics are responsible for just 7% of job creation over that time period, and in December, this group lost 51,000 jobs, with only one up month in the last eight. Therefore, ING suggests the Fed still has more work to do.

UOM PRELIM: Consumer Sentiment rose more than expected in January, to 54.0 (exp. 53.5, prev. 52.9), its highest reading since September 2025. Improvements in January were seen among lower-income consumers, while sentiment fell for those with higher incomes. Consumers continue to be focused primarily on high prices and softening labor markets. Although consumers’ worries about tariffs appear to be gradually receding, they remain guarded about the overall strength of business conditions and labor markets. Current conditions rose to 52.4 (exp. 50.5, prev. 50.4), and Expectations rose to 55 (exp. 54.2, prev. 54.6). Year-ahead inflation expectations remained at 4.2% (exp. 4.2%), while the five-year expectation increased to 3.4% (exp. 3.1%, prev. 3.2%).

BUILDING PERMITS/HOUSING STARTS: The October Building Permits fell 0.2% to 1.412 million from 1.415 million in September, above the 1.35 million forecast. Single-family authorizations fell 0.5% from September to 876,000 from 880,000. Multi-family units were at 481,000. Housing Starts fell 4.6% to 1.246 million from 1.306 million in September, while single-family starts rose 5.4% to 874,000 from 829,000. Multi-family starts were at 347,000. Pantheon Macroeconomics highlight that the data show signs of stabilisation, but big headwinds remain, and the desk continues to think "that a key route for homebuilders to run down their inventory will be building fewer homes."

FIXED INCOME

T-NOTE FUTURES (H6) SETTLED 1 TICK LOWER AT 112-07

T-notes flatten after NFP while SCOTUS avoids ruling on Trump tariffs for now. At settlement, 2-year +4.4bps at 3.538%, 3-year +3.7bps at 3.593%, 5-year +2.5bps at 3.753%, 7-year +1.8bps at 3.955%, 10-year +0.2bps at 4.171%, 20-year −1.4bps at 4.767%, 30-year −1.8bps at 4.820%.

THE DAY: The Treasury curve flattened on Friday following the NFP report, with front-end yields increasing as the jobs report indicated no need for imminent rate cuts, leading markets to completely unwind any expectations for a January rate cut. However, the long-end of the curve saw yields decrease on the session, with the moves seen after the Supreme Court announced it would not rule on Trump's tariff ruling today, with long-end yields extending lower into settlement. The Supreme Court also announced it may be issuing opinions next Wednesday, so this may be another opportunity for markets to get clarity on whether Trump's IEEPA tariffs can go ahead. Elsewhere, the UoM prelim January survey came in above expectations with the inflation expectations unchanged for the year-ahead but rose to 3.4% from 3.1% in the 5-year horizon. Fed speak saw remarks from Bostic (retiring), who expressed concern about the inflation side of the mandate, while Barkin said the drop in unemployment was welcome, but job growth is modest. Attention next week turns to 3-, 10- and 30-year supply early in the week, US CPI, and US Retail Sales.

SUPPLY

Notes

• The US Treasury will sell USD 58 billion of 3-year notes on January 12th, USD 39 billion of 10-year notes on January 12th, and USD 22 billion of 30-year bonds on January 13th (as expected); all to settle January 15th.

Bills

• The US will sell USD 86 billion of 13-week bills and USD 77 billion of 26-week bills on January 12th.
• The US will sell USD 75 billion of 6-week bills on January 13th.

STIRS/OPERATIONS

• Market Implied Fed Rate Cut Pricing: January 0bps (prev. 2bps), March 7bps (prev. 10bps), April 11bps (prev. 16bps), December 50bps (prev. 58bps)
• NY Fed RRP op demand at USD 3.28 billion (prev. 3.1 billion) across 6 counterparties (prev. 7)
• EFFR at 3.64% (prev. 3.64%), volumes at USD 87 billion (prev. 83 billion) on January 8th.
• SOFR at 3.64% (prev. 3.65%), volumes at USD 3.249 trillion (prev. 3.267 trillion) on January 8th

CRUDE

WTI (G6) SETTLED USD 1.36 HIGHER AT 59.12/BBL; BRENT (H6) SETTLED USD 1.35 HIGHER AT USD 63.34/BBL

Crude oil prices increased during the US session after trading within a narrow range during the European morning. Updates throughout the EU session included Trump noting the second wave of attacks on Venezuela was cancelled, resulting in brief new session lows for WTI and Brent of USD 57.61/bbl and USD 59.77/bbl, respectively. Thereafter, focus turned to the continued protests in Iran, with geopolitical risk seemingly being priced in following an Iranian prosecutor saying rioters causing damage will face the death penalty, a prospect that is likely to worsen relations with the US, given that Trump on Thursday said the US will hit Iran hard if they kill rioters. WTI and Brent hit highs of 59.77/bbl and USD 63.92/bbl, respectively. US Baker Hughes (9th Jan): Oil -3 at 409, Natgas -1 at 124, Total -2 at 544

EQUITIES

CLOSES : SPX +0.65% at 6,966, NDX +1.02% at 25,766, DJI +0.48% at 49,504, RUT +0.78% at 2,624

SECTORS: Health -0.58%, Financials -0.35%, Real Estate +0.19%, Energy +0.36%, Communication Services +0.75%, Technology +0.98%, Consumer Staples +1.09%, Industrials +1.11%, Consumer Discretionary +1.14%, Utilities +1.24%, Materials +1.80%.

EUROPEAN CLOSES : Euro Stoxx 50 +1.58% at 5,998, Dax 40 +0.52% at 25,258, FTSE 100 +0.80% at 10,125, CAC 40 +1.44% at 8,362, FTSE MIB +0.10% at 45,719, IBEX 35 -0.03% at 17,649, PSI +0.40% at 8,520, SMI +0.47% at 13,413, AEX +2.40% at 988

STOCK SPECIFICS:

• Vistra (VST): Meta Platforms, Inc. (META) will purchase power from three Vistra plants in the US.
• Oklo (OKLO): META will help develop small modular reactors (SMRs) planned by Oklo.
• Revolution Medicines (RVMD): Merck & Co., Inc. (MRK) is reportedly in talks to acquire RVMD for $28–32 billion.
• Insmed (INSM): FY25 revenue guidance exceeded expectations.
• WD-40 Company (WDFC): Profit and revenue missed expectations.
• AXT, Inc. (AXTI): Cut Q4 revenue view.
• Qualcomm Incorporated (QCOM): Downgraded at Mizuho to 'Neutral' from 'Outperform'.
• CrowdStrike Holdings, Inc. (CRWD): Upgraded at Berenberg to 'Buy' from 'Hold'.
• Amazon's (AMZN) latest store concept is reportedly a Walmart (WMT) style supercentre, according to Business Insider.
• Amazon (AMZN) Pharmacy to expand access to Wegovy pill (NVO), according to reports.

FX

The Dollar was ultimately firmer after the December jobs report, which sent mixed signals about the labor market. Downside was originally seen likely a result of the headline miss (act. 50k vs exp. 60k), but was accompanied by a welcome drop in the unemployment rate to 4.4% after the prior 4.6% was revised down to 4.5%. The Dollar Index (DXY) saw a reversal, hitting highs of 99.264 amid broad USD strength. Strength extended after the Supreme Court said it will not rule today on the US Trump tariff case; however, those gains faded perhaps as uncertainty is to continue over US trade policy. On the consumer, sentiment improved to its highest level since Sept 2025, with improvement present amongst low-income consumers.

JPY was the notable G10 underperformer, weighed by reports of political instability, namely Japan's PM Takaichi considering dissolving the Lower House; Lower House election likely in early or mid February. Japanese equities took the news as positive, likely on the prospects of greater stimulus inbound if Takaichi can take more control of the lower house following an improvement in the polls. Overnight, we got Bloomberg reports that BoJ officials are set to keep rates on hold in January and said to weigh a downgrade of CPI outlook on government measures. USD/JPY trades near highs of 158.187.

CAD price action seemingly followed the dollar today despite a slowdown in Canadian jobs growth. Employment grew 8.2k (exp. -5k, prev. 53.6k), as full-time employment gains (+50.2k) offset a decline in part-time employment (-42.0k). The unemployment rate rose to 6.8% from 6.5% (exp. 6.6%%), accompanied by an uptick in the participation rate.