Market Wrap 2026-01-18
Today's US Market Wrap — Key Points
- Mixed equity performance amid light data, MLK Day market closure.
- Trump's Fed Chair comments impact yields; Bowman advocates rate cuts.
- Key data ahead: Eurozone/Canada CPI, China GDP, BoC projections.
- Earnings season ramps up: NFLX, JNJ, SCHW, PG, INTC reports due.
- JPY strengthens on intervention talk, potential BoJ rate hike.
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MARKET WRAP
- SNAPSHOT: Equities showed mixed performance, Treasury yields declined, crude oil prices increased, the U.S. dollar was stable, and gold prices decreased.
- REAR VIEW: President Trump indicated he wants to retain Hassett at the National Economic Council (NEC), downplaying the possibility of him becoming the next Federal Reserve Chair. Trump also expressed gratitude to Iran for canceling scheduled executions. Federal Reserve Governor Bowman advocated for further interest rate cuts due to concerns about the job market, while Fed Governor Jefferson suggested rates have reached a level consistent with neutrality. Trump threatened tariffs on countries not complying with Greenland-related matters. Japan's Finance Minister stated that foreign exchange intervention remains a potential option under the U.S.-Japan agreement. Canada announced it would permit the import of up to 49,000 Chinese electric vehicles (EVs). China adjusted trading limits for silver and nickel futures.
- COMING UP: The U.S. market is closed for the Martin Luther King Jr. (MLK) Day holiday. Newsquawk will provide APAC coverage starting on Sunday, January 18th at 22:00 GMT/17:00 EST. EU coverage will begin on Monday, January 19th at 06:30 GMT/01:30 EST. The desk will close at 18:00 GMT/13:00 EST and reopen for APAC coverage at 22:00 GMT/17:00 EST. Economic data releases include the Eurozone final Harmonized Index of Consumer Prices (HICP) for December, Canadian Consumer Price Index (CPI) for December, Chinese Gross Domestic Product (GDP) for the fourth quarter, and Retail Sales for December. The Bank of Canada (BoC) will release its Summary of Economic Projections (SCE).
- WEEK AHEAD: Key events include the U.S. Personal Consumption Expenditures (PCE) data, the Bank of Japan (BoJ) meeting, China activity data, flash Purchasing Managers' Indexes (PMIs), and inflation figures from the UK, Japan, and Canada.
- CENTRAL BANK WEEKLY: A preview of the BoJ, People's Bank of China (PBoC) Loan Prime Rate (LPR), European Central Bank (ECB) minutes, Norges Bank, and Central Bank of the Republic of Turkey (CBRT) meetings.
- WEEKLY US EARNINGS ESTIMATES: A busy week for earnings releases, with notable reports from Netflix (NFLX), Johnson & Johnson (JNJ), Charles Schwab (SCHW), Procter & Gamble (PG), and Intel (INTC).
Additional Newsquawk resources:
- Subscribe to the free premarket movers reports.
- Trial Newsquawk’s premium real-time audio news squawk box for 7 days.
U.S. indices traded within a narrow range on Friday, ahead of the MLK Day holiday. Sector performance was mixed, with Real Estate leading and Health underperforming, amid a lack of significant U.S. economic data releases. Despite limited data and Federal Reserve commentary, the U.S. dollar strengthened and Treasury yields rose after President Trump suggested he would retain Hassett as NEC Director and that Hassett would not be his choice for Fed Chair. Following Trump's remarks, Treasury notes declined across the curve, as Hassett is viewed as a dovish candidate and less supportive of Federal Reserve independence, leading traders to reduce expectations for Federal Reserve rate cuts. FBN reported that those involved in the interview process for Rick Rieder as Fed chair considered his lack of prior Federal Reserve experience a positive. Markets now favor former Fed Governor Warsh as the next Fed Chair, with Kalshi assigning a 59% probability to Warsh. Rieder's probability remains at 10%. The U.S. dollar was flat overall, with the Japanese yen outperforming following comments from BoJ sources and renewed verbal intervention. Crude oil prices were relatively stable amid ongoing geopolitical tensions. While energy prices settled higher, benchmarks pared some gains after Trump acknowledged Iran's cancellation of scheduled executions. Spot silver prices were affected by adjustments to trading limits for silver futures in China, while spot gold also experienced losses, although to a lesser extent. Federal Reserve Governor Bowman indicated the Fed should not signal a pause in its rate cut campaign, while Governor Jefferson stated he does not want to prejudge the January rate-setting decision and that Fed rate cuts since 2024 have brought the policy rate into a range consistent with neutral. The Federal Reserve entered a blackout period ahead of the upcoming Federal Open Market Committee (FOMC) meeting.
US
BOWMAN: Federal Reserve Governor Bowman reiterated her dovish stance, stating the Fed should be prepared to cut rates again due to risks in the job market and should not signal a pause in the rate cut campaign. She added that the risks to the Fed's mandate are asymmetric, and the Fed should be ready to cut again if the labor market needs it. She believes monetary policy is modestly restrictive and should be forward-looking. She sees solid growth and lower inflation, which should stabilize the labor market, noting the economy has been resilient. However, she is concerned about labor market fragility, stressing policy should be focused on supporting the jobs market. She acknowledged the Fed has made considerable progress on lowering inflation, noting underlying inflation is close to the Fed's 2% target. She also noted that inflation pressures are easing as tariff impact abates.
JEFFERSON (voter): Governor Jefferson stated he does not want to prejudge the January rate-setting decision. He believes some upside risks remain but expects inflation to return to its path back to 2%. Jefferson views inflation as somewhat elevated, with the climb in core goods prices inconsistent with the return to 2% inflation. He is cautiously optimistic for 2026, though faces risks to both employment and price stability goals. The governor expects 2% economic growth in the near term and the unemployment rate to hold steady this year. He noted that Fed rate cuts since 2024 have brought the policy rate into a range consistent with neutral. Current policy stance leaves them well-positioned to determine how much and when to adjust the policy rate.
NAHB: The National Association of Home Builders (NAHB) housing market index fell to 37 in January from 39, below the expected 40. Within the report, current sales conditions dipped to 41 (previous 40), while sales expectations in the next six months and traffic of prospective buyers both dropped by three points to 49 and 23, respectively. The report also revealed that 40% of builders reported cutting prices in January, unchanged month-over-month, but the third consecutive month the share has been at 40% or higher since May 2020, indicating ongoing challenges for the housing market. On the price footing, the average price reduction was 6% in January (previous 5% month-over-month), and the use of sales incentives was 65% in January, marking the 10th consecutive month this share has exceeded 60%.
INDUSTRIAL PRODUCTION: Industrial Production rose 2% year-over-year in December, cooling from the prior 2.5% and missing the 2.7% forecast. Manufacturing production rose 2%, accelerating from the prior 1.9% and in line with forecasts. Month-over-month Manufacturing rose 0.2%, above the -0.2% forecast and up from the downwardly revised unchanged reading. Capacity utilization rose to 76.3% from 76.1%, above the 76% forecast. The report noted that most of the major market groups posted gains in the month. Oxford Economics stated that the data reinforce their view of a sustainable increase throughout the year. The consultancy says, "In 2026, a confluence of factors will allow manufacturing to fire on multiple cylinders. Better tax treatment of business investment, greater defense spending, more interest-rate relief, and an ongoing AI buildout will undergird further growth in factory production."
FIXED INCOME
T-NOTE FUTURES (H6) SETTLED 15 TICKS LOWER AT 111-24
Treasury notes sold off after President Trump suggested he will keep Hassett as NEC Director. At settlement, the 2-year yield was +2.8bps at 3.595%, the 3-year yield was +3.9bps at 3.661%, the 5-year yield was +5.5bps at 3.822%, the 7-year yield was +5.7bps at 4.018%, the 10-year yield was +5.6bps at 4.227%, the 20-year yield was +4.2bps at 4.789%, and the 30-year yield was +3.8bps at 4.835%.
THE DAY: Treasury notes largely meandered overnight before selling off as the U.S. session was underway. However, T-Notes tumbled to lows across the curve after commentary from US President Trump suggested he will not be going ahead with NEC Director Hassett as Fed Chair, stating he would like to keep him where he is. The move was clearly lower across maturities, but it did turn quite choppy across the curve thereafter, with the two-year paring some of the losses and hovering into settlement, while the 30-year also pared a lot of the weakness, before resuming lower into settlement. With Hassett seen as the most dovish, and less friendly for Fed-independence, traders were pricing out rate cuts from the Fed. Elsewhere on the matter, FBN reported that those inside the interview with Rick Rieder for Fed chair, saw it as a positive that he was the only candidate with no prior Federal Reserve experience. Markets are largely favouring former Fed Governor Warsh as the next Fed Chair now, with Kalshi assigning Warsh's probability at 59%. Rieder still lags at 10%, however. We are expecting to get a definitive announcement by the end of January. Elsewhere, Fed's Bowman spoke and struck her usual dovish tone, stating the Fed should not signal a pause in January.
SUPPLY
Notes
Reports suggested that the US Treasury is asking dealers whether they should consider quarterly 7-year T-note auctions with reopening's.
Bills
US to sell USD 85bln of 6-week bills (prev. 75bln), USD 89bln of 13-week bills (prev. 86bln), USD 77bln of 26-week bills (prev. 77bln) and USD 50bln of 52-week bills (prev. 50bln) on Jan 20th, to settle Jan 22nd.
STIRS/OPERATIONS
- Market Implied Fed Rate Cut Pricing: January 0bps (previous 0bps), March 3.3bps (previous 3.3bps), April 8.2bps (previous 8.2bps), December 43.2bps (previous 47.4bps)
- NY Fed RRP op demand at USD (previous 2bln) across counterparties (previous 6)EFFR at 3.64% (previous 3.64%), volumes at USD 92bln (previous 93bln) on January 15th
- SOFR at 3.66% (previous 3.64%), volumes at USD 3.201tln (previous 3.148tln) on January 15th
CRUDE
WTI (G6) SETTLED USD 0.25 HIGHER AT 59.44/BBL; BRENT (H6) SETTLED USD 0.37 HIGHER AT 64.13/BBL
The crude oil complex ended the day and week with gains amid heightened geopolitical risk. Although oil finished in the green for the week, it was well off earlier highs given the more constructive Trump tones in Iran in the last couple of days. The most recent update, which saw a brief bout of downside, was Trump noting he greatly respects the fact that all scheduled hangings, which were to take place yesterday (over 800 of them), have been cancelled by the leadership of Iran. Nonetheless, newsflow on Friday was fairly sparse, and participants are likely want to take money off the table ahead of the long US weekend due to MLK day on Monday. In the weekly Baker Hughes rig count, oil rose to 410, natgas fell 2 to 122, leaving the total down 1 at 543.
EQUITIES
CLOSES : SPX -0.06% at 6,940, NDX -0.07% at 25,529, DJI -0.17% at 49,359, RUT +0.12% at 2,678
SECTORS: Health -0.84%, Communication Services -0.72%, Utilities -0.51%, Materials -0.44%, Consumer Discretionary -0.17%, Consumer Staples 0.00%, Technology +0.09%, Financials +0.12%, Energy +0.21%, Industrials +0.65%, Real Estate +1.20%.
EUROPEAN CLOSES : European Closes: Euro Stoxx 50 -0.25% at 6,026, Dax 40 -0.30% at 25,276, FTSE 100 -0.04% at 10,235, CAC 40 -0.65% at 8,259, FTSE MIB -0.11% at 45,800, IBEX 35 +0.39% at 17,711, PSI +0.43% at 8,639, SMI -0.50% at 13,409, AEX -0.08% at 1,010
EARNINGS:
- J.B. Hunt (JBHT): Q4 revenue missed expectations.
- Regions Financial (RF): Profit and net income missed expectations, and the company expects net interest income (NII) to fall 1-2% quarter-over-quarter in the next quarter. Following the results, Wells Fargo downgraded the stock to 'Underweight' from 'Equal Weight' due to "weaker-than-expected" guidance.
- PNC Financial (PNC): Earnings per share (EPS) and revenue exceeded expectations, with a solid Q1 outlook.
STOCK SPECIFICS:
- AST SpaceMobile (ASTS) was awarded a prime contract position on the U.S. Missile Defense Agency’s SHIELD IDIQ program.
- Intel (INTC) was upgraded at Citi.
- Micron (MU) Director Teyin Liu purchased 23,200 shares between January 13th and 14th for a total of USD 7.8 million.
- Mosaic (MOS) announced preliminary disappointing Q4 results amid a challenging market environment that significantly impacted Q4 performance.
- Riot Platforms (RIOT) announced the fee simple acquisition of land and its first data center lease with AMD (AMD) at the Rockdale site.
- Seagate Tech (STX) was upgraded at Susquehanna to 'Neutral' from 'Negative'.
- U.S. President Trump stated he had a great meeting on Healthcare this morning, government money must be paid, not to the insurance companies, but directly to the people; Healthcare will be provided at a substantially reduced cost.
- OpenAI is introducing ChatGPT Go, now available worldwide; available for USD 8/month in the U.S.; ChatGPT now offers three subscription tiers globally; not launching ads in ChatGPT yet.
- Genmab (GMAB) announced topline results for epcoritamab from the Phase 3 Epcore dlbcl-1 trial in patients with relapsed/refractory diffuse large B-cell lymphoma (DLBCL); the study's overall survival (OS) did not reach statistical significance; the study demonstrated an overall survival hazard ratio (HR) of 0.96.
- Intel (INTC) hired a Qualcomm (QCOM) executive to lead GPU engineering for data centers, according to CRN reports.
FX
The Dollar Index was little changed with overnight losses erased as US President Trump downplayed NEC Director Hassett being the Fed Chair replacement. Hassett earlier highlighted that former Fed Governor Warsh and BlackRock's Rieder would be great Fed Chairs. Trump's comments sent both the dollar and US yields higher as Hassett is seen as the most dovish, and less friendly for Fed-independence, so participants were pricing out rate cuts from the Fed; gold was pressured as well. On the contrary, Fed's Bowman calls for continued rate cuts, noting concerns over job market risks with policy needing to be forward-looking. DXY hit lows of 99.16 before paring to ~99.37
JPY outperformed amongst G10 FX following a couple updates. Finance Minister Katayama said FX intervention is a potential option under the US-Japan agreement and expressed readiness to take decisive action while keeping all options on the table. Further JPY strength was founded on Reuters reports that some BoJ policymakers see scope to raise interest rates as soon as April due to the inflationary effect of a weaker JPY; seen as likely to raise its FY26 economic and inflation forecasts. USD/JPY now trades around lows of 157.82. AUD and CAD underperformed in the space.
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