Market Wrap 2026-01-25
Today's US Market Wrap — Key Points
- Mixed equity performance; Dollar weakens, Gold rises.
- Yen strengthens amid BoJ speculation, potential intervention.
- Focus shifts to upcoming central bank meetings & key data.
- Crude oil rises on geopolitics; earnings season begins.
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- SNAPSHOT: Equities showed mixed performance, Treasury values declined, Crude oil prices increased, the Dollar's value decreased, and Gold prices rose.
- REAR VIEW: US Flash Purchasing Managers' Indexes (PMIs) did not meet expectations; the University of Michigan (UoM) sentiment was revised upward; the Bank of Japan (BoJ) maintained interest rates as anticipated, although Takata voted for a 25 basis point (bps) increase; UK Retail Sales and Flash PMIs exceeded expectations; bets on Rick Rieder becoming the new Federal Reserve (Fed) Chair increased significantly; Trump criticized Canada for favoring business with China; China is reportedly allowing major tech companies to prepare orders for NVIDIA's H200 chips; the Trump administration is considering a naval blockade to stop Cuban oil imports.
- COMING UP: Data releases include the German Ifo (January), US Chicago Fed National Activity Index (October/November), Durable Goods (November), and Atlanta Fed GDP. Events include the Australian Holiday (Australia Day). Supply information will be released from Japan, the EU, and the US.
- WEEK AHEAD: Key events include meetings of the Federal Open Market Committee (FOMC), Bank of Canada (BoC), and Riksbank, as well as EZ GDP data and Tokyo CPI.
- CENTRAL BANK WEEKLY: A preview of the FOMC, BoC, Riksbank, and BCB meetings is provided, along with a review of the BoJ, Norges Bank, and CBRT meetings.
- WEEKLY US EARNINGS ESTIMATES: Earnings reports from the "Mag-7" companies begin with Microsoft (MSFT).
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MARKET WRAP
US stock indices generally declined at the end of the week, but the Nasdaq 100, which is heavily weighted in technology stocks, was the only index to increase, supported by gains in NVIDIA (+1.5%) after China reportedly informed major tech firms that they could prepare orders for H200 chips. However, a sharp drop in Intel's (-17%) value after weak guidance limited gains. Sector performance was mixed, with Financials and Industrials underperforming, while Energy was the top performer, boosted by strength in crude oil prices and continued strong rhetoric from the US regarding Iran. In addition, the US, Russia, and Ukraine began their trilateral meeting, which has concluded for the day. Zelensky stated that it is too early to draw conclusions and that he will observe how the conversation develops and what results it produces. Despite these events, the foreign exchange (FX) market was the main focus, with the Yen showing significant strength as the USD/JPY exchange rate retraced from a high of 159.226 to a low of 155.68. Overnight, the BoJ vote showed a slightly hawkish split (8 voted to hold rates, while Takata voted for a 25 bps hike), leading to speculation about FX intervention. Several important events followed the decision: 1) Ueda stated that they must pay attention to even small FX moves; 2) Finance Minister Katayama said that they are watching FX moves with a high sense of urgency; and 3) A sharp bout of JPY strength occurred during Ueda's conference. These events led markets to believe that intervention was possible; however, some desks noted that the size and timing of the move (during Ueda's press conference) made this unlikely. Subsequently, the Yen saw another sharp appreciation, albeit over a couple of hours, without any major news. Elsewhere in the FX market, all major currencies gained against the US Dollar. Despite the moves in the Dollar, T-Notes saw slight weakness in thin parameters ahead of the FOMC next week. Precious metals (XAU, XAG) gained strength amid possible diversification away from the Dollar, with spot silver topping USD 100/oz and spot gold edging towards USD 5k/oz.
US
FLASH PMIS: The Manufacturing PMI was reported at 51.9 in January, up from 51.8, but below the expected 52.0. The Services PMI fell short of the expected 52.8, remaining unchanged at 52.5 from December's 52.5. The composite PMI was 52.8, up from 52.7. Employment increased slightly, with the near-stalled job market reflecting concerns from companies over rising costs and softer sales growth in recent months. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that "The survey is signalling annualized GDP growth of 1.5% for both December and January, and a worryingly subdued rate of new business growth across both manufacturing and services adds further to signs that Q1 growth could disappoint".
MICHIGAN: The University of Michigan's final data for January was strong, with upward revisions across the board. Sentiment was revised to 56.4 from 54.0, conditions to 55.4 from 52.4, and forward-looking expectations to 57.0 from 55.0. Inflation expectations saw the short-term 1-year ahead falling to 4.0% from 4.2%, with the longer-term 5-year inching up to 3.3% from 3.2%, but beneath the expected 3.4%. Surveys of Consumers Director Joanne Hsu remarked that while the overall improvement was small, it was broad-based, seen across the income distribution, educational attainment, older and younger consumers, and Republicans and Democrats alike. Despite this, Hsu added that national sentiment remains more than 20% below a year ago, as consumers continue to report pressures on their purchasing power stemming from high prices and the prospect of weakening labor markets.
FIXED INCOME
T-NOTE FUTURES (H6) SETTLED 2+ TICKS HIGHER AT 111-21+
T-Notes experienced slight weakness across the curve ahead of next week’s FOMC meeting. At settlement, the 2-year yield decreased by 0.7 bps to 3.605%, the 3-year yield decreased by 1.1 bps to 3.673%, the 5-year yield decreased by 1 bps to 3.839%, the 7-year yield decreased by 1 bps to 4.033%, the 10-year yield decreased by 1 bps to 4.237%, the 20-year yield decreased by 0.8 bps to 4.796%, and the 30-year yield decreased by 0.6 bps to 4.833%.
THE DAY: Overnight, T-Notes traded within a range and showed limited follow-through from the weakness in Japanese Government Bonds (JGBs) after the BoJ meeting and comments from Governor Ueda. JGBs were weighed down by the hawkish dissenter, upward growth revisions, and an increase to the 2026 inflation view. Despite Ueda seemingly suggesting that the earliest point for a rate hike would be April, market pricing showed a slight hawkish skew. Nonetheless, T-Notes continued to trade within very narrow parameters throughout the EU and US sessions, hitting a peak of 111-23+ and a low of 111-16. Despite the lack of movement in Treasuries, there was notable strength in the Yen (and corresponding weakness in the Dollar), which failed to spark much reaction in other assets, but saw USD/JPY tumble from an earlier high of 159.23 to a low of 155.90. Regarding data, US S&P Global PMIs disappointed, while the final University of Michigan data for January saw all metrics revised higher, but these had little impact on markets as they had little sway on the outlook for the Fed heading into the confab next Wednesday.
THE WEEK: The bond steepener trade was negatively impacted this week, and some desks note that it is set to come under further pressure given supply seasonals, the FOMC meeting, and a reshuffling of the odds for who will be the next Fed chair. Warsh was the favorite for the vast majority of the week, followed by Rieder. As the week draws to a close, Rieder has actually become the betting favorite for the first time. On this, and as desks added, Warsh could set the bond market up for another fight between a White House demanding cuts and a Fed unwilling to deliver. In addition, Treasuries are still adjusting after Trump withdrew his tariff threats on the EU regarding Greenland earlier in the week, which helped quell some inflationary fears and reduced geopolitical concerns, flattening the curve.
SUPPLY:
Notes
- The US Treasury will sell USD 69 billion of 2-year notes on January 26th, USD 70 billion of 5-year notes on January 27th, and USD 44 billion of 7-year notes on January 29th; all to settle on February 2nd.
- The US will sell USD 30 billion of 2-year Floating Rate Notes (FRN) on January 28th, to settle on February 2nd.
Bills
- The US will sell USD 89 billion of 13-week bills and USD 77 billion of 26-week bills on January 26th, and USD 90 billion of 6-week bills on January 27th; all to settle on January 29th.
STIRS/OPERATIONS
- Market Implied Fed Rate Cut Pricing: January 0 bps (previous 0 bps), March 2.8 bps (previous 2.1 bps), April 6.5 bps (previous 6.2 bps), December 42.78 bps (previous 42.2 bps)
- NY Fed Reverse Repurchase (RRP) operation demand at 0.93 billion (previous 2.06 billion) across 5 counterparties (previous 14)
- Effective Federal Funds Rate (EFFR) at 3.64% (previous 3.64%), volumes at USD 89 billion (previous 95 billion) on January 22nd
- Secured Overnight Financing Rate (SOFR) at 3.64% (previous 3.63%), volumes at USD 3.121 trillion (previous 3.087 trillion) on January 22nd
CRUDE
WTI (H6) SETTLED USD 1.71 HIGHER AT USD 61.07/BBL; BRENT (H6) SETTLED USD 1.82 HIGHER AT USD 65.88/BBL
The crude oil complex was firmer in a week dominated by geopolitical events ahead of the US/Russia/Ukraine trilateral meeting. Recent reports suggest the meeting on Friday ended with participants awaiting any potential readout ahead of the Saturday meeting. Prior to the meeting, Trump met Putin, as he did with Zelensky on Wednesday, and the US President said Putin, alongside others, will have to make concessions to end the war in Ukraine; Trump added both Putin and Zelensky want to make a deal, while the Kremlin called the talks “constructive”. Aiding the energy upside on Friday was more punchy Iran reporting, as Trump continues to increase the pressure through more sanctions, and announced an "armada" was heading towards the Middle Eastern nation. Trump also remarked that they have a big force going towards Iran, is watching Iran very closely, and would rather not see something happen on Iran, but he did note they will be doing a 25% secondary tariff on Iran. On the supply footing, JPMorgan notes that global crude and condensate exports have been down by as much as 4.5 million barrels per day (BPD) at points this month due to disruptions in Russia, Kazakhstan, and Venezuela. Although JPM stressed a meaningful amount of that is not lost supply, and markets may be overpricing the impact. In the weekly Baker Hughes rig count, oil rigs rose by 1 to 401, natural gas rigs were unchanged at 122, and the total rig count increased by 1 to 544. WTI traded between USD 59.52-61.26/bbl and Brent traded between USD 64.29-66.07/bbl.
EQUITIES
CLOSES : SPX +0.03% at 6,916, NDX +0.34% at 25,605, DJI -0.58% at 49,099, RUT -1.82% at 2,669
SECTORS: Financials -1.38%, Industrials -0.80%, Health -0.56%, Utilities -0.40%, Communication Services +0.14%, Real Estate +0.30%, Technology +0.54%, Energy +0.61%, Consumer Staples +0.65%, Consumer Discretionary +0.73%, Materials +0.86%.
EUROPEAN CLOSES : Euro Stoxx 50 -0.05% at 5,953, Dax 40 +0.01% at 24,859, FTSE 100 -0.07% at 10,143, CAC 40 -0.07% at 8,143, FTSE MIB -0.58% at 44,832, IBEX 35 -0.67% at 17,544, PSI -0.54% at 8,558, SMI -0.72% at 13,149, AEX -0.01% at 1,000
STOCK SPECIFICS:
- China is reportedly allowing major tech companies to prepare orders for NVIDIA's (NVDA) H200 chips.
- Spotify (SPOT) was upgraded by Goldman Sachs from 'Neutral' to 'Buy'.
- Amazon (AMZN) plans a second round of corporate job cuts next week, targeting approximately 30,000 roles in total.
- Disney (DIS) expects to announce the appointment of its next CEO in early 2026.
- Cigna (CI) stated that its plan to end drug rebates will reduce earnings by $500–600 million.
- Capital One (COF) is set to acquire Brex for $5.15 billion in cash and stock.
- Fortinet (FTNT) was upgraded by TD Cowen from 'Hold' to 'Buy'.
EARNINGS:
- Intel (INTC): Provided softer-than-expected guidance for the next quarter, citing supply constraints and production efficiency challenges despite a quarterly earnings beat.
- CSX (CSX): Reported a profit beat.
- Intuitive Surgical (ISRG): Reported EPS and revenue above consensus estimates.
- SLB (SLB): Reported top and bottom line results surpassing expectations.
FX
The Dollar weakened against all major peers as participants continued to seek alternatives amid unpredictable US administration actions on trade, geopolitics, and the Fed. Given that US equities and Treasuries showed little correlation to the intraday FX moves, it appeared to be more dollar hedging as opposed to 'Sell America'. Highlighting this was silver's move above USD 100/oz and gold inching closer to USD 5000/oz (peaked at 4,990) with optimism on central bank gold buying still at large given NBP last week announcing intentions to increase gold reserves to 700 T from 550 T. On the Fed, concerns over independence have increased with betting markets assigning BlackRock's Rick Rieder around a 47% probability of being the new Fed Chair from around 6% last week, surpassing Former Fed Governor Warsh (32%). Reports suggest Rieder has garnered Trump's attention with his ideas for overhauling the Fed, likely reinforced by his zero experience at the Fed, unlike Warsh and Current Governor Waller (10% chance). Elsewhere, US data had little bearing on price action (UoM revised higher, S&P Global Flash fell short). The Dollar Index (DXY) trades around lows of 97.557 from the earlier 98.481 highs.
JPY was the standout G10 currency to end the week, following a slightly hawkish vote split from the BoJ (8 voted for hold, Takata voted for a 25bps hike) and speculation over FX intervention. The BoJ kept rates at 0.75% as widely expected, noting it will continue to raise the rate (if the economic outlook is realized, Ueda added later) and adjust the degree of monetary accommodation. A few important events followed the decision. 1) Ueda said they must pay attention to even small FX moves, 2) Finance Minister Katayama said they are watching FX moves with a high sense of urgency, and 3) A sharp bout of JPY strength in Ueda's conference. All this combined led markets to believe intervention was possibly at play; however, desks note the size of the move and timing (amid Ueda presser) likely diminishes it being the case. Some note a possible reason behind the move was as a rate check (MOF calling round to see where banks think the JPY should be). JPY strength trimmed before resuming later in the session, gradually, but albeit in an aggressive way, again signalling likely not a case of intervention but markets continuing to assess the BoJ, and FM language from today, as well as the broad USD diversification described above. From earlier 159.224 highs, USD/JPY now trades around 155.682 lows at pixel time.
All G10 FX was firmer vs. USD on Friday. GBP and AUD saw strong gains; the former was helped by surprise growth in Retail Sales for December (act: 0.4% vs exp. -0.1%) and strong UK Flash PMIs; AUD benefited from optimism on China as well as the metals rally.
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