Market Wrap 2026-01-26
Today's US Market Wrap — Key Points
- Stocks rose amid key earnings & Fed decision anticipation.
- Geopolitical tensions & trade uncertainty fueled FX moves.
- Treasury yields dipped after strong 2-yr note auction.
- Crude oil fell as Kazakhstan resumed production.
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- SNAPSHOT: Stocks advanced, Treasury yields decreased, crude oil prices declined, the U.S. dollar weakened, and gold prices increased.
- REAR VIEW: Former President Trump threatened Canada with 100% tariffs due to its ties with China; a strong U.S. 2-year note auction occurred; OPEC+ is reportedly likely to maintain its supply pause in March; a U.S. winter storm is expected to cut power for over 200,000 customers, leading to numerous flight cancellations; Microsoft (MSFT) announced the Maia 200 chip; NVIDIA (NVDA) invested $2 billion into CoreWeave (CRWV); Democrats are threatening a partial government shutdown following a shooting in Minneapolis involving ICE.
- COMING UP: Data releases scheduled include Chinese Industrial Profit (Dec), US Richmond Fed (Jan), Consumer Confidence (Jan), and ADP Employment Change Weekly. Events include an NBH Policy Announcement. Speakers include ECB President Lagarde, Nagel, and former US President Trump. Supply announcements are expected from Australia, the UK, Italy, Germany, and the US. Earnings reports are due from Texas Instruments, UnitedHealth, Boeing, UPS, General Motors, RTX, American Airlines, LVMH, and Logitech.
- WEEK AHEAD: Key events include the FOMC meeting, BoC meeting, Riksbank meeting, EZ GDP release, 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 are set to begin, starting with Microsoft (MSFT).
MARKET WRAP
U.S. stocks closed higher on Monday, with bullish sentiment prevailing ahead of a busy week for earnings reports from companies including Microsoft (MSFT), Meta (META), Tesla (TSLA), Apple (AAPL), and ASML. Futures experienced a dip on Sunday before recovering losses during trading in the APAC and EU regions. The initial decline was triggered by Trump's threat of 100% tariffs on Canada due to its trade relations with China, as well as the potential for a partial government shutdown following a disagreement over ICE funding after a shooting in Minneapolis over the weekend. The Communications and Technology sectors led in performance, while Consumer Discretionary was the only sector to decline. Microsoft announced the Maia 200 chip, posing a challenge to NVIDIA, which contributed to a slight decrease in NVIDIA (NVDA) shares (-0.7%). In the FX market, participants continued to seek alternatives to the U.S. dollar amid trade uncertainty and geopolitical tensions, leading to rallies in gold and silver. Gold briefly exceeded USD 5,100/oz, and silver climbed above 117/oz before settling around 108/oz. The Japanese yen extended its gains from Friday following further verbal intervention and speculation about a potential joint U.S.-Japan intervention. In the Treasury market, the long end outperformed, while the relative underperformance of the 2-year was limited by a strong 2-year note auction. Attention is now focused on the Fed rate decision on Wednesday, a possible Fed Chair announcement, and the start of earnings reports from the Mag 7 companies. Oil prices decreased following the resumption of oil production in Kazakhstan at its largest oil field, although outages have occurred in the U.S. due to Storm Fern. Natural gas prices saw a fifth consecutive day of gains.
FIXED INCOME
T-NOTE FUTURES (H6) SETTLED 5 TICKS HIGHER AT 111-26+
Treasury notes saw strength across the curve as attention shifts to the Fed and the next Chair, following a strong 2-year auction. At settlement, the 2-year yield was down 0.6bps at 3.590%, the 3-year yield was down 0.6bps at 3.654%, the 5-year yield was down 0.7bps at 3.816%, the 7-year yield was down 1.3bps at 4.010%, the 10-year yield was down 1.2bps at 4.211%, the 20-year yield was down 2.2bps at 4.763%, and the 30-year yield was down 2.1bps at 4.803%.
THE DAY: Treasury notes experienced gains on Monday, with the long end outperforming, although within narrow ranges and with limited news flow ahead of a week filled with risk events. Key events include the Fed meeting on Wednesday and earnings reports from the Mag-7 companies. USTs followed the lead of firmer European bonds. Upside was supported by increased trade tensions between the U.S. and China, no breakthrough between Ukraine and Russia, and continued pressures between the U.S. and Iran. The Washington Post reported that U.S. aircraft carriers and warships had reached the Middle East. Headline-driven news flow was light on Monday, as indicated by Treasury notes trading within an 8-tick range. There was a solid 2-year auction, but little movement was seen in Treasuries afterward. Some upside was also attributed to rising odds of a U.S. Government Shutdown after the events in Minnesota over the weekend.
SUPPLY:
Notes
- 2YR: The 2-year auction was solid overall. The high yield was 3.580%, with a stop-through of 1.4bps, compared to the prior auction's 0.2bps tail and the six-auction average of a 0.3bps stop-through. The bid-to-cover ratio was strong at 2.75x, above the prior 2.54x and the average of 2.6x. Dealers took a small 7.3% of the auction (previous 12.7%, average 11.2%), while Directs took 28.3%, compared to 34.1% last time and the six-auction average of 33.0%. Indirects took a substantial 64.4% (previous 53.2%, average 55.9%), ahead of the 5-year and 7-year auctions later in the week.
- The U.S. Treasury is set to sell USD 70 billion of 5-year notes on January 27th and USD 44 billion of 7-year notes on January 29th, with settlement on February 2nd.
- The U.S. is to sell USD 30 billion of 2-year FRNs on January 28th, with settlement on February 2nd.
Bills
- The U.S. sold USD 89 billion in 3-month bills at 3.580%, covered 2.90x, and sold USD 77 billion of 6-month bills at 3.525%, covered 3.07x.
STIRS/OPERATIONS
- Market Implied Fed Rate Cut Pricing: January 0bps (previous 0bps), March 2.8bps (previous 2.8bps), April 6.2bps (previous 6.5bps), December 45.2bps (previous 42.8bps).
- NY Fed RRP operation demand was at 1.5 billion (previous 0.93 billion) across 7 counterparties (previous 5).
- The EFFR was at 3.64% (previous 3.64%), with volumes at USD 99 billion (previous 89 billion) on January 23rd.
- The SOFR was at 3.65% (previous 3.63%), with volumes at USD 3.137 trillion (previous 3.121 trillion) on January 23rd.
CRUDE
WTI (H6) SETTLED USD 0.44 LOWER AT 60.63/BBL; BRENT (H6) SETTLED USD 0.29 LOWER AT 65.59/BBL
The crude complex experienced slight weakness as Kazakhstan is set to resume production at its largest oilfield, although there have been outages in the U.S. following Storm Fern. The Kazakhstan energy minister stated that they are to restart production, although industry sources indicated that volumes were still low and a force majeure on CPC Blend exports remained in place. CPC announced on Sunday that its Black Sea terminal had returned to full loading capacity after maintenance was completed at one of its three mooring points. On the supply side, the winter storm Fern hit the U.S. coast, forcing shut-ins in major crude and natural gas producing regions, with desks estimating that roughly 250,000 BPD of crude production has been lost, including declines in the Bakken field in Oklahoma and parts of Texas. Participants remain cognizant of geopolitical concerns, with reports from the Washington Post noting that U.S. aircraft carriers and warships have reached the Middle East. Additionally, Zelensky stated that the Ukraine-Russia delegation discussed steps to end the war and its monitoring, and a Ukraine-Russia meeting could happen on Sunday, but sooner would be preferable. Overall, benchmarks reached highs in the European morning before gradually selling off throughout the day, settling just off earlier lows. WTI traded between USD 60.42-61.71/bbl, and Brent traded between USD 64.52-65.72/bbl.
EQUITIES
CLOSES: SPX +0.50% at 6,950, NDX +0.42% at 25,713, DJI +0.64% at 49,412, RUT +0.64% at 49,412.
SECTORS: Consumer Discretionary -0.71%, Consumer Staples -0.05%, Real Estate -0.02%, Energy +0.04%, Industrials +0.10%, Materials +0.29%, Health +0.41%, Financials +0.65%, Utilities +0.78%, Technology +0.84%, Communication Services +1.32%.
EUROPEAN CLOSES: Euro Stoxx 50 +0.12% at 5,955, Dax 40 +0.20% at 24,950, FTSE 100 +0.05% at 10,149, CAC 40 -0.15% at 8,131, FTSE MIB +0.26% at 44,950, IBEX 35 +0.78% at 17,681, PSI +0.23% at 8,577, SMI +0.04% at 13,132, AEX -0.14% at 999
STOCK SPECIFICS:
- Baker Hughes (BKR) exceeded expectations for both EPS and revenue.
- Cisco (CSCO) was upgraded at Evercore to 'Outperform' from 'In Line'.
- CoreWeave (CRWV) is strengthening its collaboration with NVIDIA (NVDA), and NVIDIA is investing USD 2 billion.
- Merck (MRK) is no longer in discussions to acquire Revolution Medicines (RVMD).
- Netflix (NFLX) was upgraded at Phillip Securities to 'Accumulate' from 'Sell'.
- Sarepta Therapeutics (SRPT) reported positive topline three-year functional results from Part 1-treated patients in EMBARK.
- SkyWater (SKYT) is to be acquired by IonQ (IONQ) for approximately USD 1.8 billion.
- Microsoft (MSFT) announced the Maia 200 chip, an AI inference accelerator built on TSMC's (TSM) 3NM process; it will be deployed in Iowa, with future regions to follow, and will serve multiple AI models, including the latest GPT-5.2 models.
FX
The U.S. Dollar began the week as it ended the previous week, selling off against major peers (excluding CAD) as continued trade conflict sustained the de-dollarization trade. Former U.S. President Trump threatened Canada with 100% tariffs due to Prime Minister Carney's intention to increase trade with China. Unsurprisingly, the Canadian dollar lagged as an optimistic outcome of USMCA negotiations appears unlikely. Further trade uncertainty led to broad selling of the U.S. dollar, benefiting precious metals; gold climbed above USD 5,100/oz, and silver surged above USD 116/oz. Other news flow was light, with lagged November Durable Goods data having little impact on participants' outlook. Attention this week is focused on the Fed rate decision on Wednesday (expected to hold), a possible Fed Chair announcement from Trump, U.S.-EU trade relations, and any geopolitical updates surrounding Iran or Ukraine/Russia. Barclays' month-end rebalancing model indicates no strong U.S. dollar directional bias against most majors, with a weak U.S. dollar buying signal against the Euro.
Yen strength continued on Monday following further verbal intervention, specifically from Prime Minister Takaichi, who noted that they are ready to take action against speculative moves amid a weakening currency and a surge in bond yields. Despite significant intervention speculation on Friday, BoJ accounts provided no clear signal of intervention in the JPY on Friday. ING suggests two reasons behind a possible joint U.S.-Japan intervention: a weak JPY adding to higher U.S. yields via pressure on JBS, and potentially undoing the work of U.S. tariffs on Japan, giving Japanese manufacturers a competitive advantage. USD/JPY hit lows of 153.30 from Friday's close of 155.74 before recovering to approximately 153.98.
USD/CAD was slightly firmer as Trump's latest trade threat on China has cast a dim view on USMCA negotiations later this year in July. Prime Minister Carney spoke today, showing no signs of caving, arguing that new opportunities make Canadians less dependent on the U.S. "Some of President Trump's recent comments should be viewed within the framework of the USMCA review." Canadian and Chinese officials have both stated that they are not seeking a free trade deal.
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