MARKET WRAP

The big story today was the release of the NFP jobs number before the market opened. The report exceeded expectations, pushing treasury yields higher and dampening hopes for Fed rate cuts. Equities reacted negatively, ending the week with another sharp decline. While this week's overall drop isn't catastrophic yet, there are some warning signs. For example, today's move lower in SPX (-1.5%) was greater than the ±1% range priced in by options. For the week, the SPX fell by 2.8%, twice the move options had predicted. The Nasdaq fared even worse, with QQQ down by -1.6% today and -3.6% for the week. IWM had already been hit hardest over the past month and was lower by -4% this week, including a -2.2% move today. Liz points out on today’s MRKT Call that small cap action is fairly clear evidence that this selling is about rates/yields right now, and not growth concerns, a potential silver lining if yields were to stabilize. More on that at the bottom of this email. And stay tuned this weekend for a new feature previewing next week’s action—check your inbox Sunday evening.

MRKT MATRIX: January 10, 2025

Today’s Top Stories:

• Stocks tumble after strong jobs report dampens Fed rate-cutting outlook (CNBC)

• Wall Street Economists Pare Back Fed Rate-Cut Views After Data (Bloomberg)

• Inflation data will be of paramount importance in the week ahead, with earnings kicking off (CNBC)

• S&P 500 Will Likely Report Highest Earnings Growth in 3 Years for Q4 (FactSet)

• AMD Stock Downgraded. Goldman Names This Surprise Among AI Chip Picks for 2025. (Barron’s)

• Nvidia Slams Biden Chip Restrictions. Rules ‘Play Into the Hands of U.S. Adversaries.’ (Barron’s)

• TikTok Supreme Court Clash Pits Free Speech Against US Security (Bloomberg)

• The CEOs Who Are Tearing Up the Policies Trump Hates (WSJ)

Today’s MRKT Call and On The Tape Collaboration is Presented by
SoFi and CME Group

Yields Spike After Hot Jobs Report

A very special episode today, with Liz, Guy and Dan covering the hotter than expected jobs number and what the Fed does next. Dan and Liz discuss whether the Fed made a mistake with their rate cuts in the Fall given what we know now. Dan asks the question whether the Fed needs to be less stubborn on its 2% goal. Liz gets into today’s action and points out that the relative weakness comparison Russell vs Nasdaq vs SPX shows that recent moves are about rates, not growth fears and that a hotter than expected jobs number is ultimately good news when you step back to look at the entire economy. Next, Dan and Guy chart the S&P before discussing Nvidia, Apple, and then Liz weighing in on small caps vs mega caps and what signals they are showing. Then, some thoughts on the dollar, gold, oil, and more. Finally, Lululemon, Nike and your questions!

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What’s Next?

Now for some silver linings—or at least, less bad news. The SPX closed near the lower boundary of its recent range, established in early November. Earlier this week we had identified SPY 580 as a key near-term level, and that’s exactly where the market finished. A relief rally next week could indicate we’re still in a choppy market, rather than starting a new leg down. But, it’s not much of a silver lining if the market follows through to the downside to start next week. There’s likely an air pocket beneath this range and next stop could be closer to 570 SPY if we cannot hold this level. The VIX did print above 20 today. If we are able to hold this level to begin next week, that would be another silver lining. A VIX above 20 often marks a near term bottom within a choppy range. Obviously, if this level does not hold, traders would be looking for VIX in the upper 20’s if not 30, for the next sign of a more significant capitulation. We’ll be back Sunday evening with an update on next week’s market events, earnings, and the set-up overall.

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