A look at the day ahead in U.S. and global markets from Mike Dolan
After a frenetic first three days of the new Donald Trump presidency, buoyant Wall Street stocks hovered near new record highs – gradually turning attention back to a punchy corporate earnings season and economic updates.
Wednesday’s tech-led jump in U.S. equity indexes, infused by Trump’s plan to boost investment in artificial intelligence and impressive Netflix results, saw the S&P500 clock a new intraday record and volatility gauges subside to the lowest of the year so far.
Stock index futures stepped back a touch overnight and Treasury yields ticked higher in the renewed “risk on” environment, despite brisk demand for the latest sale of 20-year bonds on Wednesday.
One of the background features of the week so far has been how heavy sovereign debt sales across developed markets have been met with robust orders from investors – easing some early-year fears about government funding. Aside from the 20-year bond sale, bond auctions in Britain, France and elsewhere have been gobbled up by fixed income funds.
Benign inflation readings from the United States, Canada and Europe have helped and, at 46 basis points, the estimated “term premium” embedded in 10-year Treasuries has slipped back to its smallest of the year.
Also helping has been the retreat in U.S. crude oil prices to two-week lows, in part due to Trump’s pro-drilling push. On Monday the new president declared a national energy emergency, aimed at giving him the authority to reduce environmental restrictions on energy infrastructure and projects and ease permitting for new transmission and pipeline builds.
TRUMP TALKS TO DAVOS
There was not much new on Trump’s new tariff push overnight. Despite statements on possible new tariffs on China, the European Union, Canada and Mexico prior pledges on “Day One” hikes have not materialised – leaving the issue lingering over the weeks ahead.
Instead on Wednesday, Trump turned his attention to Russia, saying he would add new tariffs to his sanctions threat against Moscow if the country does not make a deal to end its war in Ukraine.
All eyes will be on Trump’s virtual appearance at the World Economic Forum in Davos at 11:00 a.m. ET.
On Wall Street, Thursday brings a return of economic updates after a data-starved week so far, and weekly jobless claims numbers will be watched closely again later, with the first sweep of January business surveys also about to unfold.
The day’s earnings diary is topped by Texas Instruments and General Electric, with markets now bracing for next week’s updates from Big Tech megacaps of the so-called Magnificent Seven.