A look at the day ahead in the US and global markets by Mike Dolan
After a frenetic first three days of Donald Trump’s new presidency, Wall Street’s buoyant stocks hovered near new record highs, gradually returning attention to a hard-hitting corporate earnings season and economic updates.
The rise in US stock indexes on Wednesday, driven by Trump’s plan to boost investment in artificial intelligence and Netflix’s impressive results, saw the S&P500 hit a new intraday record and volatility indicators fall to the lowest low of the year so far.
Stock index futures fell slightly overnight and Treasury yields rose amid renewed “risk-on” sentiment, despite strong demand for the latest 20-year bond sale on Wednesday.
One of the highlights of the week so far has been how sovereign debt sell-offs in developed markets have sparked robust orders from investors, alleviating some early-year fears over funding audience. Apart from the sale of 20-year bonds, bond auctions in Britain, France and elsewhere have been swallowed up by fixed-income funds.
Moderate inflation figures in the United States, Canada and Europe have helped and, at 46 basis points, the estimated “term premium” embedded in 10-year Treasuries has fallen to its lowest level of the year.
Also contributing to this situation was the decline in U.S. crude oil prices to a two-week low, partly due to Trump’s pro-drilling push. On Monday, the new president declared a national energy emergency, aiming to give him the power to reduce environmental restrictions on energy infrastructure and projects and make it easier to grant permits for the construction of new transportation networks and pipelines.
Trump speaks in Davos
Overnight, there hasn’t been much news regarding Trump’s new tariff measures. Despite declarations about possible new tariffs on China, previous commitments from the European Union, Canada and Mexico regarding “day one” hikes have not materialized – leaving the issue unresolved over the course of weeks to come.
Instead on Wednesday, Trump turned his attention to Russia, saying he would add new tariffs to his threat of sanctions against Moscow if the country did not reach 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 a.m. ET.
On Wall Street, Thursday brings a return of economic updates after a week of data dearth so far, and weekly jobless claims figures will be closely watched again later, with the first wave of consumer surveys January business also about to take place.
Today’s earnings news is dominated by Texas Instruments and General Electric, with markets now bracing for next week’s updates from the Big Tech megacaps of the so-called Magnificent Seven.
