Stock Market Update

The S&P 500 futures are up 23 points and are trading 0.4% above fair value, the Nasdaq 100 futures are up 97 points and are trading 0.4% above fair value, and the Dow Jones Industrial Average futures are up 194 points and are trading 0.4% above fair value.

Politics are in play this morning with President Trump back in office following yesterday's inauguration, which was followed immediately by a slate of executive orders undoing a lot of the Biden administration's policies and the declaration of a national energy emergency.

Notably missing from the orders were decisive tariff actions. The futures market gathered some positive momentum on that understanding, but cooled off some after President Trump later said he is thinking about 25% tariffs for Canada and Mexico starting February 1.

Still, the futures market seems enthused by the thought of deregulation and friendlier business/tax policy under the new administration and is reserving some tariff judgment until it sees them in action (and in the data). A relatively calm Treasury market at the moment is helping in this transition.

The 2-yr note yield is down one basis point to 4.26% and the 10-yr note yield is down two basis points to 4.59%. The U.S. Dollar Index is down 0.6% to 108.67.

In corporate news:

• 3M (MMM 147.20, +6.17, +4.4%): beats by $0.02, beats on revs; guides FY25 EPS in-line, revs in-line
• Apple (AAPL 225.69, -4.29, -1.9%): Jefferies downgrades to Underperform from Hold; holiday period iPhone sales in China declined by 18%, according to Bloomberg
• Charles Schwab (SCHW 81.00, +4.59, +6.0%): beats by $0.10, beats on revs
• D.R. Horton (DHI 153.35, +5.70, +3.9%): beats by $0.26, beats on revs; reaffirms FY25 revs guidance
• Fifth Third (FITB 44.90, +0.56, +1.3%): misses by $0.03
• Moderna (MRNA 35.25, +1.19, +3.5%): confirms $590 million award from the Department of Health and Human Services to accelerate the development of mRNA-based pandemic influenza vaccines
• New Oriental Education & Technology Group (EDU 53.46, -7.38, -12.1%): misses by $0.08, beats on revs; guides Q3 revs below consensus

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended Tuesday on a mixed note. Japan's Nikkei: +0.3%, Hong Kong's Hang Seng: +0.9%, China's Shanghai Composite: -0.1%, India's Sensex: -1.6%, South Korea's Kospi: -0.1%, Australia's ASX All Ordinaries: +0.7%.
  • In economic data:
    • Hong Kong's December CPI 0.1% m/m (last 0.0%); 1.4% yr/yr (expected 1.5%; last 1.4%)
    • South Korea's December PPI 0.3% m/m (last 0.1%); 1.7% yr/yr (last 1.4%)
    • New Zealand's December Electronic Card Retail Sales 2.0% m/m (last 0.1%); -1.0% yr/yr (last -2.3%). December RBNZ Offshore Holdings 59.2% (last 58.6%)
  • In news:
    • The Trump administration will assess China's adherence to the U.S.-China trade agreement.
    • China's President Xi repeated that a more proactive macroeconomic policy will be sought in 2025.
    • Japan's Economy Minister Muto said that his country wants to cooperate with the U.S. on semiconductor development while South Korea's acting President Choi said that his country wants to cooperate with the U.S. on shipbuilding.
• Major European indices trade on a mostly lower note. STOXX Europe 600: unch, Germany's DAX: -0.2%, U.K.'s FTSE 100: unch, France's CAC 40: +0.2%, Italy's FTSE MIB: -0.5%, Spain's IBEX 35: -0.6%.
  • In economic data:
    • Eurozone's January ZEW Economic Sentiment 18.0 (expected 16.9; last 17.0)
    • Germany's January ZEW Economic Sentiment 10.3 (expected 15.2; last 15.7) and ZEW Current Conditions -90.4 (expected -93.1; last -93.1)
    • U.K.'s November Average Earnings Index + Bonus 5.6% yr/yr, as expected (last 5.2%). November three-month employment change 35,000, as expected (last 173,000) and November Unemployment Rate 4.4% (expected 4.3%; last 4.3%)
  • In news:
    • European Central Bank policymaker Kazimir said that a January rate cut is certain and that there could be three or four rate cuts in a row.
    • Germany released a disappointing ZEW Economic Sentiment survey for January (10.3; expected 15.2), noting that the second consecutive year of a recession weighed on expectations.