Stock Market Update

Equity futures point to a modestly higher opening after yesterday's action saw investors rotate out of tech stocks while cyclical names resumed their rally from earlier in the week. The major averages have finished mixed in the past two sessions, though they enter today's action with solid week-to-date gains. 

Today's session could likely be the most notable of the new year so far, with multiple catalysts in play. The U.S. Supreme Court is expected to deliver opinions on the legality of President Trump's broad tariffs that were enacted under the International Emergency Economic Powers Act (IEEPA). If the court finds the tariffs illegal, refunds, or at least partial refunds of tariff revenue collected, could be paid. 

The market also has a full slate of economic data to assess this morning, including the December Employment Situation Report. Recent labor data suggests the labor market is still in a low-firing, low-hiring state. The market is expectant of multiple rate cuts from the Fed this year, but it is not until April that the probability of a rate cut reaches 50%, according to the CME FedWatch tool. 

 In corporate news:

• President Trump, in an interview, says oil companies have pledged to spend $100 billion in Venezuela, and he will meet with oil executives today, according to Politico.
• Merck (MRK 111.00, +0.01, +0.0%) could pay between $28 billion and $32 billion for Revolution Medicines (RVMD 123.00, +15.61, +14.5%), according to Financial Times.
• Taiwan Semiconductor Manufacturing (TSM 319.41, +1.40, +0.4%) beat revenue estimates, according to Bloomberg. 

Reviewing overnight developments:

Equity indices in the Asia-Pacific region ended the week on a mostly higher note. Japan's Nikkei: +1.6%, Hong Kong's Hang Seng: +0.3%, China's Shanghai Composite: +0.9%, India's Sensex: -0.7%, South Korea's Kospi: +0.8%, Australia's ASX All Ordinaries: UNCH.

In news:

• Press reports suggest that China has continued tightening restrictions on exports to Japan with The Wall Street Journal reporting that licensing for rare earth exports has been suspended. Japan's Finance Minister Katayama is expected to discuss the issue with U.S. officials during a visit next week.
• Fast Retailing increased its guidance for FY26.
• TD expects the Reserve Bank of Australia to announce a 25-basis point rate hike in February.

In economic data:

• China's December CPI 0.2% m/m (last -0.1%); 0.8% yr/yr, as expected (last 0.7%). December PPI -1.9% yr/yr (expected -2.0%; last -2.2%)
• Japan's November Household Spending 6.2% m/m (expected 2.7%; last -3.5%); 2.9% yr/yr (expected -1.0%; last -3.0%). November Leading Index 110.5 (expected 110.4; last 109.8) and Coincident Indicator -0.7% m/m (expected 0.5%; last 1.0%)
• South Korea's November Current Account $12.24 bln (last $6.81 bln)

Major European indices trade in the green while Spain's IBEX (-0.3%) lags. STOXX Europe 600: +0.6%, Germany's DAX: +0.4%, U.K.'s FTSE 100: +0.6%, France's CAC 40: +0.9%, Italy's FTSE MIB: +0.1%, Spain's IBEX 35: -0.3%.

In news:

• Germany's industrial production grew unexpectedly in November.
• European Central Bank policymaker Centeno is reportedly looking to run to replace Vice President de Guindos.
• There is some ongoing focus on merger talks between Rio Tinto and Glencore.

In economic data:

• Eurozone's November Retail Sales 0.2% m/m (expected 0.1%; last 0.3%); 2.3% yr/yr (expected 1.6%; last 1.9%)
• Germany's November trade surplus EUR13.1 bln (expected surplus of EUR16.3 bln; last surplus of EUR17.2 bln). November Imports 0.8% m/m (expected 0.2%; last -1.5%) and Exports -2.5% m/m (expected 0.0%; last 0.3%). November Industrial Production 0.8% m/m (expected -0.6%; last 2.0%); 0.8% yr/yr (last 1.1%)
• France's November Consumer Spending -0.3% m/m (expected -0.1%; last 0.5%) and Industrial Production -0.1% m/m (expected -0.2%; last 0.2%)
• Italy's November Retail Sales 0.5% m/m (expected 0.3%; last 0.5%); 1.3% yr/yr (last 1.3%)
• Spain's November Industrial Production 4.5% yr/yr (last 1.2%). December Business Confidence -3.5 (last -3.2)
• Swiss December Unemployment Rate 3.0%, as expected (last 3.0%)