Michael Reinking:
Hello, I'm Michael Reinking, senior market strategist at the New York Stock Exchange, and this is Market Storylines. Every week we are here to keep you up to date on the key trends and events driving global markets. Well, welcome back. In last week's episode, one of our main takeaways for 2025 was the expectation that there would be more volatility, and that is already showing up in the first week of the year. Now we are recording on Wednesday afternoon as markets will be closed on Thursday, in observance of the National Day of Mourning for the passing of President Carter so let's talk about some of the market storylines driving that volatility. This week has featured a little bit of all of the items we highlighted as potential volatility inducing events last week. After a persistent sell off during December, the end of last week ended on a positive note helped by a mix of headlines, including Speaker Johnson securing the House Speaker role, a better than expected ISM manufacturing survey and building optimism heading into the Consumer Electronics Show in Las Vegas with Nvidia CEO's keynote event on Monday night.
Now, this helped the S&P 500 end the week right at its 50-day moving average, which has been a closely watched technical level. Now over the weekend, some additional headlines helped to feed some of that tech optimism with Microsoft reiterating that it would spend $80 billion to build data centers this year, and a strong earnings report from Foxconn. Now over the weekend, there were also reports that Congress was working on one big, beautiful bill to address tax spending, tax spending cuts, border security and address the debt ceiling, opposed to a two-prong approach. And ahead of the open on Monday, there were also press reports suggesting that the administration was considering a more targeted approach to tariffs, which added to that upside momentum. But President Trump quickly took to the airwaves calling that report fake news, which took the wind out of the sails of the broader tape. Now at the same time, Treasury yields continued the recent move higher with the 30-year yield clearing its 2024 high around 4.85%, and the 10-year yield approaching last year's high around 4.7%.
Now on Monday night, Jensen Huang's presentation included the unveiling of its new chip, a desktop powered by Blackwell, and he also shed some light on how AI will shape the world going forward with its Cosmos platform developing physical AI systems for robots and self-driving. Now, this was all impressive enough to send the stock to a new all-time high at the open on Tuesday, briefly overtaking Apple as the largest market capitalization company and pulling it the overall tape higher with it, but there was a bit of the sell the news response after the open, which started to weigh on the overall tape. However, the real downside momentum kicked in after the day's economic data was released and sent Treasury yields sharply higher again. The JOLTS jobs opening came in ahead of expectations jumping back to 8.1%, which is about 10% higher than the September trough, which was just below 7.4 million. But it was the price's component with the ISM services that sent chills down the spine of traders and sent Treasury yields higher again.
The S&P 500 reversed nearly 2% from its intraday high to end the session down 1%, while Nvidia fell about 8.5% from its high. Now today has also been a choppy day with traders remaining hyper focused on global yields. Yields in the UK jumped over 10 basis points ahead of the US open with clearing their 2023 highs, which is the equivalent of over 5% for US Treasuries, and that could weight on futures early in the session. However, a mix of somewhat dovish Fed commentary and the FOMC Minutes this afternoon, labor market data continued to point to a slowdown in hiring and wages and a successful 10 and 30-year auctions over the last two days have helped Treasury yields back off slightly from the highs, and equities have stabilized today. Yeah, but traders are waiting with bated breath for Friday's BLS employment report. Economists are looking for about 150,000 jobs to have been added to the economy down from 227,000 last month, but be on the lookout for some revisions. Now, the unemployment rate and wages are both expected to hold steady at 4.2% and 4% respectively.
And from a market perspective, a somewhat softer number would probably be well received as it might help slow the Treasury selling. But if there is a weaker number and yields continue to march higher, that would probably be the worst mix, suggesting that the bond vigilantes have awoken from their slumber and are willing to push Washington to make meaningful progress on spending cuts and growing fiscal deficits. Now next week will be the first full trading week of 2025, and it will be jam packed with catalysts, including the start of the staff confirmation meetings in Washington, US inflation data, China trade and GDP, and two more big conferences including the J.P. Morgan Healthcare Conference and the ICR Conference in Orlando. And it is also the start of earning season with the major banks leading us out of the gate. And once again, thank you for spending some time with us today. Remember, you can watch Market Storylines on our YouTube channel or you can listen every Friday on the Inside the ICE House Podcast feed. Thanks for joining me. I'm Michael Reinking. I'll talk to you again next week.
Speaker 2:
That's our conversation for this week. Remember to rate, review and subscribe wherever you listen and follow us on X at ICE House Podcast. From the New York Stock Exchange, we'll talk to you again next week inside the ICE House. Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties expressed or implied as to the accuracy or completeness of the information, and do not sponsor, approve or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.