Minutes from the last Federal Open Market Committee meeting released Wednesday showed that the central bank expected to make interest rate cuts this year but hadn’t seriously deliberated on the timing or magnitude of them.
That failure to declare Mission Accomplished leads nicely into the latest view from strategists at HSBC, who warn of what they call a temporary “reverse Goldilocks” phase. They note that so-called supercore inflation is still higher, and more broad-based, than pre-pandemic, and that progress on some measures of underlying inflation such as the Cleveland Fed’s median CPI have stalled recently.
The compensation component of a small business sentiment survey that tends to lead wage growth by nine months points to another pickup in wage inflation in the coming quarters, as the disruption in the Red Sea points to an end of the easing of global supply chains.
At the same time, the HSBC strategists say, sentiment and positioning is now very stretched. Some examples include the strong rise in equity long positions from the trend-following CTAs, as well as close to record high net longs in U.S. equity futures of asset managers.
“The combination of continued strong activity and further positive activity surprises coupled with potential upside risks to inflation (particularly vs the dovish rates pricing and consensus expectations) lends further weight to our concern about yet another ‘reverse Goldilocks’ episode hitting us in the coming weeks,” they say.
In all, they’re now tactically underweight in both equities as well as high-yield credit, the latter asset in which they were previously “maximum overweight.” They also are underweight developed market sovereign bonds. “Instead, we raise ‘dry powder’ and wait for better re-entry points. That means we increase our tactical allocation to cash and short-dated investment grade credit,” they say.
The market
U.S. stock futures
ES00,
NQ00,
turned lower after the latest batch of jobvs data, as the yield on the 10-year Treasury
BX:TMUBMUSD10Y
rose to 3.98%.
| Key asset performance | Last | 5d | 1m | YTD | 1y |
| S&P 500 | 4,704.81 | -1.61% | 3.42% | -1.36% | 22.11% |
| Nasdaq Composite | 14,592.21 | -3.36% | 3.15% | -2.79% | 39.52% |
| 10 year Treasury | 3.957 | 11.58 | -19.88 | 7.64 | 23.82 |
| Gold | 2,055.60 | -0.97% | 0.50% | -0.78% | 11.85% |
| Oil | 73.41 | 1.90% | 5.41% | 2.92% | -0.70% |
| Data: MarketWatch. Treasury yields change expressed in basis points | |||||
The buzz
A day ahead of the U.S. December payrolls report, ADP said 164,000 private-sector jobs were created last month, while initial jobless claims fell to 202,000, the lowest since October.
Apple
AAPL,
saw another downgrade, this time to neutral at Piper Sandler, which warned of growing handset inventories, a deteriorating outlook in China and various legal battles.
Mobileye Global
MBLY,
stock slumped in premarket trade as the company said it’s become aware of excess supplies at its top customers.
Meta Platforms
META,
co-founder and CEO Mark Zuckerberg offloaded shares in his company for the first time in two years.
APA Corp.
APA,
reached a deal to buy Delaware Basin producer Callon Petroleum
CPE,
for $4.5 billion including debt.
Walgreens Boots Alliance
WBA,
is cutting its dividend by 48% while earnings did beat expectations.
Omega Therapeutics’
OMGA,
stock soared on a research pact with weight-loss drug maker Novo Nordisk
NVO,
Shares in U.K. athletic apparel retailer JD Sports
JD,
tumbled after disappointing sales data, coming just two weeks after a Nike
NKE,
warning.
Best of the web
This best-selling personal finance author says he has racked up more than $1 billion in debt.
There was no Santa Claus rally for the first time in eight years.
The U.S. Army is resurrecting production for the M777 howitzer after its heavy use by Ukraine.
Top tickers
Here were the top performing stock-market tickers as of 6 a.m. Eastern.
| Ticker | Security name |
|
TSLA, |
Tesla |
|
GME, |
GameStop |
|
NVDA, |
Nvidia |
|
NIO, |
Nio |
|
AAPL, |
Apple |
|
AMC, |
AMC Entertainment |
|
MARA, |
Marathon Digital |
|
AMZN, |
Amazon.com |
|
BABA, |
Alibaba |
|
AMD, |
Advanced Micro Devices |
The chart
The blogger who goes by the name of Citrini Research points to one counterintuitive beneficiary of the weight-loss drug craze — Torrid Holdings
CURV,
a maker of plus-sized clothing. “Someone who is 4XL that is losing weight will have to go through 3X, 2X, XL to get there. And people that are losing weight are going to want to wear clothes that fit them, to enjoy their new weight loss,” said the blogger on the social-media service X, who says the company is now the highest weight of a GLP-1 basket, overtaking Eli Lilly
LLY,
The chart, part II
Just how unpredictable are the 2024 elections? Consider this chart on current U.S. control-of-power probabilities, taken from Bruce Mehlman of Mehlman Consulting’s 2023 takeaways and 2024 look ahead. “A majority of the world goes to the polls in 2024 amidst ongoing trade wars, a growing Cold War and two active shooting wars. Perceived disorder drives voter discontent. Nationalists & Populists campaign on skepticism of free trade, embrace of industrial policy, rejection of global elites & vilification of domestic foes,” he writes. But he also pointed to good news stories with policy implications, including the soft landing for the U.S. economy, the success of appetite suppression drugs, and falls in carbon emissions and global poverty.
Random reads
A 13-year-old is believed to be the first person to ever “beat” Tetris.
Another teen phenom — this 16-year-old darts player has become a star in Britain.
Pineapple comes to the best known pizza street in the world capital of pizza.
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