A daily market update from FS Insight — what you need to know ahead of opening bell.
“The ache for home lives in all of us, the safe place where we can go as we are and not be questioned.” – Maya Angelou
Overnight
Benjamin Netanyahu under pressure from far-right allies on Gaza ceasefire deal FT
U.S. further tightens chip restrictions, adds Chinese firms to blacklist WSJ
Polish PM accuses Russia of planning acts of terrorism against airlines around the world AP
Dozens of dead pulled from illegal South African gold mine after standoff with authorities WSJ
TSMC net profit hits record high as fourth-quarter results top expectations on robust AI chip demand CNBC
Bank of America and Morgan Stanley cement a Wall Street revival YF
BP cuts 4,700 internal, 3,000 contractor roles as it trims costs WSJ
Southwest Air faces US lawsuit for ‘chronic flight delays’ BBG
Prominent short seller Hindenburg is to shutter BBG
Jeff Bezos steps up challenge to Elon Musk’s SpaceX with New Glenn’s maiden launch FT
FDA bans Red No. 3, artificial coloring used in beverages, candy and other foods NBC
Investors seek $5 Billion for basketball league to rival NBA BBG
North Korea stole $659 million in crypto assets last year, according to authorities in US, South Korea, Japan REG
Sound of meteorite striking Earth caught on doorbell camera BBC
Chart of the Day
| Overnight |
| S&P Futures +20
point(s) (+0.3%
) Overnight range: -6 to +28 point(s) |
| APAC |
| Nikkei +0.33%
Topix -0.09% China SHCOMP +0.28% Hang Seng +1.23% Korea +1.23% Singapore +0.76% Australia +1.38% India +0.42% Taiwan +2.27% |
| Europe |
| Stoxx 50 +1.36%
Stoxx 600 +0.83% FTSE 100 +0.87% DAX +0.2% CAC 40 +2.1% Italy +0.97% IBEX -0.06% |
| FX |
| Dollar Index (DXY) -0.01%
to 109.08 EUR/USD flat at 1.0289 GBP/USD -0.29% to 1.2206 USD/JPY -0.48% to 155.72 USD/CNY -0.0% to 7.3316 USD/CNH -0.01% to 7.3478 USD/CHF -0.11% to 0.9116 USD/CAD +0.2% to 1.437 AUD/USD -0.19% to 0.6215 |
| Crypto |
| BTC -0.47%
to 99207.92 ETH -2.97% to 3331.25 XRP +1.75% to 3.101 Cardano -1.44% to 1.0426 Solana -1.22% to 200.34 Avalanche -3.08% to 38.61 Dogecoin -0.69% to 0.3743 Chainlink +1.75% to 22.1 |
| Commodities and Others |
| VIX -1.12%
to 15.94 WTI Crude -0.44% to 79.69 Brent Crude -0.44% to 81.67 Nat Gas -0.15% to 4.08 RBOB Gas -0.42% to 2.15 Heating Oil +0.05% to 2.615 Gold +0.42% to 2707.56 Silver +0.57% to 30.83 Copper +0.87% to 4.427 |
| US Treasuries |
| 1M -1.1bps
to 4.281% 3M -0.6bps to 4.2958% 6M -0.3bps to 4.2867% 12M +0.8bps to 4.1755% 2Y +1.7bps to 4.2806% 5Y +1.1bps to 4.458% 7Y +0.8bps to 4.5605% 10Y +0.2bps to 4.6552% 20Y -0.1bps to 4.9497% 30Y -0.7bps to 4.8722% |
| UST Term Structure |
| 2Y-3
M Spread widened 1.2bps to -3.6
bps 10Y-2 Y Spread narrowed 1.5bps to 37.0 bps 30Y-10 Y Spread narrowed 0.9bps to 21.5 bps |
| Yesterday's Recap |
| SPX +1.83%
SPX Eq Wt +0.96% NASDAQ 100 +2.31% NASDAQ Comp +2.45% Russell Midcap +1.22% R2k +1.99% R1k Value +1.11% R1k Growth +2.42% R2k Value +1.94% R2k Growth +2.03% FANG+ +2.76% Semis +2.35% Software +1.81% Biotech +2.18% Regional Banks +2.52% SPX GICS1 Sorted: Cons Disc +3.02% Comm Srvcs +2.65% Fin +2.58% Tech +2.22% SPX +1.83% Utes +1.46% Energy +1.39% Materials +0.91% Indu +0.67% REITs +0.44% Healthcare +0.24% Cons Staples -0.09% |
| USD HY OaS |
| All Sectors -4.8bp
to 305bp All Sectors ex-Energy -4.4bp to 288bp Cons Disc -6.9bp to 253bp Indu -4.2bp to 232bp Tech -6.9bp to 313bp Comm Srvcs -4.4bp to 493bp Materials -6.9bp to 279bp Energy -2.5bp to 277bp Fin Snr -5.0bp to 267bp Fin Sub +2.1bp to 197bp Cons Staples -6.7bp to 264bp Healthcare -6.6bp to 365bp Utes +1.1bp to 221bp * |
| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 1/16 | 8:30AM | Dec Import Price m/m | -0.1 | 0.1 |
| 1/16 | 8:30AM | Dec Retail Sales m/m | 0.6 | 0.7 |
| 1/16 | 10AM | Jan Homebuilder Sentiment | 45.0 | 46.0 |
| 1/17 | 4PM | Nov Net TIC Flows | n/a | 203.566 |
MORNING INSIGHT
Good morning!
It’s been a turbulent start to the year, but we are now at the midpoint of January and the S&P 500 is up nearly one percent. So as turbulent as it’s been, we are still making forward progress.
Click HERE for more.
TECHNICAL
- SPX still has some work to do, but Wednesday’s breadth expansion was impressive.
- Positive divergence on NYSE Advance/Decline provided some bullish clues.
- Financials sector breaking out is positive for this sector to outperform on a market rally.
Click HERE for more.
CRYPTO
A recent Bloomberg article offers further evidence, in our view, that it is trade policy that continues to prop up the DXY and weigh on crypto.
Click HERE for more.
First News
As followers of inflation data and our work know, shelter has been one of the primary reasons why core inflation has remained above the Federal Reserve’s target of 2%. Roughly 53% of the components that make up inflation metrics like CPI are largely back to (or below) their pre-pandemic levels.
Fundstrat Head of Research Tom Lee has noted that the elevated nature of the CPI shelter component is due to its lag behind real-world prices, and yesterday we saw signs that this component might be cooling – shelter prices in December notched the smallest YoY gain since January 2022.
However, even after shelter inflation does eventually return to long-term trend lines, the lack of affordable housing will remain a problem.
Across the U.S., in both large cities and small towns, families are being forced to devote a growing share of household income toward housing. Personal-finance experts suggest that households limit their spending on rent/housing to no more than 30% of pre-tax income, but a recent Harvard study suggests that on average, renting households are spending 42% of pre-tax income on rent, and a record-high 22.6 million households are exceeding the 30% guideline.
Many housing experts point to restrictive zoning laws as one reason why. Such laws were originally intended to help towns and cities better plan infrastructure while ensuring that certain activities have adequate separation from each other – keeping factories away from farms and residential areas, for example.
However, such zoning laws have inadvertently resulted in the price of land available for residential development to surge. Some economists estimate that 75% of residentially zoned land in American cities is reserved exclusively for single-family homes – no multifamily units allowed. Other zoning laws include large minimum lot sizes, thus also limiting the volume of new housing that can be constructed. And of course, zoning laws in general tend to slow the homebuilding process by requiring permits that come with long approval times.
The result? As Selma Hepp, chief economist at CoreLogic, recently told CNBC, “[…] labor and materials have gone up about 50% over the last decade, but the cost of land has gone up two and a half times that.” With such higher costs, homebuilders have been forced to concentrate on building correspondingly higher-priced residences (both single-family homes and luxury apartment buildings), leaving a dearth of so-called “starter homes” (smaller, lower-priced homes aimed at younger adults buying their first home) and forcing more Americans to remain renters for longer.
That’s presented challenges for developers as well: pricey residences are increasingly staying vacant, driving up overall vacancy rates despite an undersupply of housing. Yet a slowly growing number of cities and states have implemented zoning changes and seen positive effects in their respective housing markets – among them cities like Minneapolis, Houston, and South Bend, Indiana, and states like California, Montana, and Oregon.
In Fannie Mae’s December 2024 quarterly survey of housing-industry experts, participants as a group anticipate that U.S. home-price growth is expected to slow to 3.8% this year.