Markets Overview
- ASX SPI 200 futures up 0.2% to 8,313.00
- Dow Average little changed at 43,191.83
- Aussie down 0.2% to 0.6213 per US$
- US 10-year yield fell 5.3bps to 4.6003%
- Australia 3-year bond yield fell 9.7 bps to 3.95%
- Australia 10-year bond yield fell 13 bps to 4.50%
- Gold spot up 0.7% to $2,715.19
- Brent futures down 0.8% to $81.41/bbl
Economic Events
- 11:00: (AU) Australia to Sell A$700 Million 2.75% 2027 Bonds
Stocks struggled to make headway after a solid rally, while bond yields dropped on dovish remarks from Federal Reserve Governor Christopher Waller.
Wall Street also kept a close eye on comments from Treasury secretary nominee Scott Bessent, who said the US faces an economic crisis if the 2017 Republican tax cuts aren’t extended. Equities edged lower, following an almost 2% jump in the S&P 500. While most companies rose, a slide in tech megacaps dragged down the market. Not even solid earnings from Morgan Stanley and Bank of America Corp. buoyed benchmarks.
“Investors are hitting the pause button following yesterday’s momentous rally,” said Jose Torres at Interactive Brokers.
Treasuries rose as Waller told CNBC that officials could lower rates again in the first half of 2025 if inflation data continue to be favorable. He also wouldn’t entirely rule out a cut in March. Swap trading implied a little bit more easing this year.
The dollar hovered near two-year highs. Bessent stressed that maintaining the greenback as the world’s reserve currency is critical. When asked about any inflationary impact of President-elect Donald Trump’s economic plans, Bessent said he believed the policies will bring inflation closer to the Fed’s target.
The S&P 500 fell 0.2%. The Nasdaq 100 lost 0.7%. The Dow Jones Industrial Average slid 0.2%. A gauge of the “Magnificent Seven” megacaps slipped 1.9%. The Russell 2000 added 0.2%. The KBW Bank Index declined 0.2%.
The yield on 10-year Treasuries declined four basis points to 4.61%. The Bloomberg Dollar Spot Index rose 0.1%.
Despite the lack of strength in the equity market on Thursday, some traders pointed to a buy signal from the latest sentiment survey from the American Association of Individual Investors.
Bullish sentiment, expectations that stock prices will rise over the next six months, decreased to 25.4%. Optimism is unusually low and is below its historical average of 37.5% for the third time in seven weeks, AAII said.
“We consider sentiment indicators at the extremes as fairly reliable contrarian indicators,” said Larry Tentarelli at Blue Chip Daily Trend Report. “Investors tend to be most bullish at market highs and most bearish near market lows.”
A third straight year of outsize gains in US stocks — a display of strength last seen in the 1990s — leads Bank of America Corp.’s list of potential market surprises for 2025.
It’s a tall order but not unimaginable, according to the firm, which floats the idea in the latest rendition of its list honoring late Wall Street strategist Byron Wien.
After the S&P 500 Index soared 24% in 2023 and 23% in 2024, lofty valuations will make it tough to achieve such a performance again this year, as will risks including extreme concentration and uncertainty around fiscal and monetary policy, BofA strategists led by Jared Woodard wrote in a report this week.
