The lack of geopolitical premium in the market is daunting. Many Davos participants have publicly commented about the continued deterioration of the geopolitical backdrop and how the markets are just viewing this deterioration as noise.
The most vexing remarks surround the escalation of the events in the Red Sea and the impact upon shipping. Crude is 20% lower than before hostilities broke out. Inflation is expected to rise given the increased shipping costs and delays in receiving the product, creating possible bottlenecks.
Commenting about the weekly jobless claims, initial claims decreased by 16,000 falling to the lowest since September 2022. The figure was below all estimates in a Bloomberg survey of economists.
Weekly claims are notoriously volatile, influenced by one off events such as weather or holidays. With this written however, the data clearly demonstrates a robust labor market.
The four-week moving average, which tends to paint a clearer picture, also dropped more than expected, to the lowest level in 11 months. Wow!
Equites were bifurcated yesterday. The NASDAQ—led by the tech behemoths—rallied about 1.35%. The Dow gained about 0.50%. The yield curve steepened as longer dated Treasuries sold off more than shorter dated ones.
What will happen today?
Last night the foreign markets were up. London was up 0.38%, Paris up 0.10% and Frankfurt up 0.26%. China was down 0.47%, Japan up 1.40% and Hang Seng down 0.54%.
Dow and NASDAQ futures are up 0.40% and 0.8%, respectively, perhaps on the continuing belief the Fed will lower interest rates in March. The 10-year is up 2/32 to yield 4.09%.
Kent Engelke
Chief Economic Strategist Managing Director
The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.
