Rise and shine everyone.

The S&P 500 finally touched the 5000 mark. Analysts were targeting this level but, perhaps didn’t expect it this early into the year. SPX in the pre-market is at 5005. And in line with the market moving up too quickly, we’re now seeing more frequent mention of how this is akin to the dot-com bubble…. and real rates increasing usually lead to those bubbles popping.

Personally, I don’t think we’re in a similar situation, mainly because we’re not in an everything bubble. I know the subprime crisis that led to the GFC in 2008 was also not an everything bubble but, that was a massive market spread across so many players.

What we have now is a very narrow “bubble”, if we can even call it that. I’m not saying we won’t get a correction. We probably will - we have inflation numbers likely to come in hotter, Nvidia earnings that’s priced to perfection, and call positioning in the Mag 6 that is very stretched (we showed this chart yesterday). Analysts are also expecting still further increases in Investment Grade debt and while not directly, this could cause yields to rise somewhat. This could all lead to a pullback in the next 2 to 4 weeks.

Big Stories

CPI revisions to be released at 8:30 am ET

• Annual CPI Revisions and Updates: The US Bureau of Labor Statistics (BLS) will release annual CPI revisions and seasonal adjustment updates today after 08:30 ET (13:30 GMT), ahead of the January CPI report on February 13th.

• Impact of Last Year's Revisions: Last year's revisions affected the seasonally adjusted CPI monthly changes for 2022, reducing the apparent moderation in inflation for the first half but increasing monthly revisions for the second half.

• Significance of Adjustments: These adjustments suggested the Federal Reserve needed to continue efforts to control inflation, as the perceived reduction in inflation rates was less significant.

• Specific Adjustments: November and December 2022's CPI data were revised up by 0.1 percentage points each, changing the three-month annualized rate from 3.1% to 4.3%, and the headline CPI from 1.8% to 3.3%.

• Fed's Perspective: Federal Reserve's Waller, a voting member, expressed hope that the new annual revisions would indicate progress in curbing inflation.

• Revision Process for Seasonally Adjusted Data: Seasonally adjusted data, including the U.S. city average all items index levels, can be revised up to 5 years after their initial release. Each year, CPI economists recalculate seasonal factors for seasonally adjusted series, applying them to the past five years of data. Indexes older than five years are deemed final and not subject to further revision.

Putin takes over Tucker Carlson’s Interview

In a discussion with Tucker Carlson, Russian President Vladimir Putin admitted Russia's goals in Ukraine, including "de-Nazification," remain unmet, yet he's open to peace talks with President Zelenskiy. He plans to release US reporter Gershkovich and sees potential for agreement.

Putin claimed historical rights to Ukrainian lands, criticized NATO expansion, and rejected notions of invading other nations as illogical, highlighting the risks of global conflict. He noted the West's acknowledgment of the futility of defeating Russia and expressed readiness for dialogue.

BoJ hints at policy remaining easy

BoJ Governor Ueda recently addressed parliament, indicating that the Bank of Japan is contemplating the future of negative interest rates, particularly as their price target becomes achievable. Echoing Deputy Governor Uchida's sentiments, Ueda sought to reassure that, despite the potential cessation of the negative rate policy, the financial conditions would continue to be accommodative. USD/JPY rises to its highest since Nov 27 on these comments.

Quote of the Day

“Tops are a process, bottoms are a moment” - Old Market Adage courtesy of BofA’s Hartnett

Chart of the Day

The GS IPO issuance barometer gauges how conducive the macro environment is for IPOs and it is now tracking above 100, ie, a positive environment.

It is based on five components: S&P 500 drawdown, as measured by how far the index trades from its trailing 52-week high, CEO confidence, ISM Manufacturing Index, 6-month change in the nominal 2-year Treasury note yield, and S&P 500 trailing EV/sales

BofA’s Flow Show

Other Stories

• Total social financing in China which is a broad measure of credit and liquidity, reached a record high level of CNY 6.5 trillion in January 2024, well above CNY 5.99 trillion a year earlier and beating forecasts of CNY 5.55 trillion.

• Germany reportedly cuts annual tax relief package to €3.2B

• Biden Admin said to consider restrictions on China EVs in order to address 'data security concerns' **

• Initial jobless claims were 218,000, below the forecast of 220,000. Continuing claims dropped to 1.871 million, below the expected 1.876 million, moving down from recent two-month highs.

• Fed’s Barkin (voter): Economic data has been remarkable across the board, but will not take too much signal from any one month at the moment.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)