Rise and shine everyone.

It’s a relatively quiet Friday morning ahead of US PCE Inflation data and Triple Witching today. Now that the Fed has acknowledged that inflation may accelerate, there shouldn’t be much in the way of surprises. The consensus is for the headline and core to accelerate marginally.

We also have triple witching today, i.e., options expirations for the month and quarter. This could lead to some volatility in the market.

Yesterday, US stocks attempted a modest rebound following the FOMC-driven selloff, but the recovery felt shaky. The Russell 2000 reversed into negative territory after yesterday’s near 5% collapse, while S&P futures closed near session lows on heavy trading ahead of tomorrow’s triple witching. Micron and Lennar’s earnings failed to ease investor concerns, and the December Philly Fed survey showed higher prices paid alongside weak growth metrics. With the U.S. 10-year yield rising above 4.5% for the first time since May, rate concerns remained the dominant market narrative.

Financials exhibited relative strength as yield curve normalization supported the sector. Central bank decisions today brought a mix of messages, with the BOE and BOJ hinting at caution in future policy adjustments. Meanwhile, the dollar index held flat, consolidating at its highest level since November 2022. In Washington, late-session reports suggested Republicans reached a deal to suspend the debt ceiling through 2027 while dropping PBM reforms, easing some of the political uncertainty.

Chart of the Day

A few interesting insights from BofA:

Calendars

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