January made its mark today —the first green Jan since 2019, as the S&P and Nasdaq rallied 1.5% and 1.7% respectively, positively punctuating the first month of ‘23. It was the Nasdaq’s best month since July and some say as January goes, so does the year. But that hasn’t been accurate in the recent past, so best to take that one with some electrolytes. Nevertheless, investors interpreted today’s easing labor cost data as supportive of inflation cooling, and therefore also supportive of the potential for easing in terms of hike magnitude and pace. And maybe even halting just short of a terminal 5%, despite what has been preached from the Fed pulpit prior.

A bunch of sound and fury that signified nothing this morning as markets opened to declarations of “flash crash” and “cyberattack.” Worry not– it was just a “system issue” at the NYSE, which caused 250 stocks to commence trading without an opening auction price. Not to worry— any trades effected could be declared “null and void.” Ummmkkkk. Shortly after, markets settled, but not before going below yesterday’s closing price. Yields fell as traders remained indecisive in terms of recessionary fears.

Gotta love this market, which by all accounts seems to be suffering from a severe case of indecision. Major US indices performed a quick about face early afternoon, paring the morning’s losses for no apparent reason. Then sold off again into the close for the same no apparent reason. Brainard took The Fed microphone midday, but he never veered off the script. He acknowledged inflation still remains high and The Fed needs to remain sufficiently restrictive. Nothing to see here. Commodities outperformed — Crude was up over 1.5% at one point, while bonds erased some of yesterday’s gains.

No news, no data and no Powell, equated to another market pop today. Based on the past week of predictions from various strategists, the only thing we do know is that the market will move violently, depending on where CPI comes in. Most resources put very small probability on a hotter CPI (above 6.6%), thus high expectations for a downside surprise (CPI fixings market has been flawless over the past year and expects a -0.13% m/m SA headline print).

The US is currently riding the struggle bus. While the RoW enjoys a decent start to 2023 (EU/China in particular), the combo of strong labor data and persistently aggressive Fed-speak is keeping a lid on the US stocks. Only 1 sector finished in the green today –Energy, and it was simply stemming the bleeding from the past few days. Consumer Discretionary succumbed to the weakness in the last few hours of trading and even a boost from TMUS (+3.2%), thanks to a beat in postpaid phone subscriber growth (we remain unconvinced), was unable to hold Telcos higher.

Investors expressed their optimism ahead of this week’s action, by buying US equities today. The S&P saw its best session in nearly 2 weeks and the CCMP/ RTY also enjoyed a day in the green, with the VIX up nearly 10%. Additionally, Oil was higher by almost 3.5%, pulling the XOP and XLE out of their 5-day losing streaks (XLE -8.4%, XOP -11.8% last week). And although Cons Disc (XLY +25bps) was dragged down by TSLA (-6.3%) initially, it was balanced out by a recovery in Amazon’s stock throughout the day (it started down approx. 1.1% and closed up +1.3%).

The consensus across the Redburn desk is that approximately 80% of corporate holiday parties likely take place this very evening (the last Thursday before Christmas/Hannukah obligations kick in). To that end, this View from 5th should have stellar readership (probably for the best). I’m confident in saying today felt like the holidays had truly arrived.

The turkey isn’t stuffed just yet. Investors were still a bit sore this morning after stocks fell last week, as optimism about cooling inflation was tempered by more hawkish tones from Fed officials. That sentiment spilled into the start of this holiday shortened week, as fears returned over tight COVID restrictions in a Chinese city many thought to be a test case for looser policy.

Initially, today felt like a bit of a reign tugger — a pause from the prior 2 sessions of broad based gains. US markets slid lower in early trading, with DXY strength back in play (though well off of the LT resistance at 120), while other risk indicators such as bitcoin were under pressure. The dovish “hope bubble” was seemingly popped by the economic data, which showed better than estimated growth and companies hiring at a solid clip.

No capitulation to speak of yet, though positioning remains defensive and markets continued to slide lower today. Major indices flirted with June lows (SPX=3636, CCMP=10,565), but they held, as it seems we are at an inflection point from a technical/psychological perspective. Shorts may be more incentivized to cover at this point, rather than establish new shorts and/or double down. Nearly all sectors found their way into the red, barring a few, which eked out minute gains.