A BIG WEEK FOR EARNINGS AND CENTRAL BANKS

The S&P 500 Index closed 0.25% higher on Friday, finishing the week 2.5% higher.

Overview: On a Roll

• Tech stocks lead equity gains again on Friday, notwithstanding Intel disappointment
• NASDAQ outperforms on the day and the week, up 4.3%
• US Core PCE prints in line with expectations, but personal spending falls in December
• A downshift to a 25bps Fed hike now cemented ahead of FOMC this week
• UST yields little changed on Friday. AUD yields the big movers on the week
• Subdued FX moves on Friday. AUD is the week’s notable outperformer
• Coming Up this week: AU Retail Sales, NZ Jobs, China PMIs, FOMC, ECB, BoE, US ECI, Payrolls & ISMs, Earnings

Events Round-Up

JN: Tokyo CPI (y/y%), Jan: 4.4 vs. 4.0 exp.
JN: Tokyo CPI x-fr. food, energy (y/y%), Jan: 3.0 vs. 2.9 exp.
NZ: ANZ activity outlook, Jan: -15.8 vs. -25.6 prev.
US: Personal income (m/m%), Dec: 0.2 vs. 0.2 exp.
US: Real personal spending (m/m%), Dec: -0.3 vs. -0.1 exp.
US: PCE core deflator (y/y%), Dec: 4.4 vs. 4.4 exp.
US: Pending home sales (m/m%), Dec: 2.5 vs. -1.0 exp.
US: U. of Mich. consumer sent., Jan: 64.9 vs. 64.6 exp.

I’m stoked on ambition and verve. I’m gonna get what I deserve..Hey, yeah, whoa-ho, I’m on a roll. Ridin’ so high, achieving my goals – Miley Cyrus.

The tech heavy NASDAQ led the gains in US equities again on Friday with the benchmark finishing the week with an impressive roll of four straight weekly gains. Mixed earnings by tech companies have seemingly been trumped by the prospect of an imminent Fed pose. December Core PCE printed in line with expectations but the yoy decline helped cement expectations for a downshift in Fed rate hike this week, UST yields were little changed while domestic yields were the big weekly movers. Quiet end to the week in FX, AUD is the week’s notable outperformer.

The S&P 500 Index closed 0.25% higher on Friday, finishing the week 2.5% higher. Sector performance was mixed on the day with six of the 11 main industry groups ending in the green, consumer discretionary and real estate sectors the top performers. The Nasdaq 100 Index was the outperformer on the day and the week, gaining close to 1% on the Friday and 4.3% on the week. Indeed, the NASDAQ is now on a four-week winning streak, up 11% year to date and on track to record its best January since 1999.

Notwithstanding mixed outcome from tech companies’ earnings reports with Tesla climbing over 3% on Friday following better than expected numbers, there have also been notable underperformers with Intel on Friday joining Microsoft and Texas Instruments revealing a dreary outlook. Intel shares fell 6.4%, the most since September, after the chipmaker issued one of its weakest ever quarterly forecasts as a slump in personal-computer sales hits the business.

Ahead of the ECB this week, European equities were slightly higher on Friday, the Stoxx Europe 600 closed 0.25% on the day and up 0.67% on the week. Thus, marking time ahead of another 50bps hike expected by the ECB this week, but still doing quite well year to date, up 7.13%, outperforming the S&P 500 at 6.02%.

Of note for risk sensitive currencies, such as the AUD and reflecting the positive vibes in the equity market, the VIX index closed the week at 18.5, down two points over the past 5 trading days.