Wall Street Breakfast: What Moved Markets

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Stocks closed marginally higher Friday following a stronger than expected U.S. jobs report, but all three benchmark averages snapped nine-week winning streaks. Stocks gyrated Friday as traders assessed the jobs data to guess when and if the Federal Reserve might start cutting interest rates. The U.S. economy added many more jobs than expected in December, as nonfarm payrolls added 216,000, which sent Treasury yields surging, with the benchmark 10-year yield topping 4.1% to cap its biggest weekly advance since October. A strong labor market could mean the Fed will delay its initial rate cuts, which traders have been eagerly anticipating. For the shortened holiday week, the Nasdaq Composite index slumped 3.2%, its biggest drop since September, while the S&P 500 fell 1.5% and the Dow Jones shed 0.6%. Read a preview of next week’s major stock market events in Seeking Alpha’s Catalyst Watch.

Bitcoin (BTC-USD) started the week by scaling new heights, surpassing $45,000 for the first time since April 2022 amid growing expectations that the SEC could soon approve a spot bitcoin ETF. The imminent approval caused bitcoin to more than double in value over the past year, outperforming gold and global equities, although it is still well below its 2021 peak of $69,000. The upbeat sentiment lifted crypto-related stocks, including Coinbase (COIN), Riot Platforms (RIOT), and Marathon Digital (MARA). “I suspect approval makes a nice narrative for bitcoin going higher, but the chart shows us this as the more likely outcome without needing to predict the SEC’s actions,” noted SA Investing Group Leader Jason Appel. (10 comments)

The United States rang in the new year with a lot of red ink as the national debt surpassed $34T for the first time. The gloomy fiscal milestone, reported by the Treasury Department, came as Congress braced for another fight over federal spending. Unless lawmakers can agree on another short-term continuing resolution to fund the government, or pass appropriations bills by Jan. 19 (and others by Feb. 2), the U.S. would face its first federal shutdown since 2019. Not only is the overall balance increasing, but the cost of servicing the national debt is rising at a rapid clip. (137 comments)

The latest FOMC minutes provided little insight on the timing of potential rate cuts, with Fed officials acknowledging “an unusually elevated degree of uncertainty” about the economic outlook. “The minutes confirm whatever you wanted to think about the direction of U.S. interest rates before the release,” UBS’ Paul Donovan said. “I would suggest they are consistent with three rate cuts, starting later than March – but that was my bias before the minutes.” Some Fed members also noted that keeping the benchmark rate at an elevated level might be necessary should inflation stay above target, meaning the central bank will continue to base its policy decisions on incoming economic data. (23 comments)

Concerns surrounding Apple (NASDAQ:AAPL) may soon lead to a new titleholder of the world’s most valuable company. Microsoft (NASDAQ:MSFT) closed out the session on Thursday with a market cap of $2.73T, compared to the $2.83T of its tech rival, which has fallen in every session of the new year. While Apple has held the crown since Nov. 21, it was recently hit with a set of downgrades at Barclays and Piper Sandler over concerns about an iPhone slowdown, hardware trouble and macroeconomic pressures. On the other hand, Microsoft, which just added a Copilot AI button to its Windows keyboard, has been forecast to be one of the AI favorites in 2024 as mentioned in Wall Street Breakfast’s special holiday edition. (16 comments)

Many are watching as conflict and war expand across the globe, and what those consequences might mean for various sectors of the economy. The U.S. has already outlawed or effectively lobbied allies against selling cutting-edge semiconductor chips to China out of fear that the silicon could be used for precision-guided kits or other advanced military systems. Traditional arms are also back in fashion, with BAE Systems (OTCPK:BAESY) announcing this week that it would restart production of M777 howitzer parts for the U.S. Army. Putting it in perspective, the last order that took place was five years ago, but with output back online, BAE expects to ink new contracts for the artillery cannons themselves, given inquiries from more than eight countries. (63 comments)

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