Amid mixed U.S. employment data that failed to strengthen the case for further Fed rate cuts, U.S. Treasury yields and stock futures showed modest fluctuations on Wednesday, while the dollar gained strength. Concurrently, President Trump escalated pressure on Venezuela, driving oil prices higher.
As of the latest update, Dow futures rose 0.23%, S&P 500 futures climbed 0.34%, and Nasdaq futures advanced 0.44%.
European benchmark indices edged up 0.3%, with mixed sector performance as most major indices trended upward. The energy sector led gains after Trump ordered a blockade on Venezuelan oil tankers, boosting crude prices.
In the UK, inflation data hit an eight-month low, sending the pound down 0.7%, while the FTSE 100 surged nearly 1%.
U.S. stock futures strengthened after the S&P 500 logged its third consecutive daily decline on Tuesday, with investors assessing the labor market outlook.
Trump announced via social media that he will address the nation at 9 PM ET Wednesday (10 AM Beijing time Thursday). The White House indicated the speech would highlight historic achievements, future prospects, and potentially preview policy plans for the new year.
**Cooling Jobs Data Tempers Rate Cut Bets** Latest U.S. labor market figures showed employment cooling without rapid deterioration, prompting traders to dial back near-term rate cut expectations. November payrolls rose by 64,000, exceeding Reuters-polled forecasts, though the unemployment rate ticked up to 4.6%. Data distortions persisted from the 43-day government shutdown.
Uncertainty lingers over whether the report materially alters policy outlooks, with market focus shifting to Thursday’s inflation data for potential narrative shifts during the year’s last full trading week.
Kieran Williams of InTouch Capital Markets noted: "Severe data distortions render November figures unreliable for January policy decisions. With such poor signal-to-noise ratios, the Fed can’t feasibly calibrate policy here." He added that Q1’s cleaner data would be needed to validate deterioration pace, suggesting March/April as prudent benchmarks for rate cuts.
Andrea Gabellone of KBC Global Services observed: "The jobs report confirmed existing rate path expectations rather than acting as a new catalyst. While volatile, the data doesn’t suggest imminent aggressive Fed easing."
Post-data, traders still price in two 2026 Fed cuts totaling ~50bps, likely by September, per Bloomberg. Thomas Mathews of Capital Economics noted: "An in-line CPI would relieve Fed pressure to cut soon—March may still be premature."
**Central Bank Decisions Loom** The dollar strengthened against all G10 currencies, most notably the yen, as 10-year Treasury yields held at 4.15%.
A packed central bank calendar concludes the week, with the ECB, BoE (expected to narrowly vote for a cut Thursday), and BoJ (projected Friday to hike to 30-year highs) in focus.
Bank of America strategists cautioned: "The BoJ is unlikely to provide clear terminal rate guidance." They warned premature yen weakness could accelerate timing, potentially moving the next hike to April 2026.
Elsewhere, India’s rupee gained ~1% post-intervention, while bitcoin fell over 1% to ~$86,700, heading for its fourth annual decline.
**Trade & Geopolitical Risks Escalate** Trump’s administration threatened retaliation against EU tech taxes, naming Accenture, Siemens, and Spotify as potential targets. Venezuela oil sanctions marked heightened tensions after last week’s tanker seizure.
Geopolitical risks lifted crude and gold ($4,330+, nearing October’s $4,381 record), with silver hitting all-time highs above $66/oz and platinum at 2008 peaks.
Pepperstone’s Ahmad Assiri noted: "December’s stark equity-commodity divergence enhances the latter’s allocation appeal," highlighting metals as credible momentum trades.
**Traders Dismiss CPI Impact as Volatility Expectations Plunge** Once a market-moving event, Thursday’s CPI report now elicits muted reactions. Barclays data shows options traders pricing just 0.7% S&P 500 swings—below the 1% average post-CPI moves since September.
**Goldman Sachs AM: AI Funding Fears Overblown** Sung Cho of Goldman Sachs Asset Management dismissed AI financing concerns, estimating $700B-$1T in required expenditures—90% funded by operating cash flows.
**Notable Movers** - Cannabis stocks: CbdMD (+14%), Canopy Growth (+7%), Tilray Brands (+2%) on potential Trump deregulation. - Energy: BP (+2%), Shell/Total/Eni (+1%), Exxon/Chevron (+0.7%) on Venezuela sanctions. - Lithium miners: Sigma Lithium (+8%), SQM (+4%), Albemarle (+3.9%). - Micron (+3%): Post-earnings focus + JPMorgan’s 2024 chip top pick. - Netflix (+1.4%): Warner Bros. Discovery reportedly rejecting Paramount bid. - Amazon (+1%): Potential $10B+ OpenAI investment with proprietary chips. - Hut 8 (+12%): AI infrastructure partnerships with Anthropic/FluidStack. - Destiny Tech 100 (+6%): SpaceX pre-IPO quiet period. - Oracle (-2%): $10B Michigan data center project stalls over financing. - Lennar (-3.7%): Weak guidance after Q4 earnings miss. - Teck Resources (+3.6%): Anglo American merger approved by Canada. - DBV Technologies (+30%): Positive Phase 3 peanut allergy patch results.
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