Mike Dolan's outlook for the day ahead for U.S. and global markets
After a wild first three days as President Donald Trump, a buoyant Wall Street stock market hovering near new all-time highs is gradually turning its attention back to a strong corporate earnings season and economic updates.
U.S. stock indexes rose on Wednesday led by technology stocks, driven by Trump's plan to increase investment in artificial intelligence and impressive Netflix results, with the S&P 500 hitting a new intraday record and volatility gauges falling to their lowest level this year. lowest level.
Overnight stock index futures edged lower and Treasury yields edged higher amid a new "risk appetite" environment, despite strong demand for Wednesday's latest 20-year bond sale.
One of the backdrop features of the week so far has been large sovereign debt sales in developed markets being met by strong order books from investors, easing some concerns about government financing at the start of the year. In addition to the 20-year bond sale, bond auctions in the UK, France and other places were also swallowed up by fixed income funds.
Benign inflation data in the U.S., Canada and Europe have played a role, with the expected "term premium" on the 10-year Treasury note at 46 basis points, falling back to its lowest level this year.
A fall in U.S. crude prices to two-week lows also played a role, in part due to Trump's support for drilling. On Monday, the new president declared a national energy emergency aimed at giving him the power to reduce environmental restrictions on energy infrastructure and projects and ease permits for new transmission and pipeline construction.
Trump speaks in Davos
There isn't much new in the new tariffs Trump rolled out overnight. Despite statements from the European Union, Canada and Mexico about possible new tariffs on China, previous promises of a "day one" interest rate hike have yet to materialize, allowing the issue to persist in the coming weeks.
Instead, Trump turned his attention to Russia on Wednesday, saying he would add new tariffs to his threat of sanctions against Moscow if Russia does not reach a deal to end the war in Ukraine.
All eyes will be on Trump's virtual appearance at the World Economic Forum in Davos at 11:00 a.m. ET.
On Wall Street, Thursday will bring an economic update after a data-poor week so far, with weekly jobless claims data set to be closely watched again later and the first round of business surveys for January on the horizon.
Texas Instruments and General Electric topped the day's earnings rankings, with the market now awaiting next week's latest earnings reports from the so-called Big Seven tech giants.
Overseas, Chinese shares edged higher on Wednesday after Beijing announced further measures to boost the market, although the threat of tariffs capped gains.
According to a plan jointly issued by six financial regulatory agencies including the China Securities Regulatory Commission, large state-owned insurance companies will be guided to increase the scale and proportion of investment in mainland A-shares and equity funds.
But overseas interest in China risks is temporary at best. More than half of U.S. businesses in China said they were worried about a further deterioration in bilateral relations between the world's two largest economies, a survey showed on Thursday, the highest level in five years.
In Europe, stocks also held on to most of their gains to hit new records - the European Central Bank is widely expected to cut interest rates again next week, and ECB officials appear content with markets pricing in further cuts.
As expected, the more hawkish Norges Bank kept its key policy rate unchanged on Thursday.
The U.S. dollar fluctuated within a narrow range against major currencies.
The yen was flat at $156.49, with markets pricing in a 96% chance of a 25 basis point rate hike by the Bank of Japan on Friday, now appearing comfortable with the latest tightening after months of worries about such a move.
With inflation below target again last month, the Bank of Canada may also cut interest rates by 25 basis points next Wednesday.
Key developments later on Thursday will provide more direction for U.S. markets:
* U.S. weekly jobless claims, Kansas City Fed January business survey; Eurozone consumer confidence in January; Canadian retail sales in November
* U.S. corporate earnings: Texas Instruments, General Electric, CSX, Northern Trust, Union Pacific, Intuitive Surgical, McCormick, Elevance
* World Economic Forum in Davos - including Bank of Spain Governor José Luis Escriva, German Finance Minister Jorg Kukis and Argentinian President Javier Mire
(Written by Mike Dolan, editor at XXXX; mike.dolan@thomsonreuters.com)