Despite a slight uptick in weekly jobless claims this morning, the U.S. labor market remains robust. Initial claims for unemployment benefits rose by 14,000 to a seasonally adjusted 217,000 for the week ending January 11, exceeding economists' forecasts of 210,000. Yet, these figures still reflect a healthy labor market with low layoffs. December saw nonfarm payrolls increase by 256,000 jobs, while the unemployment rate dipped to 4.1% from 4.2% in November.

Investor sentiment is buoyant, further fueled this morning by impressive earnings from U.S. banks like Morgan Stanley and Bank of America, following strong results from JPMorgan, Goldman Sachs, and Citigroup yesterday. The sector thrives in a perfect storm of high interest rates, a booming stock market, and a resilient economy. The Nasdaq 100 technology index closed up 2.31%, signaling a renewed appetite for risk assets. Along with strong corporate results, investors are cheering recent inflation data. December's U.S. CPI showed that inflation neither vanished nor spiraled out of control. Instead, it delivered a pleasant surprise by being slightly lower than feared. While inflation remains a concern, it's less threatening than anticipated, leading to a positive session for the Nasdaq 100, S&P 500 (+1.83%), and Dow Jones (+1.65%). U.S. bonds also gained, as expectations for a Fed rate cut in 2025 strengthened.

A closer look at U.S. inflation reveals a year-on-year increase from 2.7% to 2.9% between November and December, which was expected and not particularly welcome news. However, core inflation saw its first decline in six months, dropping from 3.3% to 3.2%. Though still high, this was better than expected. The slight dip was enough to please financiers. Economists suggest this softer-than-expected inflation could ease pressure on the Fed, allowing it to pause rate cuts long enough to assess the new president's policies.

The market's optimism is also driven by the ceasefire between Israel and Hamas, which temporarily halted 15 months of conflict. In Europe, markets mirrored the U.S. rally, closing with solid gains. The French CAC40's gains were tempered by LVMH's struggles following weak consumer spending in China. However, Compagnie Financière Richemont reported a 10% revenue growth for the last three months of 2024, surpassing market expectations and signaling a potential turnaround for the sector.

Today's focus is on earnings releases from Bank of America, Morgan Stanley, and UnitedHealth, alongside a slew of macroeconomic indicators and the Senate hearing of Scott Bessent, Trump's nominee for Treasury Secretary. Bessent is expected to advocate for maintaining the U.S. dollar's global dominance. In Asia, most indices closed in the green, while Europe also saw gains, with the Stoxx Europe 600 up 0.7%. Wall Street futures are mixed, ranging from a 0.3% decline for the Dow Jones to a 0.1% increase for the Nasdaq 100.

Today's economic highlights:

US new jobless claims, the Philadelphia Fed's business outlook and retail sales are on the calendar today, along with business inventories and the NAHB housing market index. See the full calendar here

  • Dollar: EUR 0.9735  GBP 0.8208
  • Ounce of gold: USD 2714
  • Brent crude: USD 81.03 WTI: USD 78.73
  • 10-year US bond: 4.66
  • Bitcoin: USD 99,200

In corporate news:

  • Chevron has found no commercially exploitable oil or gas in an exploration well in Namibia.
  • Bank of America: Total revenue for the quarter ended Dec. 31, was $25.35 billion, compared with $21.96 billion a year earlier. while $25.12 billion was expected.
  • Morgan Stanley: Q4 earnings reached $2.22 per diluted share, up from $0.85 a year earlier, and $1.68 expected by analysts. Net revenue was $16.22 billion, compared with $12.90 billion a year earlier.
  • Beacon reiterates rejection of QXO's unsolicited proposal.
  • UnitedHealth: UnitedHealth Group's (UNH) fourth-quarter results increased on an annual basis but revenue fell short of market expectations, while the health insurer kept its full-year outlook unchanged on Thursday.
  • Emeren sells its portfolio of solar projects in Germany to Trina Solar.
    Today's main earnings reports: UnitedHealth, Bank of America, Morgan Stanley, PNC Financial Services, US Bancorp, JB Hunt...

Analyst recommendations:

  • Akamai Technologies, Inc.: President Capital Management Corp upgrades to buy from neutral with a target price reduced from USD 108 to USD 105.
  • Ball Corporation: Wells Fargo downgrades to underweight from equalweight with a target price reduced from USD 56 to USD 49.
  • Confluent, Inc.: Morgan Stanley downgrades to equalwt from overwt with a target price reduced from USD 33 to USD 30.
  • Datadog, Inc.: Morgan Stanley downgrades to equalwt from overwt with a target price of USD 143.
  • Dexcom, Inc.: Baird upgrades to outperform from neutral with a price target raised from USD 86 to USD 104.
  • Edwards Lifesciences Corporation: Wolfe Research downgrades to underperform from peerperform with a target price of USD 60.
  • Estee Lauder: Baptista Research downgrades to hold from outperform with a price target raised from USD 74.30 to USD 81.10.
  • Expand Energy Corporation: JP Morgan upgrades to overweight from rating suspended with a target price of USD 112.
  • First Solar, Inc.: Seaport Global upgrades to buy from neutral with a target price of USD 274.
  • Huntsman Corporation: Alembic Global Advisors downgrades to neutral from overweight with a target price of USD 22.
  • Monday.com Ltd.: Citi upgrades to buy from neutral with a target price reduced from USD 302 to USD 298.
  • Netflix, Inc.: Seaport Global upgrades to buy from neutral with a target price of USD 955.
  • Paylocity Holding Corporation: Citi upgrades to buy from neutral with a price target raised from USD 214 to USD 231.
  • Sharkninja, Inc.: William O'Neil & Co Incorporated upgrades to buy from dropped coverage.
  • Southwest Airlines Co.: Citi downgrades to sell from neutral with a price target reduced from USD 31.50 to USD 29.50.
  • Atlassian Corporation: Morgan Stanley maintains its overweight recommendation and raises the target price from USD 259 to USD 315.
  • BROWN-FORMAN -A: TD Cowen maintains its hold recommendation with a price target reduced from USD 50 to USD 38.
  • Cheniere Energy, Inc.: Barclays maintains its overweight recommendation and raises the target price from 202 to USD 253.
  • Moderna, Inc.: Berenberg maintains its hold recommendation and reduces the target price from 42 to USD 33.
  • Roblox Corporation: Wells Fargo maintains its overweight recommendation and raises the target price from USD 58 to USD 76.
  • Associated British Foods Plc: Citi downgrades to sell from neutral with a target price reduced from GBP 24 to GBP 17.70.
  • Conduit Holdings Limited: Autonomous Research downgrades to neutral from outperform with a price target reduced from GBP 6.30 to GBP 5.20.
  • Dunelm Group Plc: Panmure Liberum downgrades to sell from hold with a target price reduced from GBX 1185 to GBX 825.
  • Easyjet Plc: Davy downgrades to neutral from outperform with a target price reduced from 7.50 to GBP 5.80.
  • Canadian National Railway Company: Stifel downgrades to buy from hold and reduces the target price from USD 132 to USD 120.