Stocks fell Tuesday after the latest data from the Bureau of Labor Statistics showed inflation held steady in December as prices for goods and services rose 2.7%. ...

Core Viewpoint - President Trump advocates for the Federal Reserve to lower interest rates, citing steady inflation data from December as justification for his position [1][3]. Inflation Data - The Bureau of Labor Statistics reported that the consumer price index (CPI) for December showed a headline inflation increase of 2.7% year-over-year, while core CPI, excluding food and energy, was at 2.6% [2]. - Although inflation remains above the Fed's long-term target of 2%, Trump believes it is low enough to warrant interest rate cuts [3][4]. Federal Reserve's Position - Trump criticized Fed Chair Jerome Powell, suggesting that lower interest rates would benefit the economy and that Powell's inaction would label him as "too late" [3][6]. - The market currently anticipates that the Fed will maintain interest rates in the range of 3.5% to 3.75%, with a 97.2% probability of no changes at the next meeting [12][13]. Political Context - The call for interest rate cuts comes amid a criminal investigation by the Department of Justice into whether Powell misled Congress regarding the Federal Reserve's renovation project [7][9]. - Powell has stated that the investigation is an attempt to pressure the Fed into making policy decisions based on political influence rather than economic evidence [9].

Economic Outlook - St. Louis Fed President Alberto Musalem stated that the US economy is robust, expecting above-potential growth, and advised against an accommodative stance from the Fed [1] - The US December CPI remained unchanged from November at +2.7% year-over-year, while the core CPI also held steady at +2.6% year-over-year, which was below the expected +2.7% [1] Stock Market Performance - The S&P 500 Index closed down -0.19%, the Dow Jones Industrials Index down -0.80%, and the Nasdaq 100 Index down -0.18% on Tuesday [5] - Stocks experienced a brief rise due to easing inflation concerns, but ultimately retreated as software stocks sold off following the release of a new AI tool by Anthropic [3][4] Sector Movements - Energy-producing stocks increased as WTI crude oil rose over +2% to a 2.25-month high, influenced by geopolitical risks and US tariffs on goods from countries doing business with Iran [3] - Software stocks faced declines, with Salesforce down more than -7%, Adobe down more than -5%, and Intuit down more than -4% after the AI tool announcement [12] Earnings and Forecasts - Q4 earnings season is beginning, with S&P earnings growth expected to rise by +8.4%, and +4.6% excluding the Magnificent Seven technology stocks [7] - Cardinal Health raised its full-year adjusted EPS forecast to at least $10.00, exceeding the previous forecast of $9.65-$9.85 [19] International Markets - Overseas stock markets showed mixed results, with the Euro Stoxx 50 up +0.22%, China's Shanghai Composite down -0.64%, and Japan's Nikkei Stock 225 up +3.10% [8]

Group 1 - The document does not contain any relevant information regarding companies or industries [1][2][3][4][5][6]

Core Viewpoint - The president is prioritizing cost reduction in response to voter concerns about the cost of living [1] Group 1 - Voter polling indicates significant worry regarding living expenses [1]

Market Overview - US stocks experienced a decline, with the Dow Jones Industrial Average falling 0.8%, the S&P 500 down about 0.2%, and the Nasdaq Composite dropping roughly 0.1% [1] Company Earnings - JPMorgan Chase reported a quarterly earnings miss, impacted by a $2.2 billion hit to net income from an Apple Card deal, leading to a more than 4% drop in its shares [2] - The earnings season has commenced, with Bank of America, Citigroup, and Morgan Stanley expected to release their results in the coming days [2] Inflation Data - The Consumer Price Index (CPI) report indicated that the annual headline inflation rate remained steady at 2.7%, with a monthly increase of 0.3%, aligning with forecasts [3] - Core consumer prices rose by 0.2% month-over-month and 2.6% year-over-year, marking the lowest annual increase since early 2021 [3] Federal Reserve Outlook - The inflation data is significant following a December jobs report that suggested a cooling labor market, leading traders to firm up bets on the Fed maintaining rates this month, with expectations for a quarter-point cut in June [4] Political and Geopolitical Context - Global central bankers have criticized the Justice Department's investigation of Fed Chair Jerome Powell, viewing it as a threat to the Fed's autonomy [5] - Former President Trump announced a 25% tariff on countries continuing business with Iran, adding geopolitical uncertainty to the market [6]

Core Viewpoint - Spot Gold (XAU/USD) has entered a price-discovery phase, reaching new records around $4,630, indicating a strong uptrend despite recent volatility [1][4][17] Technical Analysis - XAU/USD is currently in overbought territory with a 4-hour RSI around 65, showing signs of bearish divergence, while MACD indicates cooling upside momentum [2][10] - Immediate support is at $4,555, with further support levels at $4,500 and $4,440, while resistance is noted at $4,625–$4,640 and the next target at $4,714 [3][14] - Major institutions project gold prices to reach between $4,450 and $5,050 over the next 12–18 months, with a consensus around $5,000 for 2026 [9][17] Macro Drivers - The current gold price is influenced by US inflation expectations, with consensus predicting a 0.3% month-on-month rise in CPI, keeping year-on-year inflation near 2.7% [4][14] - Global debt levels are at approximately $346 trillion, about 310% of world GDP, which raises concerns about fiat currency stability and increases gold's appeal as a hedge [6][7] Geopolitical Factors - Civil unrest in Iran and new US tariff threats are contributing to increased demand for gold as a safe haven, reflecting a structural premium in XAU/USD [5][17] - The political landscape surrounding the Federal Reserve, including potential charges against Chair Powell, adds to the uncertainty, further supporting gold prices [4][17] Market Dynamics - Central banks and ETFs are driving demand for gold, with annual purchases reaching around 700 tonnes, establishing a structural floor under demand [8][17] - The shift to percentage-based margins for gold futures by the CME indicates a recognition of increased volatility and the need for more collateral, impacting speculative positions [11][10] Equity Market Response - Gold mining equities are reflecting the gold price movement, with companies like Barrick Mining and Newmont showing significant gains as gold prices rise [12][17] - The upcoming earnings reports from mining companies will be critical in assessing how much of the gold rally translates into free cash flow and dividends [13][17]

Economic Indicators - Core consumer prices rose 0.2% month-over-month in December, matching November's pace and below the 0.3% consensus, resulting in a year-over-year increase of 2.6%, slightly under the 2.7% forecast [2] - Headline CPI increased by 0.3% month-over-month and 2.7% year-over-year, aligning with monthly expectations but slightly exceeding annual forecasts, with shelter costs being the largest contributor at 0.4% [2] Central Bank Actions - Global central bank officials, including leaders from the ECB, BoE, BOC, and RBA, issued a statement supporting Fed Chair Jay Powell and emphasizing the importance of central bank independence for economic stability [5] Company Earnings and Guidance - JPMorgan Chase's stock rose after providing optimistic guidance for 2026, with net interest income expectations surpassing consensus and expenses projected to be in line [6] - Delta Air Lines guided 2026 EPS to a range of $6.50–$7.50, slightly below the $7.20 consensus, resulting in a slight decline in its stock [7] - Intel and AMD stocks gained after being upgraded to Overweight by KeyBanc, driven by strong demand for server CPUs amid increasing data center and AI needs [7] Mergers and Acquisitions - Denny's shareholders approved a $620 million buyout by TriArtisan Capital Advisors, which owns TGI Fridays and P.F. Chang's, along with Treville Capital and Yadav Enterprises [8] Industry Challenges - Wells Fargo issued a warning for cable operators, downgrading Charter Communications, Comcast, Altice's Optimum, and Cable One to Underweight, anticipating a loss of approximately 1 million residential broadband subscribers this year due to competition from fixed wireless and fiber [10][11]

Core Insights - The U.S. is facing a significant debt crisis, with inflation being viewed as the most politically viable solution to manage obligations without resorting to tax increases or spending cuts [2][6][7] - The independence of the Federal Reserve is increasingly compromised, with market reactions indicating a broader acceptance of this reality among investors [4][12] - The potential for a productivity miracle driven by artificial intelligence could alter the economic landscape, but skepticism remains regarding its ability to significantly impact the sluggish sectors of the economy [10][11] Group 1: Debt and Inflation - Ray Dalio's "Big Cycle" framework suggests that nations with high debt face limited options, leading to a preference for inflation as a means to manage debt [1][6] - Cowen argues that the U.S. may require several years of 7% inflation to effectively reduce the debt burden relative to the economy [6][7] - The U.S. government's high debt levels and chronic deficits limit the Federal Reserve's ability to act independently, leading to a reliance on inflation [3][8] Group 2: Federal Reserve Independence - The current political climate has eroded the Federal Reserve's independence, with market participants acknowledging this shift [4][12] - The investigation into Fed Chair Jerome Powell highlights the pressures faced by the central bank, which may lead to interest rate cuts [5] - Cowen emphasizes that the loss of Fed independence is a significant concern, suggesting that it has already been compromised prior to recent events [4][12] Group 3: Economic Outlook and Productivity - The potential for AI to boost U.S. GDP growth could provide an alternative to high inflation, but doubts persist about its effectiveness in less productive sectors [10][11] - Economists note a recent 4.9% boost to annualized productivity, but the sustainability and drivers of this acceleration remain uncertain [12][13] - The structural sluggishness of half the U.S. economy poses challenges to achieving significant productivity gains necessary to alleviate the debt situation [11]

Economic Outlook - The Reserve Bank of India (RBI) is expected to maintain its repo rate in the upcoming February policy meeting, awaiting new parameters that will influence inflation and growth metrics in the revised base-year series [1][5] - The December consumer inflation rate was recorded at 1.33%, with Q3 inflation averaging 0.8%, which is 20 basis points higher than the RBI's forecast of 0.6% for Q3 [1][5] - Economists anticipate a similar upward adjustment in the RBI's Q4 inflation forecast, currently set at 2.9% [1][5] Monetary Policy and Liquidity - The RBI has cumulatively reduced policy rates by 125 basis points since February 2025, bringing the rate down to 5.25% [1][5] - Economists do not foresee further rate cuts in the near term, predicting inflation could exceed 4% over the next four quarters [1][5] - There is an expectation for the RBI to inject additional liquidity through open market operations (OMO) to maintain systemic liquidity in surplus [1][5] System Liquidity - System liquidity shifted to a deficit in the latter half of December but has averaged a tight surplus of ₹36,869 crore in January [5] - Soumya Kanti Ghosh, chief economic advisor at State Bank of India, forecasts approximately ₹2 lakh crore of OMO for the remainder of FY26, with a similar trend expected in the following fiscal year [5] - Radhika Rao, senior economist at DBS Bank, indicated that additional tranches of OMOs and FX swaps are anticipated to address liquidity drains caused by foreign exchange interventions [5]