📈 Bank Stock Rally 2.0

Good morning.

⚡ The Fast Five → HPE secures $1B AI server deal from X, Gilead and LEO Pharma create strategic alliance, Bain Capital bids $1.8B for Insignia, Johnson & Johnson seeks purchase of $10B Intra-Cellular, Banks start their “show me the money” week

🔎 Market Trends → Wall Street ends lower as blowout job data spooks traders; US Futures Sink After Strong Jobs Report

And now…

⏱️ Your 5-minute briefing for Monday, January 13, 2025:

MARKET BRIEF
Before the Open

Pre-Market

Fear & Greed

Markets in Review

Strong Jobs Data Weighs on Equities, Boosts Yields

The Dow and Nasdaq both dropped 1.6%, closing at 41,938.5 and 19,161.6, respectively, while the S&P 500 declined 1.5% to 5,827. Energy was the only sector in the green, as real estate and financials led losses.

The Big Picture:

Markets retreated Friday after robust payroll data showed the US economy added 256,000 jobs in December, far exceeding the 165,000 expected. The labor market’s strength reaffirmed its resilience, even as inflation expectations edged higher.

The employment report solidifies expectations that the Fed will pause rate cuts at its upcoming meeting, keeping monetary policy steady to curb inflation. Meanwhile, Treasury yields surged, with the 10-year yield hitting 4.77%, as investors recalibrated their rate expectations.

Oil jumped 3.6% to $76.61/barrel, boosted by new US sanctions on Russian oil exports, potentially shifting demand toward Middle Eastern producers. Gold rose 1% to $2,716.70/oz, while silver climbed 0.9%, reflecting ongoing demand for safe-haven assets.

Market Movers:

• Constellation Brands (STZ): Plunged -17%, the S&P 500’s worst performer, after cutting its annual sales outlook following a Q3 miss.

• Walgreens Boots Alliance (WBA): Soared +28%, topping the S&P 500, on strong Q1 results, driven by sales growth across divisions and a reaffirmed full-year outlook.

• Constellation Energy (CEG): Gained +25%, after announcing a $26.6 billion acquisition of Calpine, reinforcing its leadership in the energy sector.

What They’re Saying:

"The labor market's strength underscores the economy’s resilience, but it also highlights the Fed's challenge in achieving its 2% inflation target," BMO Capital Markets said in a note.

WHAT WE’RE WATCHING
Events

• There are no events scheduled for today.

Earnings Reports

• Today: KB Home, Aehr Test Systems

• Tomorrow: Calavo Growers, Rocky Mountain Chocolate Factory, Applied Digital, Park Aerospace, VOXX International

MARKET BRIEF
Leading News

Bank Stock Rally 2.0: Wall Street Giants Face Their Moment of Truth

Why it matters:

The banking sector's impressive 33% surge last year could either get a fresh catalyst or hit a wall as earnings season kicks off — with implications for your portfolio and the broader market's direction.

Zoom Out:

Wall Street's biggest players are stepping into the earnings spotlight this week, with heavyweights like JPMorgan (JPM), Goldman Sachs (GS), and Citigroup (C) taking center stage. Their reports will test whether the sector's remarkable outperformance of the S&P 500 was justified — or just irrational exuberance in disguise.

The plot thickened after Friday's surprisingly robust jobs report sent yields climbing and stocks tumbling, challenging the Fed's expected rate-cut timeline. This creates an fascinating paradox for banks: higher yields can fatten their lending margins, but might also cool the deal-making renaissance investors have been betting on.

Key Insights:

• Trading boom continues: December's typical seasonal slowdown never materialized, suggesting Q4 trading revenues could surprise to the upside. (Think of it as an unexpected holiday bonus for bank shareholders.)

• The dealmaking thesis: Investment banking revenues might finally stage their long-awaited comeback, potentially setting new records. As veteran analyst Mike Mayo puts it, "it's not if, but when" — though Jefferies' recent miss suggests patience may be required.

• Regulatory tailwinds: The political landscape shift could usher in bank-friendly policies, potentially unleashing a wave of share buybacks and dividend hikes.

Market Pulse:

"The question isn't if capital markets set a record — it's a matter of when," - Mike Mayo, Wells Fargo analyst

Bull’s Take:

Despite near-term volatility, banks are uniquely positioned to benefit from both higher-for-longer rates and an eventual Fed pivot. For patient investors, the sector's current setup offers an asymmetric risk-reward opportunity that's hard to ignore.

Headlines

• HPE secures $1 bln AI server deal for Elon Musk's X (link)

• Canada Has Counter-Tariffs Ready If Trump Launches Trade War, Trudeau Says (link)

• Gilead and LEO Pharma Enter Into Strategic Partnership to Accelerate Development of Oral STAT6 Program With Potential in Multiple Inflammatory Diseases (link)

• Bain Capital ups bid for Australia's Insignia to $1.8 billion, matching CC Capital (link)

• Constellation buying Calpine in $26.6 billion deal that would join two huge US power companies (link)

• Johnson & Johnson is in talks to buy $10 billion biotech Intra-Cellular (link)

CRYPTO
Fear & Greed

Headlines

• Why High Net-Worth Investors Are Super Bullish on Bitcoin Right Now (link)

• US gov has to follow a ‘strict process’ before unloading $6.5B of bitcoin (link)

• Bitcoin’s legitimization, BlackRock shatters records, buy-in soars: Spot bitcoin ETFs mark one-year anniversary (link)

DAILY SHARE
On the Socials