| TQ Morning Briefing | The labor debate is settled for now. Yields repriced accordingly. The system absorbed it. CPI now determines whether that repricing extends or reverses. | | | | | | Labor Cleared. Inflation Sets The Next Constraint. | Futures are modestly bid. S&P up 0.3%, Nasdaq 100 up 0.2%. Cisco is weighing on sentiment, down roughly 7% after hours despite beating on revenue and earnings. | Payrolls printed 130,000 versus 55,000 expected. Unemployment fell to 4.3%. On impact, yields moved sharply higher. The 10-year pressed above 4.20% before stabilizing. The dollar firmed. | By the close, equities had absorbed the adjustment. The S&P finished flat at 6,941. The Dow slipped 67 points. The Nasdaq oscillated but failed to extend. | This was not rejection. It was recalibration. | Rate cut expectations shifted outward. March is effectively closed. July is now conditional. Total easing priced for the year compressed. | Gold's behavior stood out. It rallied into higher yields and a firmer dollar. That is not a typical correlation break. It suggests reserve diversification and structural demand remain active beneath rate volatility. | Overnight, the MSCI Asia Pacific Index extended to a fifth consecutive record. It is up roughly 13% year to date versus 1.4% for the S&P 500. Capital rotation remains a live theme. | Trade Implication | The labor question is resolved. The inflation question is not. If CPI lands at or below 2.5% with a contained core reading, rate-sensitive sectors can stabilize and yields likely retrace toward 4.15%–4.20%. A hotter print shifts the 2-year first and tightens duration tolerance across software, small caps, and homebuilders. |
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| | | | Yesterday's Answer Creates Today's Question. | Two mechanisms carry forward from yesterday's session. | First, the jobs-to-yields transmission is complete, and the positioning damage is real. | The PM briefing covered the repricing. What it didn't capture is the aftermath. | Managers positioned for three cuts absorbed immediate duration pain. | The ones who were short duration heading into the print are now stuck in a range. | That positioning dynamic, not macro uncertainty, explains futures this morning on no new catalyst. | The labor debate is settled for now. Growth is intact. But "intact growth" with sticky inflation is the worst possible combination for anyone betting on an early easing cycle. | Second, the dollar's posture this morning still reflects a shift Washington signaled earlier this week. | Commerce Secretary Lutnick told a Senate subcommittee that the weaker dollar is at a "more natural" level to promote exports. | That directly contradicts Treasury Secretary Bessent's repeated "strong dollar policy" language. | The DXY is down nearly 10% in twelve months. | When the Commerce Secretary calls that "natural," the market hears permission. | For multinationals, a structurally weaker dollar is an earnings tailwind. For commodities priced in dollars, it's a bid. | For anyone assuming the dollar decline is temporary, Lutnick just made the other side of that trade more crowded. | Execution Bias | CPI tomorrow is the swing factor. If headline lands at 2.5% or below with core MoM at 0.2%, the 10-year retraces toward 4.15% and July firms up. If it surprises hot — 2.7% or above — the next cut slides to September and the 2-year reprices first. Watch the 2-year for the earliest signal. |
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| | | | The Market Is Voting on Which Side of AI Gets Paid. | Yesterday's sector map was a verdict the PM briefing flagged in real time. This morning, it's worth noting what hardened overnight. | AI hardware led everything. | Micron surged 9.9%. Lam Research added 3.8%. Applied Materials gained 3.3%. | These names are selling into real demand, with memory, compute, and networking equipment all essential for AI workloads. | Software continues to feel the pain. | Salesforce is down roughly 26% year-to-date. ServiceNow has lost about 28%. | Software price-to-sales multiples have compressed from 9x to 6x, a decade low. | Equity markets are now differentiating between revenue growth and margin capture. | Defensives participated alongside hardware. | Caterpillar, Verizon, Coca-Cola all attracted sponsorship. | When tangible earnings and infrastructure beneficiaries lead while subscription models lag, the market is signaling preference for operating leverage over narrative leverage. | Execution Bias | Applied Materials reports after the close. Confirmation of memory and AI demand supports hardware leadership. Evidence of cost pressure or margin compression broadens the repricing inside AI supply chains. |
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| | | | Gold Crashed 17%, And It Wasn't an Accident | Gold plunged from $5,608 to below $4,700 in 48 hours. Silver collapsed 31%, its worst day since 1980. | The media called it "profit-taking." | I call it what it is: a coordinated ambush. | After a known Fed hawk was named Chair, paper sell orders flooded the market. The dollar spiked. Retail panicked. | But while paper gold was dumped in the West, buyers lined up in China to grab physical metal. | Paper says sell. Physical says buy.
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| | | | CPI Is the Week's Real Policy Event. | Tomorrow's January CPI print carries more weight than usual. | Consensus sits around 2.5-2.6% YoY headline, with core CPI expected at 0.3% month-over-month. | The BLS is introducing updated seasonal factors with this release, which could create noise in year-over-year comparisons. | And the tariff pass-through from 2025 is expected to peak this quarter. | The PM edition covered the geopolitical backdrop, Middle East naval deployments, tariff revenue surging, Supreme Court deliberations on trade authority. | None of that has changed overnight. | The incremental variable is China. | China's directive last week for domestic banks to reduce US Treasury holdings isn't moving the 10-year today. | But it sits underneath gold's refusal to sell off despite rising yields — the bid isn't about rate expectations. It's about reserve diversification. | Investor Signal | A soft CPI gives the Fed cover to keep July alive. A hot print forces a repricing that hits utilities, REITs, and homebuilders (XHB, ITB) first. Watch whether Chinese Treasury selling accelerates alongside a hot number. That combination would be genuinely new. |
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| | | | Cisco Beat Everything and Lost 7%. AI Infrastructure Has a Margin Problem. | Cisco posted record revenue of $15.35 billion, up 10% year-over-year. | EPS of $1.04 beat the $1.02 consensus. | Networking revenue surged 21%. AI infrastructure orders from hyperscalers hit $2.1 billion in a single quarter. | The stock dropped 7% after hours. | Gross margin came in below estimates, pressured by rising memory costs. | Operating cash flow fell 19% to $1.8 billion. Current quarter EPS guidance merely met expectations. | This is the template for anyone holding AI infrastructure at current multiples. | The demand is real — $2.1 billion from hyperscalers, a new Nvidia-powered switch, a Saudi AI project with AMD. | But the cost of fulfilling that demand is rising faster than the revenue it generates. | Hyperscalers carry negotiating leverage. That pressure shows up in margins before it shows up in revenue. | The AI infrastructure trade has operated on a simple assumption: build it and margins will follow. Cisco just showed that building works. Margins don't — not yet, not at scale. | Edge Setup | The relative value trade is shifting. Names with pricing power, NVDA on GPUs, AVGO on custom silicon, hold better than names selling to hyperscalers at compressed margins. If AMAT's report tonight shows similar cost pressure despite strong demand, the distinction between AI revenue and AI profitability becomes the trade. |
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| | | | Economic Data: Initial Jobless Claims, Existing Home Sales | Earnings: Applied Materials (AMAT), Arista Networks (ANET), Vertex Pharmaceuticals (VRTX), Howmet Aerospace (HWM), Coinbase Global (COIN), Airbnb (ABNB), American Electric Power (AEP), Ainylam Pharmaceutical (ALNY), Zoetis (ZTS), CBRE Group (CBRE), Public Storage (PSA), Exelon (EXC), Entergy (ETR) | Overnight: Nikkei -0.02%, Shanghai +0.05%, FTSE 100 +0.18%, DAX +1.39% |
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| | | | Labor is no longer the variable. Inflation is. | If CPI comes in soft, yields retrace and July remains viable. Hardware leadership extends. | If it runs hot, duration reprices first, the dollar firms, and easing expectations shift further out. | Yesterday proved the system can absorb higher yields. | Tomorrow determines whether it must absorb more. |
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