Yesterday the S&P rose 0.5%, outpacing the equal-weight (flat) but lagging the Russell 2000 (+0.7%). Tech led, with the AI theme driving gains after a positive operational update from OpenAI, Oracle sell-side upgrade and a big bond offering from Alphabet. Software also continued to rebound as the IGV ETF gained 3%, on top of Friday’s 3.5% bounce. Ahead of the open Treasury yields moved modestly higher following reports that Chinese regulators had reportedly told financial institutions to pare holdings of US Treasuries. However, they quickly reversed course after White House Senior Economic Advisor Kevin Hassett talked down expectations for upcoming labor data. The Dollar saw a steep decline against major crosses.

S&P futures had traded on either side of unchanged overnight and were moving modestly lower ahead of the first of this week’s major economic data points. December retail sales came in well below estimates flat m/m, below the 0.4% estimate, while the control group which feeds into GDP fell 0.1%. Sales at miscellaneous store retailers, furniture and clothing were all down just under 1%. Building materials/garden/supplies dealers and sporting goods were positive standouts for the second consecutive month. Treasuries added to yesterday’s rally following the data. There is a bull flattening of the curve with the yields at the long end down 7-8bps breaking below last week’s low. Over the last week the probability for an April rate cut has moved up to ~40% from just under 25%.