Closing Recap

U.S. stocks finished lower on Thursday, snapping a three-day winning streak as a combination of rising geopolitical tensions and hawkish-leaning central bank minutes weighed on sentiment. All major indices finished in the red, with the S&P 500 and Nasdaq both down, though they closed off their session lows. The market was hit by a flurry of negative headlines, including rising tensions between the U.S. and Iran and a hawkish signal from the Federal Reserve’s January meeting minutes, which showed a divide among policymakers on the need for near-term rate cuts. A surprisingly strong jobless claims report also tempered some of the market’s more aggressive rate-cut expectations. Crude oil was the standout performer, surging to a seven-month high on the escalating geopolitical risk premium. In a sign of the underlying anxiety, the “Safe Haven” trade in Gold paused, but Silver held firm, while Bitcoin managed to stabilize near $68,000 as traders hedged downside risk.

Key Takeaways

• Stocks Snap 3-Day Winning Streak: U.S. stocks fell as rising geopolitical tensions and a hawkish tone in the FOMC minutes from Wednesday weighed on sentiment.
• Oil Rips to 7-Month Highs: WTI Crude surged to $66.43 (+1.9%) as geopolitical tensions with Iran escalated. Trump’s warning of “really bad things” if no deal is reached in 10-15 days has injected a massive war premium into energy markets.
• Strong Jobless Claims Boost Dollar: Weekly Jobless Claims unexpectedly fell to 206,000, a sign of ongoing labor market resilience that provided a bid for the U.S. dollar and weighed on rate-cut bets.
• Precious Metals Consolidate: Gold and silver were little changed as the market consolidated its recent strong gains, with investors weighing geopolitical risks against a more cautious Fed.
• Goldman Bullish Gold: Goldman Sachs reiterated its call for Gold to hit $5,400/oz by year-end, citing relentless central bank demand.
• Pound Rallies on Strong UK Data: The British pound was a rare bright spot, with GBP/USD rising after a surprisingly strong UK retail sales report for January defied expectations of a slowdown.
• Crypto Outflows Continue: The crypto market remains under pressure, with Bitcoin struggling to hold the $67,000 level as data shows a fourth consecutive week of outflows from crypto funds.
• All Eyes on U.S. PCE Inflation: The final major risk event of the week is today’s delayed December U.S. PCE inflation report, the Fed’s preferred inflation gauge.
• Lagarde Denial: ECB President Lagarde pushed back on rumors of an early exit, stating her “baseline” is to serve until 2027. This stabilized the Euro near 1.1770.
• Yen on Intervention Watch: The Japanese yen is trading cautiously as officials escalate their verbal intervention, but RBC sees a long-cycle rotation into the yen as a key theme.
• RBC Bullish Yen: Contrarian call from RBC sees USD/JPY falling to 147 by year-end, citing a “structural rotation” of Japanese capital back into domestic bonds.
• MUFG Sees Dollar Weakness Persisting: Despite the recent bounce, analysts at MUFG see the dollar’s strength as unlikely to last, citing political uncertainty and the Fed’s dovish pivot as major headwinds.
• Supreme Court Tariff Watch: A ruling on Trump’s tariffs could drop today (Friday 20th). JPM sees a 64% chance of a “Strike Down + Replace” scenario, which would limit equity upside.

Market Overview

The market is in a “wait-and-see” mode, paralyzed by conflicting signals. The market’s recent bullish momentum hit a wall on Thursday as a confluence of negative catalysts soured the mood. The session was a classic case of a market grappling with a complex and uncertain outlook. On the macro front, a surprisingly strong U.S. jobless claims report pushed back against the “soft landing” narrative and tempered some of the market’s more aggressive rate-cut expectations. This was compounded by the hawkish-leaning minutes from the Fed’s January meeting, released on Wednesday, which revealed a divided committee still concerned about inflation.

Index	Up/Down	%	Last
DJ Industrials	-267.5	-0.0054	49395
S&P 500	-19.4	-0.0028	6861
Nasdaq	-70.91	-0.0031	22682
Russell 2000	6.48	0.0024	2665

However, the main driver of the risk-off tone was a significant escalation in geopolitical tensions. President Trump’s renewed threats against Iran, combined with reports of stepped-up military activity in the Middle East, injected a significant risk premium into the market, sending crude oil prices soaring to seven-month highs. This flight to safety provided some underlying support for gold, but the broader equity market was hit hard. With the market now anxiously awaiting a potential Supreme Court ruling on tariffs and today’s crucial PCE inflation report, the stage is set for a volatile end to the trading week. With Oil breaking out to $66 on war fears, inflation expectations could un-anchor just as global growth slows—a classic “Stagflationary” setup that is toxic for equities. The divergence between the “AI Dream” (Tech stocks) and the “War Reality” (Oil/Gold) is widening.

Economic Calendar

With U.S. markets returning to a more normal schedule, today is packed with a backlog of important economic data releases.Today is a Data Super-Nova. We get the Fed’s preferred inflation gauge (PCE), Q4 GDP revisions, and flash PMIs. This is the final piece of the puzzle for the March FOMC meeting.

Data Released Yesterday / Overnight:

• U.S. Weekly Jobless Claims: Unexpectedly fell to 206,000, a sign of ongoing labor market resilience.
• U.S. Philadelphia Fed Survey (Feb): Jumped to 16.3, well above the 8.5 consensus.
• UK Retail Sales (Jan): A massive upside surprise, jumping +1.8% m/m versus a +0.2% forecast.
• Japanese January CPI: Headline inflation cooled to 1.5% y/y, the lowest since March 2022, easing near-term pressure on the BoJ to hike rates.

Today’s Economic Calendar:

• European Session: Flash Manufacturing & Services PMIs for the Eurozone and the UK.
• U.S. Session: The main highlights are the delayed U.S. December PCE Price Index, the Fed’s preferred inflation gauge, and the final University of Michigan Consumer Sentiment survey.
• A potential U.S. Supreme Court ruling on President Trump’s global tariffs.
• 13:30 GMT (8:30 ET) – US PCE Price Index (Jan). The Fed’s Holy Grail. Est: 2.4% YoY.
• 13:30 GMT – US Q4 GDP (Second Est). Old news, but algo-moving.
• 13:30 GMT – Canada Retail Sales.
• 14:45 GMT – US Flash PMIs.
• 14:45 GMT – Fed’s Bostic Speaks.

Asset Class Spotlight: FX, Commodities, Bonds & Crypto

Gold prices are consolidating, with spot gold dipping slightly as geopolitical risks are balanced by a firmer U.S. dollar and receding Fed rate cut bets. Gold is consolidating just above the big psychological level $5,000. The geopolitical bid is fighting the “Hawkish Fed” headwinds.Silver is holding $77.63, showing relative strength vs Gold. Crude oil was the standout performer, with WTI surging 1.9% to a seven-month high of $66.43 a barrel as escalating tensions between the U.S. and Iran raised fears of a major supply disruption.

Asset	Up/Down	Unit / % Change	Last
WTI Crude	1.24	0.019	66.43
Gold	-12.1	-0.0024	4997.4
EUR/USD	-0.0017	-0.0014	1.1765
USD/JPY	0.18	0.0012	155
10-Year Note Yield	-0.005	-0.0012	0.04073

The U.S. dollar found a bid as strong domestic data and a hawkish tilt in the FOMC minutes tempered some of the market’s more aggressive rate-cut expectations.

• GBP/USD: The pound is the standout performer, with the pair surging after a blockbuster UK retail sales report for January defied expectations of a slowdown.Sterling bounced off the 1.3400 lows on the blockbuster Retail Sales print. However, the downtrend remains intact unless 1.3500 is reclaimed.
• EUR/USD: The euro is holding steady around 1.1765 ahead of key Eurozone PMI data. The single currency is being supported by the view that the ECB is firmly on hold, but a stronger dollar is a headwind.The weak German PPI (-0.6%) signals deflationary pressure in the industrial core, which limits the ECB’s hawkishness. Support at 1.1750 is critical.
• USD/JPY: The yen remains on the back foot, with the pair trading near 155.00. The currency is being weighed down by a softer-than-expected January CPI print, which has tempered some of the market’s more aggressive BoJ rate hike expectations.The pair rallied as Japan’s CPI missed, reducing the odds of an imminent BOJ hike. The divergence between the “Warsh Fed” (Higher for Longer) and a “Patient BOJ” is lifting the pair.

Cryptocurrencies: After a brief period of stability, the crypto market remains under pressure. Bitcoin is struggling to hold the $67,000 level, with data showing a fourth consecutive week of outflows from crypto funds. The market is also bracing for the technical impact of a potential “death cross” on the charts. U.S. Treasury yields are slightly lower as investors seek the safety of government bonds amidst the geopolitical uncertainty. The benchmark 10-year yield is trading around 4.07%, reflecting ongoing concerns about the global economic outlook.

Looking Ahead

Today is a critical day for the market. The release of the delayed U.S. PCE inflation report will be the main event, with the potential to either validate or completely upend the market’s current dovish narrative. A hot number would be the worst of all worlds, raising the specter of stagflation and likely triggering the next major leg down for risk assets. The looming Supreme Court ruling on tariffs adds another layer of high-stakes event risk, making for a potentially explosive end to the trading week.

What to Watch Today

• PCE Core Deflator: This is the number that matters. Anything above 0.3% MoM is bearish for Risk Assets.
• Oil @ $66.50: WTI is testing a major breakout level. A close above here confirms the “War Premium” is entrenched.
• SCOTUS Tariff Ruling: Watch for headlines around 10:00 AM ET. A ruling against Trump’s tariffs would be Bullish for stocks (lower costs) but Bearish for the Dollar.
• Japan Long Weekend: Japanese markets are closed Monday. Traders may square up JPY positions today, leading to erratic moves in USD/JPY