Closing Recap 

U.S. stocks kicked off the new month with a powerful rally on Monday, shrugging off pre-market weakness and concerns about a brief government shutdown. The major indices advanced in a broad-based rally, with the tech-heavy Nasdaq leading the charge. The positive sentiment was driven by a surprisingly strong U.S. ISM Manufacturing PMI report, which showed the factory sector expanding at its fastest pace since 2022, and news of a new trade deal between the U.S. and India. Small caps and cyclical sectors like Technology and Financials were the standout performers. The U.S. dollar was mixed but held its ground, while, the real story remains the violent dislocation in hard assets: Gold, Silver, and Oil have suffered a catastrophic repricing, while the Australian Dollar exploded higher after the RBA defied the global easing trend with a surprise hawkish rate hike.

Key Takeaways 

• Strong ISM Data Ignites Rally: A much stronger-than-expected ISM Manufacturing PMI, which jumped to 52.6, its first time in expansion in 12 months, was the primary catalyst for a broad rally in U.S. stocks. 
• Tech and Small Caps Lead Gains: The Nasdaq was the top-performing index, and the Russell 2000 also posted solid gains as investors embraced a “risk-on” mood. 
• Government Shutdown Delays Jobs Report: A brief partial government shutdown over the weekend has delayed the release of the January jobs report, which was scheduled for this Friday. 
• Precious Metals Suffer Massive Crash Again: After a spectacular rally last week, gold and silver are in freefall. Gold has plunged nearly 10% in just three sessions, while silver has collapsed almost 41% from its recent all-time high amid successive margin hikes. 
• Silver Crash is “Rarest in 50 Years”: The volatility in Silver is historic. After a 26% plunge and intraday swings of nearly 40%, UBS called it one of the most extreme moves in five decades. The physical squeeze has turned into a liquidation nightmare. 
• Oil Plunges on Peace Talks: WTI Crude collapsed nearly 5% to settle near $62.00 as the “War Premium” evaporated. Reports that the U.S. and Iran are in serious talks, combined with OPEC+ holding output steady, sent energy names tumbling.
• RBA Shocks with Hawkish Hike: The Reserve Bank of Australia became the only hawk in town, delivering a unanimous 25bps rate hike to 3.85% and signaling more tightening for 2026. The Aussie Dollar ripped over 1% on the divergence.
• “Hawkish” Fed Chair Pick Boosts Dollar: President Trump’s nomination of former Fed Governor Kevin Warsh, who is seen as more hawkish than the market was anticipating, has triggered a sharp rally in the U.S. dollar. 
• Kevin Warsh & The Dollar Wrecking Ball: President Trump’s nomination of Kevin Warsh for Fed Chair is driving a “Strong Dollar, Small Balance Sheet” narrative, deepening the sell-off in precious metals and emerging market currencies (excluding India).
• Crypto Carnage Continues, Bitcoin Plunges to 10-Month Low: The crypto market is in a state of meltdown, with over $500 billion wiped out in three days. Bitcoin has crashed 13% to its lowest level since April 2025. 
• U.S.-India Trade Deal Reached: A new trade deal between the U.S. and India, which will see the U.S. slash tariffs in exchange for India buying U.S. oil, has provided another tailwind for market sentiment. 
• Natural Gas Collapses 25%: After a historic rally, natural gas prices plunged over 25% on forecasts for warmer weather, marking the largest one-day percentage decline since 1995. 
• Crypto ETFs Bleed Cash: The “risk-off” mood in alts continues, with US Bitcoin ETFs seeing their longest streak of outflows ever ($5.7B withdrawn in 3 months). Bitcoin is trying to stabilize near $78,000 after testing 52-week lows. 
• Short Sellers Capitulate: Despite the volatility, bearish bets are vanishing. Short interest in the SPY has dropped to ~9% (8-year lows), suggesting the “pain trade” remains higher for equities.

Market Overview

The new month has kicked off with a powerful and decisive “risk-on” move, a stark reversal from the fear and volatility that had gripped the market in recent weeks. The primary catalyst for the sharp turnaround was a surprisingly strong U.S. ISM Manufacturing PMI report. The data, which showed the factory sector not only returning to expansion but doing so at its fastest pace since 2022, has completely upended the market’s “soft landing” narrative and is forcing a reassessment of the U.S. economic outlook. This, combined with news of a new trade deal between the U.S. and India, provided a powerful cocktail for the bulls. The price action was a classic risk-on rotation, with cyclical sectors like technology and financials leading a broad-based rally. However, the macro picture is becoming increasingly complex. 

Index	Up/Down	%	Last
DJ Industrials	515.86	0.0106	49408
S&P 500	37.49	0.0054	6976
Nasdaq	130.29	0.0056	23592
Russell 2000	26.43	0.0101	2640

The nomination of the perceived hawk, Kevin Warsh, as the next Fed Chair has sent the U.S. dollar soaring and is creating a major headwind for assets that have benefited from the “easy money” trade. This was most evident in the commodity and crypto markets, which are experiencing a brutal and historic washout. With another U.S. government shutdown now a reality, albeit a brief one, and with the January jobs report now delayed, the market is facing a deeply uncertain and volatile start to the new month.

Economic Calendar 

The government shutdown has gutted the US data calendar, removing the JOLTS report from today’s docket. The focus shifts entirely to Central Bank speak and the lingering impact of the RBA’s hawkish pivot. However, the January jobs report has been delayed. Data Released Yesterday / Overnight: 

• U.S. ISM Manufacturing PMI (Jan): A huge beat, surging to 52.6 (vs. 48.5 exp), its first time in expansion in 12 months and the strongest pace since 2022.
• RBA Rate Decision: Delivered a unanimous 25bp hike to 3.85% and adopted a hawkish tone, sending the AUD soaring. 
• UK January Nationwide House Prices: Rose +0.3% m/m, as expected. 

Today’s Economic Calendar: 

• European Session: Final Manufacturing PMIs for the Eurozone and the UK. 
• U.S. Session: The U.S. data calendar is empty  due to Shutdown, with the market awaiting key releases later in the week. 
• 13:00 GMT – Fed’s Barkin Speaks (Hawkish/Non-Voter). 
• 14:40 GMT – Fed’s Bowman Speaks (Dovish/Voter).

Major Risk Events This Week: 

• “Big Tech” Earnings (Alphabet, Amazon)
•  Delayed U.S. January Jobs Report (TBA) 
• U.S. December JOLTS Job Openings (Tuesday) 
• Bank of England (BoE) Rate Decision (Thursday). 

Asset Class Spotlight: FX, Commodities, Bonds & Crypto

It has been a bloodbath for precious metals. Gold has plunged nearly 10% in just three trading days, officially entering a bear market after a stunning 21% collapse from its record high. The sell-off was triggered by profit-taking and exacerbated by successive CME margin hikes. Silver has fared even worse, suffering a historic drop of nearly 41% from its peak. The liquidation continues, though Gold is attempting a dead-cat bounce. Gold settled down nearly 2% yesterday but clawed back the $4,900 level in early European trade as the Dollar paused. Crude oil is also down sharply, with WTI falling over 4.7% on reports of potential talks between the U.S. and Iran and persistent concerns about a global supply glut. Natural gas was the most spectacular mover, collapsing over 25% on forecasts for warmer weather.

Asset	Up/Down	Unit / % Change	Last
WTI Crude	-3.07	-0.0471	62.14
Gold	-92.5	-0.0194	4652.6
Silver	(Volatile)	-32%+	87.2
EUR/USD	-0.0061	-0.0052	1.1787
USD/JPY	0.89	0.0057	155.65
10-Year Note Yield	0.03	0.007	0.04271

The U.S. dollar is surging as the nomination of a hawkish Fed Chair and strong domestic data force a dramatic repricing of interest rate expectations. The Australian dollar is the other main outperformer. 

• AUD/USD: The clear outperformer. The pair ripped over 1% to reclaim the 0.7000 handle after the RBA delivered a unanimous hike to 3.85% and signaled more tightening for 2026. This is a massive divergence play against a Dovish Fed/ECB world.
• EUR/USD:The Euro is on the defensive, struggling to hold 1.1800. The pair is pinned by a massive $3.9 billion option expiry at 1.1850 today, which limits upside. The divergence between a booming US manufacturing sector and a stagnant Eurozone is becoming impossible to ignore. The prospect of a less dovish Fed is a major headwind for the single currency. 
• GBP/USD: The pound has also tumbled, with the cable holding just above the 1.3650 level ahead of this week’s BoE meeting. Sterling is holding up better than the Euro, hovering near 1.3690. Traders are hesitant to sell ahead of the Bank of England meeting on Thursday, where rates are expected to be held at 3.75%. The BoE’s “cautious hawk” stance is providing a floor for now.
• USD/JPY: The pair is grinding higher, trading near 155.65. Despite Japan’s Finance Minister playing the “coordination” card with the US to dampen volatility, the Warsh nomination and rising US yields are overpowering intervention fears. The “Carry Trade” is back on, but it’s volatile.

Cryptocurrencies: The crypto market is in a state of meltdown. Bitcoin has crashed below its key $76,037 cost basis for MicroStrategy for the first time since October 2023 and is now trading at a 10-month low. Over $500 billion has been wiped from the total market cap, with a staggering $5 billion in liquidations over the past three days. Treasuries: U.S. Treasury yields are slightly higher as investors digest the strong ISM data. The benchmark 10-year yield is trading around 4.27%, reflecting the market’s ongoing uncertainty about the Fed’s future policy path. 

Looking Ahead 

The market has survived the “Margin Call Monday” test, but the coast is not clear. The “Warsh Regime” represents a fundamental shift in liquidity conditions—from “infinite abundance” to “constrained balance sheets.” Today’s trading will be dominated by the market’s continued reaction to the Warsh nomination and the strong ISM data. With a heavy slate of “Big Tech” earnings and key jobs data still to come this week, the stage is set for a period of extreme volatility. The key question for traders is whether the hawkish repricing of the Fed is a temporary reaction or the beginning of a major regime shift for the market.

What to Watch Today 

• The “Biblical” Commodity Crash: We are witnessing a historic unwind. Silver’s 26% plunge and Gold’s 20% drop from highs in three days marks the end of the parabolic “debasement” run. The move in Nat Gas (-25% in one day) is a warning sign of extreme illiquidity. Watch for “limit down” moves or sudden reversals. 
• The “Domino Effect” in Assets: The week started with heavy selling as leveraged funds were forced to dump everything to cover margin calls in metals. Watch the correlation between Gold and Tech stocks today. If Gold dumps again, expect the Nasdaq to feel the pinch as liquidity is drained. 
• The Oil Collapse: Crude plummeting 5% changes the inflation math. With US-Iran talks progressing, the geopolitical risk premium is zero. This is bearish for Energy stocks (XLE) but bullish for the consumer. 
• Stock Market Resilience: Despite the chaos in other asset classes, stocks started the week with heavy selling pressure only to reverse hard on the ISM beat. This “bad news is good news” regime (economy strong = earnings strong) is currently overpowering the “higher rates” fear. Watch if the S&P 500 can hold 6,950.