Closing Recap 

U.S. stocks surged to new all-time highs on Tuesday, extending the powerful rally that kicked off the new year. The Dow Jones Industrial Average and the S-P 500 both closed at new records, while the small-cap Russell 2000 also posted strong gains. The broad-based rally was driven by a combination of receding geopolitical fears and continued optimism about the U.S. economy. Investors brushed aside the initial shock of the U.S. operation in Venezuela, choosing instead to focus on the potential for increased oil supply and new investment opportunities. The technology sector was a key driver of the gains, with Nvidia and other giants making key announcements at the CES conference. The U.S. dollar and Treasury yields both firmed, while crude oil prices fell sharply as the geopolitical risk premium unwound. 

Key Takeaways 

• Dow and S&P 500 Hit New All-Time Highs: The Dow surged nearly 500 points to a new record, and the S&P 500 also closed at a new high, as the new-year rally gained momentum. 
• Broad Rally Signals Healthy Market: The gains were broad-based, with cyclical sectors like Healthcare, Materials, and Technology leading the way, a sign of strong underlying risk appetite.
• Geopolitical Fears Subside: The market has quickly moved past the initial shock of the U.S. operation in Venezuela, with the focus now on the potential for increased oil supply rather than escalating conflict. 
• Copper Hits Record High, Oil Tumbles: Copper surged to another all-time high above $13,000 a ton on U.S. tariff-driven demand, while WTI crude fell over 2% as the Venezuela risk premium faded. 
• Silver Corrects, but Remains a Top Performer: After a parabolic run to an all-time high of $83, Silver is experiencing a sharp but healthy correction as traders book profits, but it remains one of the top-performing assets of the past year.
• Japan’s Bond Yields Soar to Historic Highs: Japan’s 30-year bond yield hit an all-time high, and the 10-year yield surged to its highest since 1999, signaling a major liquidity drain from global markets that could pose a risk to risk assets and a critical development that signals the end of the “free money” era and poses a significant risk to global carry trades. 
• Oil Slips as Venezuela Supply Hopes Outweigh Geopolitics: WTI Crude Oil is falling, with the market looking past the immediate geopolitical risk of the U.S. action in Venezuela and focusing instead on the long-term prospect of increased supply from the oil-rich nation.
• Jobs Data in Focus: The market is now bracing for a heavy slate of U.S. jobs data, including ADP and JOLTS today, and the crucial December NFP report on Friday. 
• Bitcoin Slips as Recovery Stalls: The crypto market’s recovery attempt stalled, with Bitcoin falling back towards $92,000 as the initial risk-on mood failed to provide a sustained lift. 
• “January Effect” in Play: The market has now entered January, which is historically one of the strongest months of the year for stocks, with the S&P 500 rising 62% of the time, providing a powerful seasonal tailwind.

Market Overview

The U.S. stock market has started the new year with a powerful display of strength with the bulls back in the driver’s seat. Tuesday’s session saw a powerful and broad-based rally that took both the Dow and the S&P 500 to new all-time highs. The market’s ability to not only shrug off but seemingly embrace the major geopolitical shock of the U.S. intervention in Venezuela is a testament to the powerful underlying bullish sentiment. Rather than focusing on the risk of escalating conflict, investors have chosen to look at the potential upside, with oil company stocks, which had rallied on the initial news, giving back some of their gains as the market prices in the prospect of increased Venezuelan oil production. The rally was further supported by positive headlines from the CES technology conference, where announcements from Nvidia and other tech giants have rekindled enthusiasm for the AI trade. 

Index	Up/Down	%	Last
DJ Industrials	484.9	0.0099	49462
S&P 500	42.76	0.0062	6944
Nasdaq	151.35	0.0065	23547
Russell 2000	34.97	0.0137	2582

This is occurring against a backdrop of incredibly bullish sentiment from U.S. consumers, who, according to recent surveys, have almost never been this optimistic about the stock market. However, a significant risk is brewing under the surface. In Japan, government bond yields are skyrocketing to multi-decade and, in some cases, all-time highs. This “great liquidity drain” could have major ripple effects across global markets by tightening financial conditions and reducing the appeal of risky assets. For now, the market is choosing to ignore this threat, but it remains a key vulnerability.

Economic Calendar 

This week will see a flood of key economic data. Today’s slate is particularly important, with three top-tier reports on the U.S. economy due. Overnight data from Australia was a significant miss, reinforcing the dovish case for the Reserve Bank of Australia. Data Released Earlier / Overnight: 

• Australian CPI (Nov): A significant downside surprise, with headline inflation slowing to 3.4% y/y, easing pressure on the RBA to hike rates. 
• German Retail Sales (Nov): Fell a sharp -0.6% m/m, a significant downside miss that points to a weak consumer. 
• Japanese Services PMI (Dec): Slowed to a seven-month low of 51.6, signaling a loss of momentum in the services sector. 

Today’s Economic Calendar: 

• European Session: The main highlight is the Eurozone Flash CPI (Dec). 
• U.S. Session: A heavy slate of data is due, including: 
• U.S. ADP Employment Report (Dec) 
• U.S. ISM Services PMI (Dec) 
• U.S. JOLTS Job Openings (Nov) 

Asset Class Spotlight: FX, Commodities, Bonds & Crypto

The big story in commodities is the continued strength in Gold, which has pushed past $4,490, driven by geopolitical risk and the weaker dollar. Gold continued its impressive run, with February futures settling up nearly 1% at $4,496.10 an ounce. The metal is being fueled by strong safe-haven demand and a bullish long-term outlook from major banks like Morgan Stanley. In contrast, Silver is seeing a sharp pullback, with prices falling back to the $80 level as traders book profits on its incredible rally. Additionally, crude oil prices fell sharply, with WTI settling down over 2% at $57.13 a barrel as the geopolitical risk premium from the Venezuela situation began to fade.

Asset	Up/Down	Unit / % Change	Last
WTI Crude	-1.19	-0.0204	57.13
Gold	44.6	0.01	4496.1
EUR/USD	-0.0026	-0.0022	1.1694
USD/JPY	0.35	0.0022	156.73
Bitcoin	-1000	-0.011	92543
10-Year Note Yield	0.018	0.0043	0.0418

The U.S. dollar firmed as investors positioned ahead of this week’s key data releases, while the yen found a bid on hawkish BoJ bets.

• EUR/USD: The pair is under pressure, trading below 1.1700 as renewed dollar strength and soft German retail sales data weigh on the single currency. The pair has now been down for all five trading days of the new year. A notable $1.2B options expiry at the 1.1725 level could act as a magnet today.
• GBP/USD: The pound is consolidating around the 1.3500 level, holding its ground against a broadly stronger dollar as the market balances dovish Fed expectations against a hawkish BoE. 
• USD/JPY: The pair is trading with a negative bias near 156.50. The yen is finding support from hawkish expectations for the Bank of Japan and a broader flight to safety. The Japanese Yen is benefiting from safe-haven flows, but the upside is being capped by the prospect of a massive new stimulus package from PM Takaichi. The explosion in JGB yields, with the 30-year hitting a record high, is a major structural headwind for the currency.
• USD/CAD: The pair is consolidating, with a large $1B options expiry at the 1.3800 level likely to contain price action.

Cryptocurrencies: After a brief recovery, the crypto market’s rebound has stalled. Bitcoin fell back towards $92,000 on Wednesday as the initial risk-on mood failed to provide a sustained lift, and data showed MicroStrategy’s unrealized losses on its holdings had grown. U.S. Treasury yields edged higher as investors adopted a wait-and-see approach ahead of this week’s key jobs data. The benchmark 10-year yield held steady around 4.18%. 

Looking Ahead 

Today is a critical data day for the U.S. market. The ADP employment report, ISM Services PMI, and JOLTS job openings will provide the most significant insights yet into the health of the U.S. economy after weeks of flying blind. Stronger-than-expected data could challenge the market’s dovish conviction and lead to a reversal in the dollar and a pullback in stocks. Conversely, weak numbers would all but guarantee further Fed easing and could fuel the next leg higher for the new-year rally. Traders should be prepared for a volatile session as the market digests these crucial reports.

What to Watch

• The Data Deluge is Here: Today’s ADP, ISM Services, and JOLTS reports will be critical in shaping the narrative for the Fed’s path and could trigger significant volatility. 
• The January Effect in Full Swing: The powerful seasonal tailwind for stocks is a major factor. With the first five days of the year historically setting the tone, the market’s ability to hold its gains will be closely watched. 
• Japan’s Bond Market Crisis: The explosion in JGB yields to multi-decade highs is a major structural shift for global markets. This is a story that will have far-reaching implications for the Yen, global carry trades, and risk assets. 
• The CES Tech Catalyst: The Consumer Electronics Show (CES) is a major event for the tech sector. Keynote speeches from the CEOs of Nvidia and AMD have already driven price action, and any new announcements on AI, robotics, and the future of computing will be heavily scrutinized.