Closing Recap 

U.S. stocks started the day with gains but faded into the close, finishing mixed on Wednesday as a stronger-than-expected ISM Services report cast some doubt on the market’s aggressive rate-cut expectations. The S&P 500 fell for the first time this week, while the Dow also finished in the red. The tech-heavy Nasdaq was the lone bright spot, eking out a small gain, but the broader market showed signs of fatigue. The strong services data, which showed the sector expanding at its fastest pace of the year, provided a tailwind for the U.S. dollar and sent Treasury yields higher. Technology and defensive sectors held up best, while cyclicals like Materials and Financials led the declines. Late in the session, President Trump’s comments attacking the defense industry for high salaries and a lack of investment weighed on sentiment. 

Key Takeaways 

• Stocks Fade as Strong ISM Data Hits Rate Cut Hopes: An early rally evaporated, and major indices finished mixed after the December ISM Services PMI surged to its best reading of 2025, challenging the market’s dovish Fed narrative. 
• Nasdaq Ekes Out a Gain, but Broader Market is Weak: The Nasdaq managed a small gain, but market breadth was negative, and cyclical sectors like Materials and Financials fell over 1%, signaling a defensive rotation. 
• Trump’s Influence on Full Display: President Trump’s influence on markets is a key theme, with his comments on the defense industry, housing, and auto loans all causing sharp, sector-specific moves.
• Gold and Silver Pull Back on Stronger Dollar: Precious metals saw some profit-taking after their recent powerful rally. Gold fell -0.75%, pulling back from its recent highs as the dollar firmed. 
• Japan’s Bond Yields Continue to Soar: Japan’s 30-year bond yield hit another all-time high, signaling a major liquidity drain from global markets that poses a significant risk to risk assets. 
• Bitcoin Slips Below $90k: The crypto market’s recovery attempt stalled again, with Bitcoin falling below $90,000 as the risk-on mood soured and geopolitical uncertainty lingered. 
• 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.
• All Eyes on U.S. Jobs Data: The market is now squarely focused on Friday’s crucial December U.S. Nonfarm Payrolls report for the next major directional cue. 

Market Overview

The U.S. stock market started the new year with a powerful display of strength, but the momentum has started to fade. After two strong days to start the new year, the market’s bullish momentum hit a wall on Wednesday. The session was a classic case of “good news is bad news,” as a surprisingly strong ISM Services report for December was met with a wave of selling. The data, which showed the services sector expanding at its fastest pace of the year and the employment component returning to growth, directly challenged the market’s narrative of a rapidly cooling economy that would necessitate aggressive Fed rate cuts. The result was a firming of the U.S. dollar and a rise in Treasury yields, which in turn weighed on equities. The price action revealed a clear defensive rotation. While the tech-heavy Nasdaq managed to hold onto a small gain, the broader market was much weaker, with economically sensitive sectors like materials and financials bearing the brunt of the selling. 

Index	Up/Down	%	Last
DJ Industrials	-466	-0.0094	48966
S&P 500	-23.87	-0.0034	6920
Nasdaq	37.1	0.0016	23584
Russell 2000	-7.48	-0.0029	2575

This bifurcation highlights the market’s ongoing struggle to reconcile a resilient U.S. economy with its own lofty expectations for monetary easing. Late-day comments from President Trump, in which he attacked the defense industry and announced a ban on institutional buying of single-family homes, added another layer of policy uncertainty to an already nervous market. While the “January Effect” and a dovish Fed narrative are providing a bullish tailwind, growing geopolitical uncertainty and President Trump’s increasingly interventionist rhetoric are creating headwinds. With the long-term trend of rising Japanese bond yields also posing a threat to global liquidity, the path of least resistance for stocks may be lower until the market gets more clarity from Friday’s all-important jobs report.

Economic Calendar 

This week has seen a flood of key economic data. Today’s focus is on the weekly Jobless Claims report. Data Released Yesterday / Overnight: 

• U.S. ISM Services PMI (Dec): A major upside surprise, surging to 54.4 (vs. 52.2 exp), its best reading of 2025, and showing a return to expansion in the employment component. 
• U.S. JOLTS Job Openings (Nov): Fell to 7.146M, below the 7.600M forecast, a sign of cooling labor demand. 
• U.S. ADP Employment Report (Dec): Showed a gain of 41,000 jobs, slightly below the 50,000 forecast. 
• German Industrial Orders (Nov): A massive beat, with orders jumping +5.6% m/m versus a -1.0% forecast. 

Today’s Economic Calendar: 

• European Session: An extremely light calendar with only Swiss CPI on the docket. 
• U.S. Session: The main highlight is the weekly U.S. Jobless Claims report, the final labor market indicator before Friday’s NFP. 

Asset Class Spotlight: FX, Commodities, Bonds & Crypto

The big story in commodities has been the sharp correction in precious metals. After a parabolic run, precious metals saw some profit-taking after their recent powerful rally. Gold fell -0.75% to settle at $4,462.50 an ounce as the stronger U.S. dollar and a slight uptick in bond yields weighed on the metal. Silver is also pulling back but remains extremely volatile, with Goldman Sachs warning of continued extreme price swings. Crude oil prices also fell, with WTI settling down 2% at $55.99 a barrel after the U.S. Energy Secretary signaled that Venezuelan oil sales would begin “immediately,” easing supply concerns.

Asset	Up/Down	Unit / % Change	Last
WTI Crude	-1.14	-0.02	55.99
Gold	-33.6	-0.0075	4462.5
EUR/USD	-0.0006	-0.0005	1.1681
USD/JPY	0.14	0.0009	156.76
Bitcoin	-2000	-0.015	89641
10-Year Note Yield	-0.022	-0.0052	0.04157

The U.S. dollar firmed on the back of the strong ISM Services data, which tempered some of the market’s more aggressive rate-cut expectations. Overall, the currency market is seeing a mixed U.S. Dollar as traders weigh the competing forces of dovish Fed bets and safe-haven demand.

• EUR/USD: The pair is under pressure, slipping below 1.1700 as the dollar recovers. The strong U.S. data has overshadowed recent soft signals from the Eurozone, creating a headwind for the single currency. The pair is being pressured by the broad strength of the U.S. dollar and the weak German retail sales report. A large $1.3B options expiry at the 1.1660 level could act as a magnet today. 
• GBP/USD: The pound is trading on a flat note around 1.3465, 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. A massive $2.2B options expiry at the 156.15 level is a key level to watch.

Cryptocurrencies: After a brief recovery, the crypto market’s rebound has stalled again. Bitcoin fell back below the key $90,000 level on Thursday as the risk-on mood soured and geopolitical uncertainty lingered. U.S. Treasury yields were mixed after a day of conflicting economic data. The 10-year yield fell slightly to 4.14%, while the 2-year yield was little changed, reflecting the market’s ongoing uncertainty about the Fed’s future policy path. 

Looking Ahead 

Today’s trading will be dominated by the weekly U.S. Jobless Claims report. After a string of mixed labor market signals, this will be a key indicator for traders assessing the economy’s health ahead of Friday’s all-important NFP report. A soft number would revive hopes for aggressive Fed easing and could reignite the risk-on rally. Conversely, a surprisingly strong print could add to the market’s recent jitters and lead to further downside for stocks.

What to Watch

• The Data Deluge Continues: After a mixed bag of data yesterday, today’s Weekly Jobless Claims report will be the market’s next clue on the health of the U.S. labor market. The NFP report tomorrow will be the main event. 
• 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. The market will be watching for any further major announcements on AI and other emerging technologies that could reignite the tech rally. 
• Trump’s Market Influence: President Trump’s increasingly direct interventions in specific sectors are a major new source of volatility. Traders will be on high alert for any new social media posts or official announcements that could move markets.