Welcome back. Futures are pointing to a higher open as traders await a fresh reading on wholesale inflation. Joining me is Eric Criscuolo, market strategist at the New York Stock Exchange. Eric, thanks for joining us. The S&P has been consolidating after last week's big move. Is this a healthy pause or something more cautious?
If you just look at the S&P it is consolidating last week's gain. Big move higher. Right now we are trading in a very tight range — up and down a couple of basis points every day. We got the CPI data and it did not do much to markets yesterday. Things are stabilising. Some of that optimism is being burned off from last week. The Strait of Hormuz situation — I think investors are now very preconditioned. They have seen the pattern. Trump says something, then says something directly opposite. Hostilities increase, then pull back. When you get punched in the arm enough, you just stop feeling it. That volatility in the region is not manifesting in market volatility right now.
What is the yield curve telling you about where the market thinks the Fed will land?
There is about a 60% probability of a Fed hold in September priced into the market right now. Looking through December, one cut of 25 basis points is priced in. The economy is performing well — earnings have been strong. These relatively higher interest rates on the short end have not slowed anything down on the corporate side. But the longer-term yield — the ten-year and the thirty-year — those are actually continuing to rise. That tells you there is greater uncertainty around the Fed. Investors just do not know which way inflation or policy could go, and that is pushing up longer-dated yields higher and higher.
Anthropic could go public as soon as October targeting a valuation of as high as $2 trillion. What does that say about investor appetite for AI right now?
AI has been the dominant story across markets for a while. The money is flowing around AI — between software, hardware, memory names, hyperscalers — but it is not leaving the AI ecosystem. That is actually good for the demand picture around potential IPOs. SpaceX came out, it has been a little volatile but recovered from its lows. There is still big demand for AI. Some of the new data centres reported very strong earnings and have ripped the past couple of days. But here is the tactical question: if I want to invest in Anthropic or OpenAI, I need funds from somewhere. I probably have to sell something. What investors will sell to raise capital for that IPO — that is a question that has to be answered.
Overall view on the week — geopolitical headlines, CPI, PPI all at once?
Groundhog Day is the perfect explanation. The Strait of Hormuz situation feels like something that will be a long process to resolve — there are so many facts that have to be figured out around who patrols it, what the conditions are. Oil is well off its highs but also off its lows, and it will probably continue to ping-pong based on how negotiations play out. Global reserves have been sold down to stabilise flows while the strait has been restricted — and one thing that will eventually have to happen is those reserves get refilled. That could push prices up at some point. But right now oil looks relatively steady, and as long as markets know roughly where oil is and where it could go, that is okay for now.
Thanks so much, Eric.
Happy to be here as always. Thank you.
