Gold and Silver Shine as Treasury Risks Mount

US equities slid Wednesday as traders brace for a widely anticipated quarter-point rate cut later in the session, along with projections from officials on the trajectory of monetary policy.

The S&P 500 Index fell 0.1% in New York as of 9:32 a.m. in New York, while the technology-heavy Nasdaq 100 Index was down 0.3%. All eyes will also be on artificial intelligence bellwether Oracle Corp.'s earnings after markets close.

Markets are all but certain that the Federal Reserve will reduce its benchmark interest rate by a quarter point on Wednesday, but more important will be economic views from policymakers and the tone Chair Jerome Powell takes when he speaks following the meeting.

The recent choppiness in US stocks comes alongside a climb in Treasury yields, with the 10-year bond around 4.19%.

Over the past three years, US stocks have suffered turbulence and weaker returns when the yield on 10-year Treasuries climbs above 4.25%, according to Michael Kantrowitz, chief investment strategist at Piper Sandler & Co. Any hawkish remarks from Powell at his press conference could "easily push" the 10-year note toward that "line in the sand," Kantrowitz wrote in a note to clients.

Oracle, which reports earnings after the closing bell, and many other artificial intelligence companies are facing a wave of skepticism due to heavy capital expenditures and the circular nature of some arrangements. The company's latest results will provide a gut check for investors on the AI trade.

Traders are placing more importance on the earnings readout from Oracle than on the Fed decision, according to Citigroup Inc.'s trading strategy desk. The S&P 500 options-implied move for the results, as well as next week's jobs data and inflation report, have risen to above today's FOMC meeting, according to Citi's Vishal Vivek.

"The upcoming Oracle earnings has become almost as important as Nvidia's earnings," Vivek wrote in a note to clients Wednesday. "Oracle appears to have become the benchmark to measure the likelihood of AI capex spent ending in a bubble."

Options traders have weighed in on whether the run in artificial intelligence stocks is coming to an end, and their verdict is a resounding no, not anytime soon.

That's on display in the derivatives market, where open interest in call options on the Magnificent Seven group of tech stocks is near its highest since March 2023 relative to puts, a sign that traders are preparing for a move upward.

Among single stocks, Amazon.com Inc. pledged to invest $35 billion in India over the next five years. US manufacturer GE Vernova Inc. jumped after boosting its buyback and doubling a dividend.

Meantime, SpaceX is moving ahead with plans for an initial public offering that would seek to raise significantly more than $30 billion, people familiar with the matter said, in a transaction that would make it the biggest listing of all time.

Source: Bloomberg Europe

Source: cnbc

A photo of eight high school students forming a "human swastika" on a California football field went viral online last week, spurring an outcry from the Jewish community and political leaders across Silicon Valley.

The social media post showing the students lying on the ground in the shape of the Nazi symbol at Branham High School in San Jose was posted online on December 3, along with a 1939 antisemitic quote from Adolf Hitler calling for the annihilation of Jews. The incident began to garner national attention on Tuesday.

The image was eventually deleted from Instagram, but screenshots remain online, including one posted by a member of the California State Assembly, Gail Pellerin, along with a statement condemning the incident.

Antisemitic incidents that had been on the rise in the U.S. for years spiked after the October 7, 2023, attack on Israel by Hamas-led militants and Israel's subsequent military offensive in Hamas-controlled Gaza.

The head of the school district of which Branham is a part condemned the post in a statement, calling the swastika "an unmistakable symbol of genocide."

Robert Bravo, superintendent of the Campbell Union High School District, promised parents on Tuesday that the students would be punished, noting that he had "heard from many community members who are sincerely worried that the students involved will not face consequences strong enough to reflect the seriousness of their actions."

But Bravo also said that some had questioned "whether the students should be disciplined at all," while saying that "antisemitism in any form is unacceptable in our district."

"I want to be very clear: the district considers this an instance of hate violence," he wrote. "The district will respond firmly, thoughtfully, and within the full scope allowed by Board Policy and California law."

He was not available late Tuesday to elaborate on his statements.

The San Jose Police were called to the school regarding the matter, according to media accounts. A San Jose police media spokesperson did not immediately respond to calls and emails seeking comment.

"The actions of students who used their bodies to form a swastika, photographed it, and posted it online with their names and a threatening Hitler quote attached, paint a terrifying picture of the hate plaguing our communities," Pellerin, of the State Assembly, said in her post.

Maya Bronicki, an education leader with the Bay Area Jewish Coalition, said the image has rattled the Jewish community.

"These are children," Bronicki said. "I don't know if they are hateful or ignorant, but it represents blind hate."

Branham High principal Beth Silbergeld told students and parents that the post "does not reflect the values of our school and community," and said the incident was under investigation, according to the school's student newspaper, the Branham Bear Witness.

Marc Levine, ADL's Northern California director, said on Tuesday that Branham school administrators have reached out to him.

"We all want to keep hate out of student spaces," he said.

The Jewish watchdog group, the Anti-Defamation League, reported in its annual audit that in 2024 there were more than 9,300 antisemitic incidents across the U.S., marking a 5% increase from 2023 and a 344% increase over the last five years.

Source: Reuters

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

Major economies around the world continue to show resilience to US trade protectionism, but uncertainty is still high. In the United States, economic growth is being supported by strong consumption and a surge in AI investment. The US government shutdown caused volatility in quarterly growth and delayed the release of some key economic data. Tariffs are causing some upward pressure on US inflation. In the euro area, economic growth has been stronger than expected, with the services sector showing particular resilience. In China, soft domestic demand, including more weakness in the housing market, is weighing on growth. Global financial conditions, oil prices, and the Canadian dollar are all roughly unchanged since the Bank's October Monetary Policy Report (MPR).

Canada's economy grew by a surprisingly strong 2.6% in the third quarter, even as final domestic demand was flat. The increase in GDP largely reflected volatility in trade. The Bank expects final domestic demand will grow in the fourth quarter, but with an anticipated decline in net exports, GDP will likely be weak. Growth is forecast to pick up in 2026, although uncertainty remains high and large swings in trade may continue to cause quarterly volatility.

Canada's labour market is showing some signs of improvement. Employment has shown solid gains in the past three months and the unemployment rate declined to 6.5% in November. Nevertheless, job markets in trade-sensitive sectors remain weak and economy-wide hiring intentions continue to be subdued.

CPI inflation slowed to 2.2% in October, as gasoline prices fell and food prices rose more slowly. CPI inflation has been close to the 2% target for more than a year, while measures of core inflation remain in the range of 2½% to 3%. The Bank assesses that underlying inflation is still around 2½%. In the near term, CPI inflation is likely to be higher due to the effects of last year's GST/HST holiday on the prices of some goods and services. Looking through this choppiness, the Bank expects ongoing economic slack to roughly offset cost pressures associated with the reconfiguration of trade, keeping CPI inflation close to the 2% target.

If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. Uncertainty remains elevated. If the outlook changes, we are prepared to respond. The Bank is focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval.

Information note

The next scheduled date for announcing the overnight rate target is January 28, 2026. The Bank's next MPR will be released at the same time.

Source: BOC

The Bank of Canada maintained its target for the overnight rate at 2.25% on Wednesday, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

In its announcement, the central bank noted that major economies worldwide continue to show resilience despite U.S. trade protectionism, though uncertainty remains high. The Canadian economy grew by a stronger-than-expected 2.6% in the third quarter, primarily due to volatility in trade, while final domestic demand remained flat.

"If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment," the Bank stated.

The labor market has shown some improvement, with solid employment gains over the past three months and the unemployment rate declining to 6.5% in November. However, job markets in trade-sensitive sectors remain weak, and economy-wide hiring intentions continue to be subdued.

CPI inflation slowed to 2.2% in October as gasoline prices fell and food price increases moderated. Inflation has been close to the 2% target for more than a year, while core inflation measures remain in the range of 2.5% to 3%.

In prepared remarks ahead of a press conference set to follow the announcement, Bank of Canada Governor Tiff Macklem highlighted three key messages. First, steep U.S. tariffs on steel, aluminum, autos, and lumber have significantly impacted these sectors, with uncertainty about U.S. trade policy weighing on business investment more broadly. Second, inflationary pressures remain contained despite added costs related to trade reconfiguration. Third, the current policy rate is deemed appropriate for maintaining inflation near target while supporting economic adjustment.

"Increased trade friction with the United States means our economy works less efficiently, with higher costs and less income. This is more than a cyclical downturn—it's a structural transition," Macklem said.

The Bank expects GDP growth to be weak in the fourth quarter before picking up in 2026. It also noted that the recent federal budget includes increased government spending, particularly in defense, which will contribute to growth in both demand and supply over time.

The next scheduled date for announcing the overnight rate target is January 28, 2026, when the Bank will also release its next Monetary Policy Report.

Source: Investing

The euro has had a solid year, and analysts at Bank of America Securities stay bullish on the single currency into 2026, seeing a much lower bar for upside European surprises when compared with the end of the second quarter.

At 08:50 ET (13:50 GMT), EUR/USD traded 0.1% higher at $1.1635, and is on course for annual gains of over 12%.

"Following the initial euphoria, Europe sentiment has considerably moderated, with the FX market seeming to attach several (implementation or other) risks to German fiscal and European defence spending, while continuing to expect little on reforms," said analysts at Bank of America, in a note dated Dec. 10.

"Still, fiscal hopes in Europe are in sharp contrast with recurrent concerns in the U.S., Japan, and U.K."

The bank looks for EUR/USD to reach $1.22 by the end of 2026, "though we expect most USD weakness post the first quarter", and also expects gains for the single currency against both the Japanese yen and the British pound.

"Our bullish EUR/USD view reflects mostly, but not solely, U.S. developments: our economists anticipate U.S. and EA growth convergence in 2H 2026. The EA growth acceleration we expect in late 2026 and through 2027 is owing to the German fiscal package and a recovery in external demand, also amid China easing in late 1Q/early 2Q," BofA added.

The European Central Bank could act as a small drag on the single currency in the near term, the bank said, with BofA economists expecting at least one more cut (likely in March) and no hikes through 2027.

"Still, we would focus on real rates: we expect an inflation undershoot in the EA [euro area], but an overshoot in the U.S. and several economies," BofA said.

Source: Investing