1. Good news is bad news.

The US labor market finished 2024 on a blowout, adding 256,000 jobs in December (versus +165k expected) and unemployment falls to 4.1%

Once again, the labor market has shown significant resilience in the face of higher interest rates.

And while that’s good for the economy, that’s bad for the stock market. Because if the economy is holding up well, inflation risks remain to the upside, and the Fed is unlikely to cut interest rates anytime soon.

As a result, stocks and other risk assets sold off, and the 10-year yield hit a new high as it approached the psychological level of 5%.

Wall Street banks, strategists, analysts, and other forecasters are now tripping over each other to adjust their expectations, with Bank of America even saying this current rate-cutting cycle is over. We’ll see what next week’s inflation data brings, but the fear on Wall Street is that rates are going to stay higher for longer.

Equity markets tanked on the good news. Let’s see if we can find support on the 200-day moving average. Mondays and the 13th of the month are not a good combo.

2. Time to take a good look at bonds.

Historically, they look attractive if we are in a late expansion.

3. Constellation Energy buys Calpine for about $27 billion creating the largest US clean energy provider with 60GW low-to-zero emission capacity.

Near-term policy uncertainty has been a massive drag on renewables stocks, but demand for renewable energy is too strong to ignore. With incredible electricity demand coming from data centers, reshoring, and elsewhere, the US needs more power generation.

Renewables advantages include speed to build, hyperscaler preference, economic competitiveness, and zero-emission attributes. “There could be a significant shortfall in available US power grid access relative to the magnitude of new data centers needed to "absorb" the AI equipment purchases over the next several years, with the bottleneck becoming apparent in mid- to late 2025. “

Morgan Stanley estimates a ~36 GW shortfall of US power access for data and the need for 107 GW of new renewables and 32 GW of batteries by 2027, representing an additional 66% demand vs. the baseline outlook.

Also, as grid capacity shrinks, the time to connect new data centers lengthens. “We expect this dynamic to drive increased interest in solutions like siting data centers at nuclear plants.”

4. The stock went up more than 20% after buying out its competitor, Calpine Corp.

The market loves the addition of power generation assets across the US as the nation’s electricity demand is forecast to surge.

5. The past two years have not been kind to value stocks, especially when compared to the broader market.

Still, some say at least parts of the value sector may start doing better, if not the group as a whole.

RBC Capital Market’s head of US equity strategy research Lori Calvasina is maintaining her overweight stance on financials, noting a strong trajectory of earnings and sales revisions, and the group’s tendency to outperform within the S&P 500 in the 12-month period following the past two Presidential elections.

Technical analysts now recommend watching if the ratio between value names and the S&P 500 Index can hold the 2021 low.

6. The Q4 earnings season kicks off this wednesday and earnings are expected to have grown 11.6%.

The consensus is priced in.

7. Here is the schedule.

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