Taiwan Semi's Surge, Cisco's New Chip, Miran's Take on the Buck

The week is off to a decent enough start. Of course, Monday was a low-pressure day. The Friday rally did carry through, though with a little less gusto. Demand for U.S. Treasuries and precious metals was kept up as well, even if demand for cryptos appears to be waning again overnight Monday into Tuesday. December retail sales will hit the tape at 8:30 this morning. That will set off a week where perhaps the macro takes the football away from earnings and runs with it.

A key measure of consumer health, the importance of retail sales is, of course, exacerbated through the holiday season. For November, this report, which is released by the Census Bureau, was hot as the season got off to a solid start. This morning, we look forward to year-over-year growth of 0.4% both at the headline and ex-autos. This will touch off a series of events that will include data covering January job creation and January wage growth on Wednesday and then January consumer-level inflation on Friday.

Though much lower in profile, November business Inventories will cross the tape at 10 a.m. ET. This number will not make headlines at CNBC or any of your other favorite financial media outlets. Why it matters to you and me is that this number is a key component in gross domestic product. What is released for November, especially after December retail sales hit the tape, will force all those, such as the Atlanta and New York regional Feds to adjust their fourth-quarter estimates for economic growth.

Those adjustments, will, if a little wonky, force a high-speed, algorithmic reaction upon our marketplace. These numbers may cross the tape uneventfully. Just be fully cognizant that there will be an under-publicized event out there that could upset your apple cart later this morning.

Agree to Disagree

Fed Gov. Stephen Miran on Monday spoke publicly from Boston University's Questrom School of Business. In discussing weaker U.S. dollar valuations relative to reserve currency peers, Miran said, “You need a really big move for it to sort of really be a first order issue that would really affect consumer inflation in the United States. The result is that it doesn't matter that much for consumer inflation.”

Miran does not expect recent dollar weakness to impact central bankers in the implementation of monetary policy. On this matter, I agree to a point. Lower dollar valuations force higher prices for commodities and goods and services at the producer / wholesale levels. These impacts would, in a controlled laboratory, produce in higher consumer prices.

Now understand that human response to changing environments is a key component in pricing trends. Emotion matters nearly as much as do labor market conditions. The U.S. economy is well into a disinflationary phase due to softer demand for labor and the increased productivity created through the development of artificial intelligence, machine learning, automation, and so on.

This has all exacerbated the devaluation of human participation in the marketplace, which is a driver behind this softer demand for labor. So, yes, this is precisely when central bankers need to be aggressive on policy as this is very likely that moment when the horses might be saved or at least their welfare preserved for a little longer, before leaving the barn.

Miran is correct in that this dollar weakness should not impact decision makers. He is, at a fundamental level, however, incorrect to assume that a weaker dollar will not impact inflation. To do so, could be akin to mistaking art for science and vice versa. Economics, no matter how much economists want to claim it is a science, will always be art, as conditions can never be constant. 

Policy makers need to adopt this basic interpretation, or will forever, fail to be effective precisely when they are needed to be. To our nation's central bankers, and I know that several of you are reading this, I am and will always be at the service of my country should the need arise. Though, I kicked mainstream Wall Street to the curb a decade ago, I am still a resource. Never be afraid to learn. 

"The artist is nothing without the gift, but the gift is nothing without work."

- Emile Zola (1840-1902)

Marketplace

Monday presented as a continuance of the rally for risk assets that probably began as a short covering on Friday. The upside relief carried forward without hitting resistance, which is a positive, but for a second consecutive day, aggregate trading volumes tailed off. I see this, at this point, as a failure across professional money management to "buy in" to this sudden change of trend. Hence, I think a lot of managers are waiting to see the macro released this week, especially the labor market data tomorrow and the inflation-related data on Friday before deciding whether or not this party is for them.

On Monday, the S&P 500 gained 0.47%, while the Nasdaq Composite popped for 0.9%. Small to midcap stocks lagged the broader marketplace, but tech remained hot. The Dow Jones U.S. Software Index screamed 3.3% higher, led by Applovin  (APP)  and Oracle  (ORCL) . Those two names were up 13.2% and 9.6% respectively. Trailing software were the semiconductors, which have never lost market significance. The Dow Jones U.S. semiconductor Index gained 2% on Monday.

Breadth

For the regular session on Monday, seven of the 11 S&P sector SPDR ETFs closed the day in the green, led by of course, technology  (XLK)  and materials  (XLB)  on the market snapback and that weaker dollar. The health care  (XLV)  and the staples  (XLP)  sectors both finished toward the bottom of the daily performance tables as those seeking safe haven took a break.

Winners beat losers by a rough seven to five at the NYSE and by about three to two at the Nasdaq. Advancing volume took a near-commanding 66.7% share of composite Nasdaq-listed trade and a still majority 58.4% share of composite NYSE-listed activity. Unfortunately, for those looking for some confirmation of an upward change in trend, aggregate trade contracted on a day-over-day basis, by 10.1% across those NYSE-listings and by 9.7% across Nasdaq-listings.

Making matters worse, of the last eight trading sessions, the five highest volume days across the membership of the S&P 500 were all red-candle days, while the three lowest volume days were all green candle days. Without confirmation, I trade more and invest less. With confirmation, I invest more and trade less.

A New Day Calls...

" The humblest citizen of all the land, when clad in the armor of a righteous cause, is stronger than all the hosts of error."

- William Jennings Bryan (1860-1925)

This Morning

Taiwan Semiconductor  (TSM)  reported monthly revenue for January of NT$401.26 billion (or about $12.7 billion in U.S. dollars). That print was good for a surge of 38.6% year over year and a surprisingly hot 19.8% pop month over month. The company had projected growth of just under 30% for all of 2026, so this is a fast-paced, AI-driven start. For those about to ask, this translates to potential good news for the likes of Nvidia  (NVDA) , Advanced Micro Devices  (AMD) , Apple  (AAPL)  and Qualcomm  (QCOM)  among others.

Brand New Toy

Cisco Systems  (CSCO) , which will report tomorrow night, introduced a new networking chip intended to speed information through large data centers in an effort to compete against the likes of Nvidia and Broadcom  (AVGO)  on their own turf. The Silicon One G300 will be the brains behind the Cisco N9000 and the Cisco N8000 systems that have been specifically designed for use by hyperscalers, neoclouds, sovereign clouds, service providers and businesses in general.

At Last

Pitchers and catchers will officially report to Major League spring training camps across both Florida and Arizona later today. (Many players are already there.) Football season is finally over. Baseball season is here. There is peace across the land.

" I watch a lot of baseball on the radio."

- President Gerald R. Ford

Economics 

(All Times Eastern)

06:00 - NFIB Small Biz Optimism Index (Jan): Expecting 99.9, Last 99.5.

08:15 - ADP Employment Change (weekly): Last +7.75K.

08:30 - Retail Sales (Dec): Expecting 0.4% m/m, Last 0.6% m/m.

08:30 - Core Retail Sales (Dec): Expecting 0.4% m/m, Last 0.5% m/m.

08:30 - Employment Cost Index (Q4): Expecting 0.8% q/q, Last 0.8% q/q.

08:55 - Redbook (Weekly): Last 6.7% y/y.

10:00 - Business Inventories (Nov): Expecting 0.2% m/m, Last 0.3% m/m.

4:30 p.m. - API Oil Inventories (Weekly): Last -11.1M.

The Fed 

(All Times Eastern)

12:00 p.m. - Speaker: Cleveland Fed Pres. Beth Hammack.

1:00 p.m. - Speaker: Dallas Fed Pres. Lorie Logan.

Today's Earnings Highlights

(Consensus EPS Expectations)

Before the Open:  (KO)  (.56),  (DD)  (.43),  (HAS)  (.95),  (SPOT)  (2.77)

After the Close:  (F)  (.19),  (LYFT)  (.32),  (MAT)  (.55)

At the time of publication, Guilfoyle was long TSM, NVDA, AMD, AAPL equity.