5 Things You Need to Know to Start Your Day: Americas

Good morning. Bond traders dial back aggressive rate-cut bets, US steps up Houthi strikes and chipmaker TSMC returns to growth. Here’s what’ [View in browser]( [Bloomberg]( Good morning. Bond traders dial back aggressive rate-cut bets, US steps up Houthi strikes and chipmaker TSMC returns to growth. Here’s what’s moving markets. —[Charlotte Hughes-Morgan](. Recanting rate bets Bond traders are heeding central bank warnings and [abandoning wagers]( that the Fed will cut interest rates in March. They’re now seeing around a 50% chance of a quarter-point reduction in the federal funds target in the first quarter versus a rate cut in March that was seen as almost a sure thing last month. Behind the rethink: [stronger-than-expected US retail sales]( and hotter-than-anticipated [domestic inflation]( data. The two-year Treasury note’s yield, more sensitive than longer maturities to Fed moves, has risen 18 basis points since last week, to 4.32%. More US strikes Middle East tensions are ratcheting up after the US launched [another round of strikes]( on Yemen’s Houthis overnight. The American military targeted 14 Houthi missiles just before midnight Yemeni time. Hours later, [Pakistan]( launched missiles against militants in Iran. Oil prices [edged higher]( on Thursday following the strikes, with Brent rising above $78 a barrel as concern builds around the potential for interruptions to crude production and disrupted supply chains. Since the war between Israel and Hamas erupted in October, the Houthis have attacked vessels in the Red Sea, US bases have come under fire from Iran-backed groups in Iraq and Syria, and Tehran has struck targets in neighboring countries. Listen to our [Daybreak podcast]( for more. Tech recovery TSMC, the main chipmaker to Apple and Nvidia, said it expects a return to solid growth this quarter, suggesting the [world’s most valuable chipmaker]( anticipates a recovery in smartphone and computing demand. TSMC is budgeting capital expenditure of $28 billion to $32 billion, and expects revenue growth to bounce back to at least 20% for the year. The Taiwanese company’s outlook, while not quite surpassing the most bullish estimates, comes after a years-long slump in tech demand. But these results should boost the signs of a recovery for the chipmaking sector that have emerged in recent weeks. TSMC also announced another delay to its [$40 billion site in Arizona](, in a further blow to the Biden administration’s plans to boost manufacturing of critical components on US soil. Apple setback Apple will begin selling versions of its Series 9 and Ultra 2 watches without a blood oxygen feature in the US, after a [legal setback]( in its patent dispute with Masimo Corp. The US Court of Appeals for the Federal Circuit declined to grant Apple a longer pause on an import ban of the devices imposed by the US International Trade Commission. This means Apple has to stop selling watches with the oxygen measurement feature while an appeal of the ban plays out, a delay that could last a year or more. Elsewhere, Apple is also poised to face a [US antitrust lawsuit]( as soon as March, with enforcers alleging that the company has imposed software and hardware limitations on iPhones and iPads to stop rivals successfully competing. Coming up... Looking ahead, we’ll get data on new housing starts and building permits for December, which will provide an insight into the health of the US housing market. We’re also due the Philadelphia Fed Business Outlook and the Atlanta Fed’s Raphael Bostic is set to speak on the economic outlook. Bostic has recently said inflation could “see-saw” if policymakers cut rates too soon, but did also note that inflation had come down more than he expected.  Is it time to take profits on some of the trades touted in year-ahead outlooks back in November and December? Share your views in the latest MLIV Pulse [survey](. What We’ve Been Watching This is what’s caught our eye over the past 24 hours. - Singapore’s Transport Minister Resigns After [Biggest Graft Case]( Since 1986 - [Listen](: US Oil is Booming and It’s Upending Global Markets - You Switched the Lights On. Traders Made [Billions of Dollars]( - Businessweek Feature: The Downfall of [Diddy Inc.Â]( - Netflix [Snubs Apple’s Vision Pro]( by Opting Not to Put App on Headset - Davos Live: JPMorgan’s Dimon Tells Democrats to [‘Grow Up’Â]( - Steve Forbes Is Selling His [Winston Churchill]( Memorabilia Collection And finally, here's what Joe’s interested in this morning I've posted this chart before, but I'm posting it again because it's remarkable. US oil production is at record highs, despite all kinds of talk over the last couple of years about how domestic players were focused on profitability over volume, and all kinds of talk about the Biden administration standing in the way of the industry. In addition to all the production, there's something else remarkable going on with US oil. The industry is making a lot of money. This is the big surprise really. The story of the 2010s was all about US shale pumping like crazy and not worrying about making money. A big part of the story was capital markets: cheap money encouraging companies to grow at all costs. But at least for the moment, the industry is in a sweet spot. Increasing volumes, while doing so profitably. [On today's Odd Lots podcast](, we speak with our [Bloomberg Opinion columnist Javier Blas]( about what's going on the industry. There's a few interesting dynamics here that we touch on. One is the tech story. Shale itself exists as an industry because of tech. But the tech keeps getting better. Even with tighter financial conditions, producers are still getting better and better at getting more oil out of each well. The industry has also gotten better at standardizing parts, allowing operators to work more efficiently. Meanwhile, US shale is putting massive pressure on OPEC, with Saudi Arabia recently having undertaken a unilateral production cut in order to put a floor under prices. It's quite a massive story and the question is how long these set of conditions can last. But at least for the moment, we're seeing high volumes, cheaper gasoline prices, profitable US players, and pressure on OPEC. Quite a combo. Find the episode on [Apple](, [Spotify]( or elsewhere. Follow Bloomberg's Joe Weisenthal on X [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Tell us what you want to see in the Five Things newsletter! Please [take our quick survey here.]( [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. 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