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

Good morning. The tech rally is set to extend, Apple’s headset is coming and debate rages about the inverted yield curve. Here’s what’s movi [View in browser]( [Bloomberg]( Good morning. The tech rally is set to extend, Apple’s headset is coming and debate rages about the inverted yield curve. Here’s what’s moving markets. — [Sam Unsted]( Tech rally A rally in big tech stocks helped the Nasdaq 100 to [close at a record high]( and futures are pointing those gains extending on Friday. A brighter outlook from Taiwanese chipmaking behemoth TSMC [helped the mood]( and lifted hopes for a broader recovery in the tech sector in 2024. Semiconductor sector names like Nvidia and Broadcom were among those benefiting and fueling the Nasdaq rally, along with the best day for Apple shares since May. Tech earnings season kicks into gear next week, with Netflix, Texas Instruments and Intel among those set to report. Apple’s launch Apple shares were helped along [by a rating upgrade]( from Bank of America analysts, driven by optimism about artificial intelligence and a better iPhone upgrade cycle to come. The broker was also positive on the launch of the [Vision Pro mixed-reality headset](, preorders for which start on Friday to provide the first taste of consumer demand for the $3,499 device. The headsets [won’t include apps for YouTube and Spotify](, however, the world’s most popular video and music-streaming services respectively. Netflix too had already said it won’t launch a specific app. Inversion normalization Bond traders are increasingly convinced that the inversion in US Treasury yields [is headed toward normalizing](, though how and why this happens will mean volatility will continue. The question being asked is whether yields will sink on the short-end of the curve as rate cuts emerge, or whether 10-year yields will rise more in a higher-for-longer scenario. The Federal Reserve continues to push back against current wagers for rate cuts, [with Raphael Bostic]( the latest to urge caution given the global uncertainty overshadowing 2024. The Fed’s Austan Goolsbee and Mary Daly are due to speak on Friday. Bank measures US regulators are preparing to launch a plan that would [require banks tap its discount window]( at least once a year in order to reduce the stigma of doing so and ensure that lenders are ready for a downturn. It’s the latest response to the regional bank crisis last year, which highlighted that some lenders were not operationally set up to quickly borrow from the window in a pinch. Separately, [banks borrowed a record amount]( from the Fed’s Bank Term Funding Program in the week to Wednesday, a tool that allows banks and credit unions to borrow funds for up to one year. China selloff The largest brokerage in China is [said to have suspended short selling]( for some clients in mainland markets following the rout in Chinese stocks at the start of the year. State-owned Citic Securities made the move after so-called window guidance from regulators.  A Hong Kong gauge of Chinese stocks has notched up its worst week since March, while [global passive funds]( are adding to the pressure by joining in with the selloff. And this is all wreaking havoc in the country’s asset management sector, with [mutual fund closures]( hitting a five-year high in another sign of deteriorating investor confidence. What We’ve Been Reading This is what’s caught our eye over the past 24 hours. - Escalating Middle East tensions on [the Daybreak podcast](. - Amazon’s takeover of iRobot to be [blocked by EU regulators](. - The cost of the slow return of [Chinese tourists](. - More predictions for an [M&A rebound](. - Congress approves funding to [avert a shutdown](. - [Quitting smoking]( the Swedish way. - Tokyo overwhelmed by [demand for freezing eggs](. And finally, here's what Kristine’s interested in this morning This week, Federal Reserve Bank of Philadelphia President Patrick Harker penned [an ode to soft data]( and its importance in guiding central banks in their process of conducting monetary policy. In particular, he honed in on soft data's predictive power and how it prompted him to shift his views well before it was borne out in hard economic data: "For example, my conversations with contacts across the Third District throughout last spring indicated that our rapid tightening of monetary policy was indeed cooling the economy. But what I also heard from them was a clear plea for time and room to breathe and adjust in the wake of the run-up in rates and continued economic uncertainties. Their reasoning quickly became evident to me as I studied the numbers and saw the localized impacts of higher rates on businesses and prospective home buyers begin to be more broadly borne out in the hard data. And I tempered my position on rate increases accordingly." Assuming Harker's colleagues on the FOMC look at soft data in a similar way, it begs the question: what did they glean from such data to decide in December that it was time to signal a pivot toward rate cuts? Bloomberg Economics points us toward the Fed's Beige Book published a few weeks prior to the pivot. That showed two-thirds of federal districts reporting flat to declining economic activity through mid-November, which was eventually followed and supported by Fed business surveys and ISM surveys. And it's primarily this data that has prompted Bloomberg's economists to conclude that the balance is tipped toward a mild US recession as opposed to a soft landing. We'll get more in the way of soft data today via the University of Michigan sentiment data, which hit a five-month high last month. There is a seasonal element to this, however -- it has trended higher every December for the past 10 years, save for 2017. The latest reading will give us a sense of whether the good vibes are persisting, or if households are turning dour enough to validate the Fed's shift toward lower rates. [Kristine Aquino]( is managing editor for Bloomberg Markets Today. Follow her on X at [@krisaqnews](. 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