MPC Morning Call 9th January 2026 – Rotation into Defence and Cyclicals as Markets Await Payrolls
US markets mixed overnight with rotation from big tech into defence stocks and cyclicals ahead of Friday's payrolls report—Dow outperformed while Nasdaq lagged. Defence names rallied on Trump's spending boost signals.
W ATCH ON YOUTUBE US equities were mixed overnight, with rotation out of big tech into defence and cyclicals ahead of Friday’s US payrolls report. The Dow outperformed with gains around 0.6% to ~49,266, supported by non-tech names like Home Depot, American Express, and Caterpillar—marking one of the strongest five-day starts to a year since 2006. The S&P 500 was essentially flat, up less than 0.1% near 6,921, while the Nasdaq slipped ~0.4% to 23,480 as mega-caps like Nvidia and Broadcom lagged. Defence stocks rallied sharply after President Trump flagged substantial increases in US defence spending, boosting names such as Northrop Grumman, Lockheed Martin, and L3Harris—helping offset tech weakness in broader indices. The President also threatened to ban institutional investors from purchasing single family homes. Small caps continued early-year outperformance, with the Russell 2000 up ~1.1% to a new record high of 2,604, reflecting ongoing rotation toward cyclically sensitive and domestically focused areas amid reassessments of growth and Fed-cut expectations. Caution prevailed ahead of the key December non-farm payrolls report due Friday, balancing optimism on eventual Fed easing against uneven data signals. Political commentary on fiscal policy and defence added to sector leadership shifts, keeping volatility elevated in pockets while investors positioned for potential early-cycle dynamics into 2026. Government Bond Yields Commodities, Energy & FX ASX Overnight: SPI 8701 (+0.45%) The Day Ahead: The ASX looks set for a modestly higher open, tracking mixed US leads with potential support from defence-related exposure and cyclicals. Materials may benefit from stable commodities, while banks and small-cap proxies could see rotation flows if global risk sentiment holds amid payrolls anticipation. Tech remains vulnerable to any extended profit-taking.
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