Daily Market Summary – Feb 17th

Fed cautious on rates

Federal Reserve officials signaled a cautious approach to monetary policy amid evolving economic pressures, with Vice Chair Michael Barr indicating a likely pause in rate decisions while monitoring inflation trends for further easing. Chicago Fed President Austan Goolsbee highlighted the potential for several interest rate cuts this year if inflation continues toward the 2% target, fueling bets in financial hubs on aggressive easing as unemployment surges. Wall Street scrutinized former Fed Governor Kevin Warsh's strategies for shrinking the central bank's massive balance sheet during a policy transition, though implementation faces significant market and political hurdles. Bond rallies stalled as traders demanded concrete evidence for rate cut expectations amid global uncertainty, while the US dollar strengthened against major currencies as investors questioned pricing for three cuts. These dynamics reflect heightened scrutiny on the Fed's path amid cooling job markets and persistent inflationary watchpoints.

Labor weaknesses intensify

Labor market weaknesses intensified with signs of a white-collar recession spreading across tech, finance, and professional services through widespread layoffs, signaling broader economic softening. Unemployment rates surged sharply, particularly among men facing economic obsolescence from automation, deindustrialization, and the rise of service sectors, stranding low-skill workers. A San Francisco Fed paper linked drops in unauthorized immigration to slower job growth by constraining labor supply in low-wage areas, while stagnant conditions eroded worker sentiment overall. Tech stocks plunged as AI disruption fears extended to more firms, with companies increasingly using AI advancements as a cover for cost-cutting layoffs rather than genuine automation shifts.

AI investments boom

Massive investments poured into artificial intelligence infrastructure, positioning key players for long-term dominance. India's Adani Group committed $100 billion to green-powered AI data centers by 2030, aiming to build 5 gigawatts of capacity and establish the country as a global AI hub, complemented by national targets for over $200 billion in related infrastructure by 2028. Seventeen US-based AI companies secured $100 million or more in funding this year, underscoring robust venture appetite. Wedbush analysts forecasted Apple's pivotal AI advancements culminating in a transformative "AI moment" by 2026, driving substantial growth. Temporal raised $300 million led by Andreessen Horowitz for AI agent demand, while French firm Mistral bolstered its capabilities through acquiring cloud startup Koyeb, its first deal to support sovereign AI goals. Infosys partnered with Anthropic for enterprise AI agents amid sector jitters, though software stock valuations face risks from slowing revenue and rising competition.

Oil tensions rise

Oil markets tensed amid geopolitical risks, with prices rising as Iran closed sections of the Strait of Hormuz for naval drills, threatening disruptions to global shipments through this vital chokepoint. Bears underestimated these hazards, including potential supply spikes from escalating tensions, while thin holiday trading saw dips tied to US-Iran nuclear talks in Geneva. China's renewable energy capacity overtook coal-fired plants for the first time at 1,824 gigawatts versus 1,171 gigawatts, yet coal approvals doubled and generation hit records to meet surging electricity needs. Eni announced major natural gas discoveries offshore Côte d’Ivoire, estimating over 5 trillion cubic feet, bolstering exploration prospects.

Europe targets Big Tech

Europe ramped up regulatory scrutiny on US Big Tech giants including Google, Apple, Meta, and Amazon through antitrust probes and Digital Markets Act enforcement, risking transatlantic trade frictions and US retaliation amid economic slowdowns. Britain advanced plans for a Visa rival clearing network to protect £2.5 trillion in annual transactions from potential Trump-era severance of US payment access. The US signaled openness to revising steel and aluminum tariffs, while Minera Vicuña, a BHP-Lundin Mining venture, pledged $18 billion for copper projects in Argentina to capitalize on electrification demand. Colombia's trade deficit ballooned from soaring imports and falling oil-coal exports, highlighting commodity vulnerabilities.

Supply chains falter

Global freight and supply chains deteriorated sharply, with a downturn fueling bankruptcies and threatening trade stability alongside economic recovery efforts. Rail freight outlooks stayed subdued awaiting stronger indicators, and copper prices slipped on rising stockpiles signaling oversupply against recovering demand. Grain markets struggled with ample supplies, weak demand, and favorable weather curbing rallies, as corn, wheat, soybeans, rice, and sugar traded steadily or lower. Gold held near $5,000 per ounce amid holiday-thinned volumes, while silver saw post-holiday plunges after speculative surges.

Corporate adaptations

Corporate strategies adapted to competitive pressures, with Ford detailing a cost-effective EV platform debuting in a midsize pickup to accelerate electrification. Bayer advanced $10.5 billion in Roundup cancer lawsuit settlements, including a $7.25 billion deal resolving thousands of claims and strengthening its Supreme Court position. Media giants Netflix, Paramount, and Warner Bros. heightened rivalry, with Warner Bros. reopening takeover talks with Paramount after a seven-day waiver, amid Netflix monitoring consolidation. Streaming escalated three-way battles, while Climatic launched a hybrid fund bridging startups' funding gaps.

Crypto volatility surges

Cryptocurrency exchanges navigated volatility, with Gemini's stock plunging after abrupt executive dismissals post-IPO by the Winklevoss brothers. MicroStrategy ramped up Bitcoin buys despite $48 billion holdings underwater, as prices declined amid geopolitical risks and a potential longest losing streak since 2018. Coinbase surged nearly 20% on crypto momentum, while Harvard's endowment shifted from Bitcoin to Ethereum. President-elect Trump backed prediction markets like Kalshi and Polymarket against state bans, planning federal overrides to spur innovation, defended by CFTC amid lawsuits. The Netherlands' crypto tax on deemed yields above €57,000 sparked debates on unrealized gains.

Earnings mixed

Mixed corporate earnings reflected sector strains, with tech firms like Medtronic beating on heart devices, eToro on multi-asset growth, yet misses from Leidos, LGI Homes, and others due to shutdowns or weak demand. Utilities like DTE Energy popped positively, while General Mills foresaw sales drops from consumer softness. UPS planned 22 facility closures for efficiency, and Norwegian Cruise Line surged on activist pushes. Activist investors targeted Fiserv, Tripadvisor for board overhauls and sales, as Softbank dissolved its Nvidia stake and Palantir relocated to Miami.

Markets cautious

Stock markets exhibited caution, with Nasdaq and S&P 500 sliding on AI fears, Japanese shares falling during Lunar New Year closures, and tech/AI stocks plummeting. AI jitters rattled IT amid overvaluation concerns creating picking opportunities, though bulls risk endless growth assumptions. Universa’s Mark Spitznagel eyed S&P 500 to 8,000 before a bust, while Trump predicted Dow at 100,000 via robust growth. SpaceX veterans raised $50 million for AI-driven data center interconnects, and Raspberry Pi soared 40% on CEO buys amid hype.