February 10th Market Overview

Happy Monday.

Markets are shaking off tariff noise and betting on tech muscle. The S&P 500 and Nasdaq climbed higher even as Trump slapped 25% tariffs on steel/aluminum imports

The DOJ just tossed corporate bribery rules out the window. Oh, and France wants to power AI with nuclear reactors in a state backed program.


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Executive Summary

• Tech leadership intensifies with semiconductors rebounding sharply from January’s DeepSeek-driven selloff
  

• U.S. Steel/aluminum producers rip after Trump announces 25% blanket import tariffs
  

• Policy shifts ripple: Trump's pause of anti-bribery (FCPA) enforcement aims to boost U.S. business competitiveness abroad, while France allocates 1 gigawatt of nuclear power to challenge U.S./China AI dominance
  

• Corporate earnings tell two stories: $MCD signals global growth confidence with 2,200 new stores (1,000 in China) despite U.S. weakness, while $ON warns of continued margin pressure in auto/industrial chips, highlighting sector-specific challenges

Market Overview

Key Market Drivers

1. Trade Tensions Escalate:

   • Trump announces 25% steel/aluminum tariffs effective immediately

   • China implements retaliatory tariffs on U.S. energy exports

   • JPMorgan maintains 6,500 S&P target despite headwinds
     

2. AI Competition Intensifies:

   • OpenAI develops proprietary chip using TSMC 3nm process

   • France allocates 1GW nuclear power to AI computing facility

   • DeepSeek concerns fade as tech rebounds
     

3. Earnings Momentum:

   • S&P 500 companies beating estimates by 4% average

   • Mag7 capex spending ▲23% YoY vs broader market ▲3%

   • Q4 results show divergence between tech and traditional sectors

Stock Spotlight

• $MCD ▲4%: Despite worst U.S. sales drop since 2015 (-1.4%), announces aggressive expansion with 2,200 new stores planned for 2025 (1,000 in China)

• $ROK ▲13%: Best day since March 2020 after beating EPS estimates ($1.83 vs $1.58)

• $CLF ▲17%: Leads steel surge on tariff news; $NUE ▲5.5% and $X ▲3.5%

• $ON ▼9%: Revenue guidance and margins miss expectations significantly

• $BP ▲6%: Elliott Management stake sparks transformation hopes after 11% yearly decline

Big Name Updates

• $GOOGL: BofA maintains Buy rating ($225 PT), citing minimal ChatGPT impact on search traffic

• $NVDA: OpenAI’s chip development signals potential competition in AI hardware space

• $MSTR: Acquires additional 7,633 BTC at $97,255 average price

• $TSLA: Stifel reduces PT to $474, citing Chinese competition while maintaining Buy rating

• $MBLY: Partners with $LYFT for Dallas robotaxi launch in 2026

Other Notable Company News

• $ET: Signs landmark 450,000 MMBtu/day natural gas deal for CloudBurst’s 1.2 GW Texas facility

• $RIVN: Opens delivery van sales beyond $AMZN exclusive partnership

• $BYD: Integrates DeepSeek AI into EV software platform

• $MMM: Board restructure brings Bill Brown as Chairman; Amy Hood departing 2025

• $SHOP: Benchmark upgrade to Buy ($150 PT) ahead of earnings

Sector Watch

Bond Market

Treasury yields hold steady near 4.05% ahead of Powell’s testimony. Trump’s economic plan focuses on lowering aggregate demand rather than pressuring Fed rate cuts. Corporate spreads tighten 2bps despite trade tensions.

Policy Watch

1. FCPA Enforcement Pause:

• What Changed: Trump halted enforcement of the 1977 Foreign Corrupt Practices Act (FCPA), which prohibits bribing foreign officials for business advantages.

• Why It Matters:

  • Business Impact: U.S. firms gain short-term flexibility in competitive global markets (e.g., energy, infrastructure) but face long-term reputation risks.

  • Market Reaction: $BP (+6%) and industrials rallied on reduced compliance risks, while ESG-focused funds voiced concerns.

  • Historical Context: The DOJ brought 24 FCPA cases in 2024 – this pause marks the first major rollback since the Act’s 1998 expansion.

2. France’s Nuclear-Powered AI Bet:

• Strategic Move: Macron allocated 1GW of nuclear energy (enough to power 700,000 homes) to a state-backed AI supercomputing facility.

• Global Implications:

  • Challenges U.S./China dominance in AI infrastructure (Microsoft’s $MSFT and Alibaba currently control 58% of global AI compute).

  • Positions France as a low-cost, energy-secure AI hub – potential long-term threat to U.S. cloud providers.

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What to Watch

1. CPI Report (Wed 8:30 AM ET):

   • Consensus expects 3.1% YoY vs previous 3.4%

   • NY Fed survey shows food/gas expectations up 0.6%

2. Powell Speaking tomorrow (Tue):

   • Focus on response to UMich inflation expectations spike to 4.3%

   • Potential commentary on labor market strength

3. Tariff Implementation Timeline:

   • Steel/aluminum industry supply chain adjustments

   • Potential exemptions and international responses

4. Tech Earnings Continued:

   • $SHOP reports Tuesday

   • Watch for AI investment commentary

   • Focused on enterprise customer growth metrics

Thanks for reading 🙂

- John