February 18th Market Overview

Happy Tuesday.

Markets churning the butter cautiously post-holiday: Energy up, tech down, and Intel’s potential breakup lit a fire under chip stocks. An interesting headline worth emphasizing —>42% of fund managers now rank trade conflict as their top risk. (BofA survey)

 
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Executive Summary

• S&P 500 flat, Dow ▼0.4%, Nasdaq ▼0.2% in cautious trading
  

• $INTC ▲15.26% on Broadcom/TSMC breakup deal exploration
  

• Energy sector ▲1.67%, led by $HAL and $VLO
  

• 42% of fund managers cite trade conflict as top risk, up from 30% in January
  

• Homebuilder confidence at five-month low amid tariff/mortgage rate concerns

Market Overview

Key Market Drivers

1. Strong Dollar Pressures Tech: Dollar Index ($DX-Y.NYB) ▲0.45% to 107.06. $AAPL (58% international revenue) and peers warned of FX headwinds.
   

2. Fed Minutes Anticipation: Markets await Wednesday’s Fed minutes. Officials signaled rates should hold at current levels, with Philadelphia Fed’s Harker emphasizing patience.
   

3. Trade War Concerns: BofA survey shows trade worries jumped to 42% from 30% as top risk. Cash levels hit 15-year lows despite concerns.
   

4. Housing Market Cooling: NAHB Index fell five points to 42 in February. Builders cited 7% mortgage rates and policy uncertainty.

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Stock Spotlight

• $INTC: ▲15.26% on WSJ reports of Broadcom/TSMC talks exploring company split. Discussions remain preliminary.

• $SMCI: ▲16.45%, extending five-day rally to 30%. On track to meet Feb 25 Nasdaq filing deadline; CEO projects $40B FY26 revenue.

• $NKE: ▲6% on NikeSKIMS partnership launching spring 2025 (US) and 2026 (global). Jefferies: “step in right direction.”

• $META: ▼3.61% to $710.06, breaking 20-session streak. Still ▲22% YTD.

• $WBA: ▲11.9% after CNBC reported renewed Sycamore Partners buyout talks.

Big Name Updates

$T reached March 2020 levels, among 22 S&P 500 stocks hitting 52-week highs including $GS (all-time high since 1999 IPO), $BK (highest since 2007 merger), and $PLTR (all-time high since 2020 IPO).

$AMZN ▼2% on $900M FX headwind ($700M above expectations), projecting 5-9% Q1 revenue growth.

$EIX gained on UBS upgrade to buy (target: $65 from $69), citing excessive wildfire liability discounting.

Other Notable Company News

• Southwest Airlines cutting 15% of corporate workforce. CEO: “unprecedented” decision to become “leaner, faster, more agile.”

• $MRNA downgraded by Barclays to equal weight, target cut to $45 from $111 on “policy uncertainties and limited clinical upside.” Stock ▼20.6% YTD, ▼63% over 12 months.

• Empire Manufacturing Index: 5.7 in February (returning to expansion). Prices paid index jumped to 40.2, highest in nearly two years.

Sector Watch

Bond Market

10-year yield rose to 4.54% from previous week’s low. Fed Governor Waller suggested Trump’s tariffs would have modest inflation impact and indicated possible rate cuts “at some point this year” if inflation eases.

Policy Watch

Markets processed Trump’s reciprocal tariff approach, which boosted stocks Thursday. Fed Governor Bowman opposed rate cuts until tariff policy clarity improves, stating better understanding of implementation is needed first.

US-Russia Ukraine talks commenced in Saudi Arabia Monday. European defense stocks (Rheinmetall, Dassault) hit all-time highs as regional leaders agreed to increase military spending.

What to Watch

1. Fed Minutes (Wednesday): Focus on inflation views, tariff impact discussions, and rate cut timelines. Hawkish tone may pressure growth stocks; dovish signals could boost rate-sensitive sectors.
   • Note dissenting committee opinions
   • Watch for strong dollar impact assessments

2. Retail Earnings: Major retailers report this week, providing consumer spending insights.
   • Monitor inventory levels and promotional activity
   • Look for regional spending pattern differences

3. Trade Policy Developments: Tariff clarifications could trigger significant moves.
   • Manufacturing and tech hardware face greatest exposure
   • Watch for potential retaliatory measures