February 19th Market Overview

Happy Wednesday.

I’m back to the normal format, vacation was as good to me as $BABA has been the past month. Anyways → the S&P 500 just notched another record, tech stocks are flexing quantum-level strength, and tariff headlines are back on the menu.

Let's dig in...

Executive Summary

• S&P 500 hits second record high despite Trump’s proposed 25% tariffs on autos, chips, and pharmaceuticals
  

• Microsoft’s quantum chip unveiling sent related stocks soaring, with $BTQ jumping 42%
  

• Mixed economic signals from housing starts (▼9.8%) and permits (▲0.1%) reflect ongoing market uncertainty
  

• Capital One shareholders approved Discover Financial acquisition, advancing major financial sector consolidation
  

Market Overview

Key Market Drivers

1. Trump’s tariff proposal: President Trump floated a potential 25% tariff on imported automobiles, semiconductors, and pharmaceuticals, possibly taking effect April 2. The New York Times reports Trump has expressed interest in a new China trade deal seeking greater investments and American goods purchases.

2. Fed’s cautious stance: Minutes from the Federal Reserve meeting showed officials want more progress on inflation before cutting rates further. The Fed also expressed concerns about potential tariff impacts on prices and economic growth.

3. China’s investment plan: China unveiled a sweeping plan to boost foreign investment, stimulate consumer spending, and lift market restrictions. Key measures include eliminating foreign investment restrictions in manufacturing and expanding financing options.

4. Tech sector momentum: Microsoft’s quantum computing breakthrough and Nvidia’s continued AI dominance is fueling optimism across tech stocks, offsetting broader market concerns.

Stock Spotlight

• $MSFT (▲1.0%): Unveiled Majorana 1 quantum chip after 20 years of research. Triggered gains across quantum stocks: $BTQ (▲42%), $RGTI (▲5%), $QBTS (▲5%).
  

• $ADI (▲10.0%): Beat quarterly revenue and earnings expectations on industrial and communications demand.
  

• $NKLA (▼39.7%): Filed Chapter 11 bankruptcy after failing to secure funding. Trading halted at $0.46, down 95% over 12 months.
  

• $ANET: Q4 revenue up 25.3% YoY to $1.93B. Operating cash flow grew 95% YoY. Meta deployed Arista's 7700R4 for AI clusters.

Big Name Updates

• $AAPL: Launched $599 iPhone 16e with A18 chip for AI. Evercore projects $12B revenue potential.
  

• $NKE: NikeSKIMS partnership with Kim Kardashian debuts spring 2025. Targets Kardashian's 358M followers (vs Nike's 302M).
  

• $TSLA: BYD Chairman claims 3-5 year Chinese EV technology lead in products and supply chain.
  

• $NVDA: UBS maintains $185 PT. xAI plans additional $30B GPU purchase.

Other Notable Company News

• $COF (▲1.6%): BofA upgrade to buy (PT: $235). Shareholders approved $DFS acquisition.
  

• $BMBL (▼16.8%): Weak Q1 guidance: EBITDA $60-63M vs $68.8M expected; revenue $242-248M vs $256.9M forecasted.
  

• $TOL (▼5.8%): Q1 miss with EPS $1.75 vs $2.04 expected. Home deliveries: 1,991 vs 2,060 projected.
  

• $FOUR: Missed revenue expectations. Acquiring Global Blue for $1.5B ($7.50/share, 15% premium).
  

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Sector Watch

Bond Market

10-year Treasury yield fell 2.86bps to 4.531%. Fed minutes confirmed officials remain cautious on inflation and want more progress before cutting rates. Market still expects cuts in 2025, but timing remains uncertain.

Policy Watch

January building permits: 1.483M (▲0.1% MoM), above 1.45M estimate. Housing starts: 1.366M (▼9.8% MoM), in line with forecasts.

ECB's Schnabel: "Risks to inflation outlook somewhat skewed to upside." Called for halting rate cuts until wage growth decelerates, diverging from market expectations.

What to Watch

1. Nvidia’s Earnings (Feb 26): The AI chipmaker reports after market close Thursday.

   • Wall Street expects revenue of $24.3B and EPS of $0.65

   • Commentary on AI chip demand and supply constraints will be crucial

   • Guidance for 2025 could significantly impact tech sector sentiment
     

2. Trump’s Trade Policy Development: Further clarification on proposed tariffs.

   • Watch for specific implementation timelines and targeted sectors

   • Potential market impacts if China retaliates with counter-measures

   • Implications for global supply chains and inflation expectations
     

3. Fed Speakers This Week: Several FOMC members scheduled to speak.

   • Listen for hints about rate cut timing and inflation assessment

   • Commentary on potential tariff impacts on monetary policy

   • Divergence between hawkish and dovish committee members
     

4. Housing Market Data: Existing home sales report tomorrow.

   • January’s mixed permit/starts data suggests caution

   • Affordability remains key concern for potential buyers

   • Impact of persistent high mortgage rates on transaction volume