Feb. 23rd Market Overview

Happy Monday

Rough day. The Dow dropped 800 points, software stocks got hammered, and half of finance Twitter is convinced AI is about to wipe out every desk job in America. Mainly because of one research post that went viral over the weekend (I’m not buying it).

I'm not going to sit here and tell you AI doesn't matter. It does.

Fear has been looking for a catalyst. Today felt more like a sentiment flush than a fundamental shift. The companies reporting actual earnings this week will tell us if this reaction is grounded in reality.

Let's dig in...

Today's Big Picture

1. Wall Street's AI Panic Isn't About Building It, It's About What It Destroys

A Citrini Research post went viral Sunday night laying out a scenario where AI guts white-collar jobs, crushes software margins, and triggers a cascade through financials, private credit, and housing. The Dow dropped 800 points Monday with software, cybersecurity, and financial stocks taking the worst of it. I've never seen a single Substack post move this many sectors simultaneously.

Consumer staples are having their best start to a year since 1990 because investors are piling into businesses AI can't easily replace.

2. Trump Hits Back With Global Tariffs After Supreme Court Loss

Two days after the Supreme Court struck down his emergency tariffs, Trump raised the global rate to 15 using Section 122 of the Trade Act of 1974. The European Parliament paused ratification of the EU-US trade deal in response. The statute only allows these duties for 150 days without Congressional approval, so we're likely heading back to court before the year is out.

3. Novo Nordisk's Next-Gen Obesity Drug Falls Short Against Eli Lilly

Novo Nordisk $NVO said CagriSema delivered 23 weight loss at 84 weeks vs 25.5 for Eli Lilly $LLY's tirzepatide. Clear miss on the non-inferiority endpoint. Novo's ADRs got crushed while Lilly moved higher. The obesity drug race just got a lot less competitive.

Market Overview

Chart of the Day

Stock Spotlight

Gilead Sciences $GILD ( ▼ 1.08% )  
is buying Arcellx $ACLX for $7.8 billion in cash. The deal gives Gilead a promising cell therapy pipeline for cancer treatments.

Novo Nordisk $NVO ( ▼ 16.43% )  
failed a head-to-head weight loss drug trial against Eli Lilly $LLY. Lilly shares climbed on the news while Novo took a massive hit.

IBM $IBM ( ▼ 13.41% )  
dropped after Anthropic released a new autonomous coding tool. The market is pricing in a direct threat to their consulting and software revenue.

Merck $MRK ( ▲ 1.42% )  
is splitting its pharmaceutical business in two. They need to separate their big cancer drugs from the rest of the pipeline before key patents expire in a few years.

Big Name Updates

Domino's Pizza $DPZ ( ▲ 3.74% )  
beat fourth quarter sales estimates. The CEO noted they are stealing share from weaker pizza chains.

Chevron $CVX ( ▲ 0.45% )  
is negotiating to take over a massive Iraqi oilfield after US sanctions forced the Russian operator out.

AppLovin $APP ( ▼ 9.09% )  
and Intuit $INTU took heavy losses as the broader software sector sold off.

Other Notable Company News

Zscaler $ZS ( ▼ 10.31% )  
hit a new 52-week low. The entire cybersecurity sector is bleeding on fears that AI will replace traditional security platforms.

International Paper $IP ( ▼ 4.3% )  
traded lower after industry data showed domestic containerboard pricing dropped in February.

American Airlines $AAL ( ▼ 4.86% )  
and Delta Air Lines $DAL canceled thousands of flights due to an East Coast winter storm.

Sector Watch

Bond Market

Treasury yields dropped as money flowed into safer assets. The 10-year note touched its lowest intraday level since late November.

• Trade war escalation is keeping a steady bid under bonds

• Expect yields to stay pressured if the tariff situation gets worse

Policy & Macro

Fed Governor Waller is waiting on February jobs data before committing to a March rate move. He said he plans to look past inflation bumps caused by new tariffs.

• Senate Democrats introduced a bill to refund tariffs the Supreme Court recently struck down.

• China officially asked the US to drop unilateral tariffs, calling the recent measures a violation of international trade rules.

• The White House is floating larger military actions against Iran if nuclear diplomacy fails.

• Brazil and South Korea signed a new strategic partnership covering trade and critical minerals.

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What to Watch

Nvidia Earnings
The chipmaker reports Wednesday. They carry massive short interest right now, and their forward guidance will dictate where the entire technology sector goes next.

Job Market Signals
The Fed is hypersensitive to employment data right now. Waller's comments today confirm they are looking for excuses to cut rates if the labor market shows real cracks.

Thanks for reading 🙂

- John

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