February 19th Market Overview

Happy Thursday

Oil went from under $60 to $72 in seven weeks and it feels like nobody noticed. Stocks drifted lower, a private credit fund locked its investors out, and the S&P is flat on the year.

Let’s dig in...

Today's Big Picture

Private Credit Is Cracking Blue Owl Capital 
$OWL sold $1.4 billion in loans and used that as the reason to permanently block investors from pulling money out of one of its funds. The loans sold at nearly full value, so this isn't a panic move. That's almost worse. If they're locking the doors when things are fine, what happens when they're not?

Blackstone $BX, Apollo $APO, and Ares $ARES all sold off as investors started asking that same question.

Iran Standoff Pushes Oil Toward $72 
Brent crude moved toward $72 as the U.S. military buildup in the Middle East intensified. Defense officials reportedly told Trump the current deployment could support air strikes by this weekend. Iran's state media floated a partial closure of the Strait of Hormuz, which handles roughly 20 million barrels a day. Oil started this year under $60.

Sector Divergences Are Flashing a Warning 
Energy is up over 20 points in six weeks. Consumer staples up 13. Financials and consumer discretionary both down. Divergences this wide with a flat index almost never happen outside of banking crises and pandemics.

Market Overview

Index Performance

Stock Spotlight

Deere $DE ( ▲ 11.46% ) 
beat on both lines and raised its full-year outlook. First-quarter earnings came in at $2.42 a share on $8B in revenue versus $2.05 and $7.69B expected. Small farm tractor demand is recovering and the stock is on pace for an all-time closing high.

Klarna $KLAR ( ▼ 26.97% ) 
got crushed on its first post-IPO earnings miss. Q1 operating income guidance of $5M to $35M came in well below the $62M consensus. The buy-now-pay-later model is under real scrutiny now.

Etsy $ETSY ( ▲ 9.4% ) 
agreed to sell Depop to eBay $EBAY for $1.2 billion in cash. eBay is making a play for Gen Z and millennial resale shoppers. Both stocks traded higher.

Occidental Petroleum $OXY ( ▲ 9.78% ) 
posted adjusted earnings well above expectations and rode the oil price tailwind higher.

Big Name Updates

Walmart $WMT ( ▼ 0.68% ) 
reported a strong holiday quarter with sales up nearly six points and e-commerce growing 24 points. But the full-year earnings outlook of $2.75 to $2.85 missed the $2.96 consensus, and the stock faded after an early pop. Amazon $AMZN officially passed Walmart as the world's largest company by revenue at $716.9B vs. $713.5B.

Microsoft $MSFT ( ▼ 0.43% ) 
board director John W. Stanton bought 5,000 shares for roughly $1.98M. That's the largest insider purchase in about 11 years. The stock is down big year-to-date and retail investors have been buying aggressively according to JPMorgan.

DoorDash $DASH ( ▲ 1.65% ) 
posted mixed results but total orders grew 32 points year-over-year. CEO Tony Xu is positioning for an AI agent-led future. Multiple analysts raised price targets. BofA to $272, Goldman to $286. Stock traded higher.

Wayfair $W ( ▼ 14.73% ) 
fell despite beating on both lines and posting its first annual revenue gain since 2020. Sometimes a beat isn't enough.

Other Notable Company News

Hims & Hers $HIMS ( ▼ 0.44% ) 
is acquiring Australia's Eucalyptus for up to $1.15B to accelerate international expansion. Roughly $240M in cash at close with the rest deferred.

Super Micro Computer $SMCI ( ▲ 6.87% ) 
channel checks suggest it will split Anthropic TPU rack builds with Celestica, alongside another upward revision to Google TPU demand.

Palantir $PLTR ( ▼ 0.85% ) 
was removed from BofA's US1 conviction list.

Chewy $CHWY ( ▲ 5.71% ) 
Raymond James upgraded to outperform with a $28 target after the stock dropped significantly over the past year.

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Sector Watch

Bond Market

10-year settled around 4.08, flat on the day. 30-year mortgage rates fell to 6.01, lowest since September 2022. A push below 6 could make for an interesting spring housing market.

• Dollar strengthened on expectations rates stay put for a while

• Jobless claims at 206K, well below the 225K estimate

• Philly Fed manufacturing hit 16.3, highest since September

Policy Watch

Iran Trump said he'll decide on military strikes within 10 days. The U.S. hasn't assembled this much air power in the region since the 2003 Iraq invasion. Talks in Geneva this week produced little. Iran is expected to offer a more detailed nuclear proposal in the coming weeks.

Tariffs & Trade

• December trade deficit hit $70.3B, up $17.3B from November and well above the $55.5B estimate

• Full-year deficit barely moved despite aggressive tariff policy

• Deere flagged $600M in tariff costs riding on the Supreme Court's IEEPA ruling. Several justices appeared skeptical of Trump's authority to impose tariffs without Congress

Fiscal 
CBO projects public debt will exceed $56 trillion by 2036 and top GDP later this year. Entitlement spending and interest costs on existing debt are driving it.

Software & AI Disruption 
Mistral AI CEO Arthur Mensch said more than half of enterprise software could be replaced by AI. ServiceNow $NOW COO Amit Zavery said the sector is headed for consolidation because some companies won't survive the shift. Software names were under pressure all day.

What to Watch

Dell Earnings, February 26 Dell 
$DELL reports Q4 next Thursday. Evercore just added it to their tactical outperform list citing a path to high-single-digit revenue growth.

AAII Sentiment Flip
Bears exceeded bulls for the first time since November. The neutral camp grew too. When the crowd gets nervous while the index is flat, positioning is getting lighter. That can be fuel for either direction.

Private Credit Contagion 
Blue Owl gated its fund today. The question now is whether other managers follow. Watch Blackstone $BX, Apollo $APO, and Ares $ARES for any similar moves in the coming days.

Thanks for reading - you are now the more informed 🙂

- John

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