February 24th Market Overview

Happy Tuesday

Markets caught a real bid today after Monday's software panic. A massive chip deal helped calm nerves. I still think we're trading too much on headlines and not enough on fundamentals.

Let’s dig in...

Today's Big Picture

1. Software Panic Fades 
   Enterprise software stocks took a beating yesterday on fears that AI would make them obsolete overnight. Today they bounced back. Anthropic clarified its new AI agent is built to work with existing software, not replace it entirely. The death of software has been greatly exaggerated imho.
   

2. The 10% Reality 
   The new global tariffs officially kicked in at midnight. Markets rallied simply because the rate landed at the stated level rather than the higher threat floated over the weekend. Certainty always beats uncertainty on Wall Street.
   

3. Meta's Massive Hardware Bet 
   Meta Platforms $META agreed to buy 6 gigawatts of computing power from Advanced Micro Devices $AMD over five years. The deal includes warrants for up to 160 million AMD shares, roughly a 10% stake. This locks their roadmaps together for the long haul.

Market Overview

Index Performance

Stock Spotlight

Home Depot $HD ( ▲ 2.04% )  
beat earnings estimates for the first time in a year. Management said they are done raising prices after leaning on hikes to offset costs last year.

Novo Nordisk $NVO ( ▼ 2.79% )  
will slash US list prices for Wegovy and Ozempic by up to half starting in 2027. The obesity drug price war with Eli Lilly is escalating. NVO shares are now down roughly three-quarters from the mid-2024 high.

Apple $AAPL ( ▲ 2.03% )  
is moving some Mac Mini production from Asia to a Foxconn facility in Texas. Also confirmed plans to buy over 100 million advanced chips from TSMC's Arizona plant.

IBM $IBM ( ▲ 2.85% )  
bounced back after Monday's brutal selloff. Jefferies called it a "near-term sentiment overhang" and said the mainframe business is far more resilient than the market gave it credit for.

Big Name Updates

Salesforce $CRM ( ▲ 3.92% )  
rallied ahead of its earnings report tomorrow. It trades around 13x forward earnings now, which puts it firmly in value territory if the customer base holds.

Tesla $TSLA ( ▲ 2.22% )  
is suing the California DMV to overturn a ruling on its Autopilot marketing. The company already made the required fixes but wants the false advertiser label removed from its record.

JPMorgan Chase $JPM ( ▼ 0.17% )  
held its investor day and highlighted momentum in investment banking and trading. Multiple analysts hiked earnings forecasts. CEO Jamie Dimon called Monday's AI fears overblown.

Nvidia $NVDA ( ▲ 0.74% )  
barely moved despite the AMD-Meta news. DA Davidson put out a note arguing NVDA "is not a bellwether anymore" and that the market has picked other AI winners. Earnings tomorrow after close.

Other Notable Company News

Whirlpool $WHR ( ▼ 13.75% )  
announced $800 million in new shares to pay off debt. Stock got hit hard.

Hims & Hers $HIMS ( ▼ 0.45% )  
guided below expectations for Q1 and disclosed that the SEC Enforcement Division opened an investigation tied to its compounded semaglutide disclosures.

Dillard's $DDS ( ▼ 7.97% )  
missed revenue targets. Winter storms shut down a third of its stores during the quarter.

Blue Owl Capital $OWL ( ▲ 2.97% )  
got downgraded to hold by Deutsche Bank as private credit faces growing skepticism.

Arm Holdings $ARM ( ▲ 3.48% )  
got a price target raise from BofA. The firm now sees ARM's CPU market share reaching 20-25% by 2030.

Stripe priced its latest employee share sale at a $159 billion valuation.

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Sector Watch

Bond Market

Treasury yields barely flinched as the new trade tariffs took effect. The 10-year sat around 4.04%. The dollar pushed higher against the yen after China hit Japan with new export restrictions.

Consumer confidence came in at 91.2 for February, better than expected. But write-in responses still skew pessimistic, with prices, trade, and politics on everyone's mind.

Policy Watch

The Fed 
Austan Goolsbee said rate cuts aren't happening until inflation moves closer to 2%. He has a vote on the Fed's rate-setting committee this year, so that carries weight. Separately, Lisa Cook warned that AI could displace white-collar workers in a way that rate cuts can't solve.

Her suggestion: education and workforce policy would do more than cheaper borrowing.

Trade and Tariffs

• Customs stopped collecting the emergency tariffs the Supreme Court struck down last week

• The 10% global tariff is now live for 150 days

• The administration is already drafting new Section 232 national security levies on batteries, cast iron, plastic piping, industrial chemicals, and telecom equipment

• FedEx $FDX filed a lawsuit demanding refunds for duties paid under the old tariffs

• China said it's open to a 6th round of trade talks but reserves the right to adjust countermeasures

International 
China banned exports of critical minerals and military-use goods to several major Japanese companies, including parts of Mitsubishi Heavy Industries. The trigger: Japan's Prime Minister Takaichi recently warned that Japan could get pulled into a conflict over Taiwan. China views Taiwan as its territory and has been retaliating ever since, cutting flights and warning tourists away from Japan.

On a separate front, Japan's Mainichi newspaper reported that Takaichi pushed back on the Bank of Japan's plans to raise interest rates during a closed-door meeting with the central bank's governor. She favors looser monetary policy, which is good for Japanese stocks but has bond investors nervous about more government spending.

What to Watch

State of the Union 
The President speaks tonight at 9pm ET. Watch for a forced pledge from tech companies to cover the rising electricity costs from their data centers. New cost-cutting measures also expected.

Nvidia Earnings
The biggest test for the AI trade this week. Reports Wednesday after close. DA Davidson thinks the stock is priced for a 2026 peak in AI demand, which would be a problem if Jensen Huang says otherwise. Or confirms it.

Workday and Salesforce Earnings 
Both have been hammered this year on AI displacement fears. If they can show they're not losing customers, the oversold case gets a lot stronger. If guidance is weak, software has another leg down.

Labor Freeze 
ADP data shows employee turnover hit a nine-year low. People are staying put. Apollo's Torsten Slok raised his economic tail risk estimate from 10% to 30%, partly on concerns that AI could trigger a sharp rise in unemployment. Friday's payroll report will tell us more about whether this freeze in hiring is temporary or structural.

Thanks for reading - you are now the more informed 🙂

- John

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