Market Update

Good morning, Happy Friday and Goodbye February,
 
Equity futures are under pressure to close out the week and month, having steadily eroded from their highs since around the European open, but trying to bounce off the lows. The S&P fell yesterday though the equal-weight and Russell were up ~0.5%. More rotational forces were at play as Big Tech hardware names, including Nvidia post-earnings- came under pressure while software (IGV +2%) and other beaten down areas (XLF +1%) saw gains.
 

 
Concerns over AI spending and disruption continue to rip through the market and are causing big moves across sectors. OpenAI announced it closed a $110B raise ($730B pre-money valuation), with Amazon investing $50B, Nvidia and Softbank $30B. Meanwhile, Anthropic has rejected the Defense Department’s demands for its AI safeguards. AI data center provider CoreWeave is down over 10% in the pre-market following earnings, as the huge $32.5B capex spend for this year jolted investors. Duolingo, Zscaler and Elastic are also lower following earnings. Autodesk (+ve) and Intuit (-ve) are seeing modest moves, with both companies have seen pressure on the AI-disruption trade. On the other hand Dell is up over 10% on a solid report and strong guide. Payments and fintech provider Block announced a steep headcount reduction last night during its earnings call, citing AI efficiency gains as a reason. The stock is up ~10% and that reasoning is playing into the unemployment fears that were game-planned in the Citrini Research piece we’ve highlighted. Axios is reporting that Senator Brian Schatz (D-Hawai'i) is planning to introduce two AI labor bills in the coming months. This will likely see a lot of momentum as the mid-term elections draw closer. Credit names- Private credit, consumer credit, etc.- are trading lower in response to that news, as well as lingering concerns from yesterday’s newsflow around the MFS bankruptcy in the UK.
 
PPI came in hotter than expected this morning, pushing Treasury yields off their lows and driving another leg down for futures.  Treasury yields are down a couple of basis points but off their lows following the PPI print. The 10yr is sub 4%. 

• US 2yr -2bps to 3.41%, 5yr -3bps to 3.54%, 10yr -2bps to 3.98%, 30yr -2bps to 4.64%
• USD index: +$0.05 to $97.79

Commodities are strong today. Crude is up strongly at its highs following US-Iran talks yesterday and ahead of an OPEC meeting on Sunday. Diverging opinions arose as Oman mediators said there was significant progress while US officials were reportedly disappointed. More negotiations are expected next week, though last Thursday Trump said Iran had 10-15 days to reach an agreement or face consequences and The State Department just pulled non-emergency personnel from Israel. Precious metals are also heading higher led by silver. Ag is up as well, however crypto is stumbling again, with Bitcoin down 2% and trading ~$66k.
 

 
European equites are around unchanged and up for the week while CPIs in France and Spain were hotter than expected while Germany was lower, potentially creating issues for the ECB’s forward guidance. Japanese equities closed higher overnight with the Nikkei ending the week up over 3%. Tokyo core CPI data was a tick higher than consensus but fell below last month’s 2.0% reading. Ex-fresh food and energy however ran a little hotter than last month as well as expectations, at 2.5%. Rate increases are still expected by the BOJ but this report could create a further push for a cautious path. The Takaichi government is taking a page out of the Trump administration playbook and will become the largest shareholder in Japanese chipmaker Rapidus, with 10% voting rights, expandable to over 50% in certain circumstances, as well as a Golden Share for veto power on certain corporate decisions. In China the Hang Seng and Shanghai indexes were higher and finished the week up as well. For the very short month for them, Hang Seng fell ~3% while Shanghai added 1%. Hang Seng Tech fell 10% in February. Like the US, rotational forces have been at play as big names like Baidu and Alibaba declined ~10% over the month while hardware names like MiniMax jumped 60%. Next week is the National People’s Congress, where 2026 economic targets and five-year goals will be announced, though a GDP growth goal of 4.5%-5.0% is expected.    
 

 
 
Earnings:

• After-Market (Thrs): AAOI, ACA, ADSK, AES, AGO, AHR, ALTG, ARLO, AXIA, BCO, BCSF, BHR, BWMX, CABO, CLPR, CODI, COMP.EQ, CON, CPNG, CRWV, CTRA, CUBE, DELL, DUOL, DV, EBS, ESTC, EVTC, FIGS, FLUT, GLOB, GRND, GSBD, INTU, MAIN, MBI, MP, MSDL, MTZ, NATL, NEXA, NHI, NNI, NRDY, NTAP, PAR, RKT, RLJ, SG, SITC, SMR, SOLV, TPC, VTEX, WULF, XPOF, XYZ, ZS  
• Pre-Market: ABR, AMR, DK, DKL, FRO, GLP, NIQ, NWN, RC, SHO, VIA

 
Economic Data:
US:

• PPI m.m / y.y Jan: 0.5%  / 2.9% vs 0.3% / 2.6% cons, prior 0.4% / 3.0%
  • Core: 0.8% / 3.6% vs 0.3% / 3.0% cons, prior 0.6% / 3.3%
  • Ex-food/energy/trade: 0.3% / 3.4% vs prior 0.3% / 3.5%
• 9:45am Chicago PMI
• 10:00am Construction Spending
• 1:00pm Rig Count

Global:

• Tokyo CPI: 1.6% vs 1.4% cons, prior 1.5%
  • Core: 1.8% vs 1.7% cons, prior 2.0%
  • Ex-fresh food and energy: 2.5% vs 2.3% cons, prior 2.4%
• Japan Retail Sales (Jan, y.y): 1.8% vs -0.4% cons, prior -0.9%
• Japan Industrial Production m.m: 2.2% vs 5.5% cons, prior -0.1%
• UK Gfk Consumer Confidence: -19 vs -15 cons, prior -16
• France CPI y.y: 1.0% vs 0.8% cons, prior 0.3%
• Spain CPI: 2.3% vs 2.2% cons, prior 2.3%
• Germany CPI: 1.9% vs 2.0% cons, prior 2.1%
• Germany Unemployment: 6.3% vs. 6.3% cons, prior 6.3%
• India Q4 GDP: 7.8% vs 7.2% cons, prior 8.4%