Fed Monetary Policy, Magnificent Seven Reports, Stock Market News, and Geopolitics
Stock market news
• Monetary policy is back in focus now that tech stocks have regained their balance after the DeepSeek shock earlier in the week. The US Federal Reserve, which kept rates on hold as expected, led the pack of overnight rate decisions. Dovish comments from Chairman Jerome Powell subsequently offset the Fed's hawkish message - and left traders uncertain about the likely timing of the next cut.
That contrasts with Sweden's Riksbank and the Bank of Canada, which both cut rates. However, the Riksbank signaled that its current easing cycle may be over, while Canada's central bank cast doubt on the likelihood of another cut in March, pointing to potential inflation risks from US tariffs.
A reminder of the ECB, which, like the Bank of Canada, traders believe is preparing for rapid cuts today, in March and July, with a high chance of another in December. But again, like the Canadians, the threat of tariffs from President Donald Trump looms.
• The White House says Trump still plans to follow through on his promise to impose a 25% tariff on Canada and Mexico on Saturday, and a 10% tariff on China is also "well under consideration," despite Trump's friendly phone call with Xi Jinping this month.
Trump also lashed out at Europe in the early days of his presidency, threatening punitive measures if the bloc did not buy more American oil and gas. He had previously singled out cars.
• European traders will not get clear trading signals from Asia today, with many markets in the region closed for the Lunar New Year. However, Tokyo recovered from early losses to trade in the green, the Sydney Stock Exchange closed at a record high and US share futures rose after a weak finish on Wall Street yesterday.
• Megacap's "Mag 7" report kicked off Wednesday with mixed results: Microsoft beat quarterly revenue estimates, while Tesla's fourth-quarter profitability missed expectations. Meta's first-quarter revenue guidance missed market estimates. Apple reports after the close today.
• European shares started strong after rising to a record high on Wednesday, helped by strong results from Dutch chipmaker ASML. There was also plenty of earnings in Europe today from a diverse group of companies including ABB, Deutsche Bank, Hennes & Mauritz, Shell and STMicroelectronics.
• iPhone can now connect directly to Starlink: Apple added this in the new 18.3 update - Bloomberg. SpaceX is going to deploy satellite communications for mobile devices around the world, but no specific dates are specified.
• ChatGPT Plus for $10 - OpenAI caved in to pressure from the Chinese. Insiders noticed information about a $10 promo subscription for three months in the site code. When the three months are up, you can create a new account.
OpenAI (ChatGPT) published a statement accusing Chinese startups of trying to use the developments of American companies to improve their AI models.
In this regard, OpenAI promised to cooperate more closely with the US authorities to protect their developments.
Microsoft and OpenAI are investigating whether data obtained using the American company's technology was stolen by a group associated with the Chinese AI startup DeepSeek - Bloomberg.
• The head of the American AI department, David Sachs, said that the Chinese DeepSeek appeared to have used the “distillation” method
- a technique in which one neural network literally “pulls knowledge” from another, more powerful model.
According to him, there is evidence that DeepSeek took knowledge from OpenAI models, which now forces developers to look for ways to protect against such copying in the future. Everything points to the fact that the “DeepSeek miracle” is just ordinary traditional technology theft, and not real innovation. And yet, the Chinese have stirred up this AI nest.
• Starbucks (SBUX) shares rose 8% as the company's "Back to Starbucks" strategy paid off, with global same-store sales falling less than expected. Despite a 4% drop in U.S. sales, the results beat consensus estimates, demonstrating the company's recovery plans are working.
• Meta Platforms (META) said its Reality Labs unit exceeded its 2024 sales and user targets, with sales growing more than 40%. The growth positions the company well for future success as the unit continues to see strong sales of its wearables and Quest brand.
• LendingClub (LC) reported Q4 GAAP EPS of $0.08, slightly missing estimates, but revenue grew 17% year over year. The company maintained a strong capital position and liquidity, with significant loan sales helping improve its financial performance.
• Twitter founder Jack Dorsey introduced Goose, a powerful AI assistant for developers.
Which will take over all the routine and allow you to create code in just a few minutes.
What Goose can do:
- Write programs on one request, edit code, test scripts, fix bugs and even take screenshots.
- Completely local - your data is protected.
• Nassim Taleb: NVIDIA's sell-off is the beginning of the AI market's decline. Future crashes could be double or triple what Monday's saw. Taleb's opinion is worth listening to.
• Coinbase (COIN) Adds Powerful Advisors: Trump Campaign Manager and Former New York Fed President Join Coinbase Team
• Norway's pension fund earned a record $222 billion in 2024. The world's largest sovereign wealth fund returned a total return of 13%. The pension fund's biggest gains came from NVIDIA, Apple, Amazon, Alphabet and Microsoft. Norway is an example of an effective investment strategy for a state pension system.
• ASML (ASML) shares rose 4% after reporting better-than-expected fourth-quarter results.
The company’s net sales and electric vehicle orders were significantly higher than analysts had expected, thanks to increased demand in the artificial intelligence sector. This marks a significant shift in market dynamics, with ASML benefiting significantly from the AI boom. ASML CEO says DeepSeek is positively impacting chip demand.
• Corning (GLW) fell 3% despite reporting strong fourth-quarter results and positive guidance.
The company reported strong sales growth in its enterprise optical communications segment and successful price increases in its display technology segment. Corning plans to further refine its Springboard strategy to increase annual sales by more than $3 billion by 2026.
• Qorvo (QRVO) rose 0.3%. The company's revenue is heavily dependent on the iPhone Pro and Pro Max models, with forecasts pointing to little to moderate growth from Apple.
• Norfolk Southern (NSC) beat earnings estimates on cost cuts, insurance claims. Norfolk has taken about $1.4 billion in losses over the past two years due to an eastern Ohio accident in 2023 that released more than 1 million gallons of hazardous materials and pollutants near a railroad. NSC shares rose 2%. Aluminum Rises as Europe Prepares Ban on Russian Imports - Bloomberg
• DJT shares rose 7% after Trump Media announced expansion into financial services. Trump Media & Technology Group will expand its financial services operations.
Stocks in the morning after the reports
MSFT -4.5%
META +2.1%
TSLA +4.4%
NOW -8.5%
IBM +8.5%
LRCX +3.1%
WM +0.2%
CP +1.0%
AMP +0.9%
URI -2.1%
Key events that could impact markets on Thursday:
- ECB policy decision
- European earnings including ABB, Deutsche Bank, H&M, Roche, Shell, STMicro
- Apple earnings
Fundamental news
• The Bank of Canada cut interest rates by 0.25 percentage points to 3%
And declined to recommend any further adjustments to borrowing costs as U.S. President Donald Trump withdrew his announcement of a tariff hike.
The Bank of Canada will begin buying assets again in March. That's QE.
The Fed, as expected, kept rates on hold and dropped the inflation-reduction narrative from its announcement.
Stock market reaction slightly negative, but dollar stable. Bitcoin rose to $104,000.
• Behind Trump in the White House stands a woman who knows how to "keep him on a leash," - BILD. According to the publication, this is Trump's chief of staff Susie Wiles, with whom the US president looks much more disciplined. Wiles protects Trump from "external influence," plans his schedule, filters calls and ensures that only the information they want to let through leaks into and out of the White House.
• Elon Musk's department is saving the government $1 billion a day, the Department of Government Effectiveness (DOGE) said. The department says it will increase that figure to $3 billion a day. The savings come largely from halting hiring for unnecessary positions, eliminating DEI (diversity, equity, and inclusion) programs, and ending unnecessary payments to foreign entities. It will be interesting to read the official report from the Budget Committee.
• Trump to allow influencers and TikTokers to briefings. Donald Trump regularly criticizes the media, calling them “enemies of the people” and accusing journalists of lying. In his second term, he intends to allow new faces to attend White House press conferences, including influencers, TikTokers, bloggers, and podcasters.
• About 60 senior USAID staff have been placed on administrative leave - Reuters. The audit launched by the Donald Trump administration has found "actions that may have been aimed at circumventing the president's orders," the journalists' sources said.
• EU to expand 'simplification' programme to cut red tape The European Commission is to publish an updated comprehensive plan to boost the European Union's competitiveness, setting out a counter-offer for businesses and investors.
The updated draft plan says the bloc will launch a 'series of simplification packages' to shorten and simplify EU rules. Which country's bureaucrats have succeeded in cutting red tape?
• China may be building the world's largest nuclear fusion center - Reuters. Although China has not officially announced anything about this, this is evidenced by the latest satellite images of the province.
• German conservative leader Friedrich Merz wants to tighten migration policy and is apparently ready to accept support from the AfD - DW. Among Merz's ideas is declaring a "state of emergency" in the country, which would allow for long-term border controls in circumvention of EU agreements.