Gary Tanashian is proprietor of NFTRH.com. Actionable, hype-free technical, macro economic and sentiment analysis is provided in the premium market report 'Notes From the Rabbit Hole' (https://nftrh.com/nftrh-premium/). Complimentary analysis and commentary is available at the public website (https://nftrh.com).Analyst’s Disclosure: I/we have a beneficial long position in the shares of SHY, IEI, IEF either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses ...

Economic Outlook - U.S. Producer Prices (PPI) have come in higher than expected, indicating persistent inflationary pressures in the economy [1][7] - Concerns about the economy's stability are growing, with warnings about potential job losses due to AI disruption and a lack of micro stability [2][6] - The Federal Reserve is not expected to adopt an easing bias, and any rate cuts may signal significant economic issues [3][7] Treasury Market Performance - U.S. Treasuries have seen a strong performance, with a return of 1.5% in February and a 25 basis point drop in the 10-year yield, as investors seek safety amid economic uncertainties [4] - There is a notable flight to safety in the bond market, with lower breakeven rates and a strong labor market contributing to this trend [3][4] Inflation and Consumer Behavior - Inflation remains a concern, with expectations of core PCE running slightly above 3%, driven by sectors like healthcare and airfare [21] - Consumers are expected to save or pay down debt with tax refunds rather than spend, as the savings rate has dropped to its lowest level in three years [17][16] Private Credit Market Concerns - The collapse of MFS in the U.K. has raised alarms about credit risks, particularly in the software sector, with potential default rates reaching 15% [22][24] - Allegations of fraud against MFS include double pledging of collateral, leading to significant financial shortfalls [27][28] Corporate Developments - Dell has reported robust demand for AI servers, projecting $50 billion in revenue for the current fiscal year, indicating strong market interest in AI technologies [31] - CoreWeave is facing challenges after reporting a larger-than-expected loss, raising concerns about its capital spending and infrastructure investments [32][39] Market Dynamics - The investment-grade market is experiencing strong demand, with expectations of $240 billion in issuance in March, driven by a solid appetite from institutional investors [42][51] - There is a notable divergence in credit spreads, with high-yield tech spreads widening while investment-grade spreads remain relatively stable [46][49]

Key TakeawaysGerman business sentiment surged to 88.6 in February, outperforming market expectations of 88.3 and marking a six-month high for the Eurozone's largest economy.Italy’s final harmonized inflation (HICP) held steady at 1.0% Y/Y in January, confirming preliminary data and supporting the European Central Bank's (ECB) current disinflationary narrative.Swiss sight deposits jumped to 457.6B CHF for the week ending February 20, up from 452.7B CHF previously, signaling a notable increase in liquidity wi ...

Market Overview - Stocks initially moved to the downside but regained some ground during the trading day, with the Nasdaq briefly reaching positive territory. Currently, major averages are posting modest losses: Dow down 194.05 points (0.4%) at 49,468.61, S&P 500 down 17.09 points (0.3%) at 6,864.22, and Nasdaq down 41.09 points (0.2%) at 22,712.54 [1] Company News - Walmart reported fourth quarter results that exceeded analyst estimates but provided weaker than expected earnings guidance for the current year. Despite notable pre-market weakness, Walmart's stock increased by 1.3% during regular trading [2] Economic Indicators - The Labor Department reported that first-time claims for U.S. unemployment benefits fell significantly to 206,000, a decrease of 23,000 from the previous week's revised level of 229,000, which was better than the expected drop to 225,000 [4] - A report from the Commerce Department indicated that the U.S. trade deficit unexpectedly widened in December due to a surge in imports and a slump in exports [5] Sector Performance - Airline stocks experienced a substantial decline, with the NYSE Arca Airline Index dropping by 3.6%. Biotechnology stocks also showed weakness, reflected by a 1.7% loss in the NYSE Arca Biotechnology Index. Conversely, computer hardware stocks performed well, driving the NYSE Arca Computer Hardware Index up by 2.4% [6] - Gold stocks performed strongly, resulting in a 1.9% increase in the NYSE Arca Gold Bugs Index [7] International Markets - In overseas trading, stocks in the Asia-Pacific region mostly moved higher, with Japan's Nikkei 225 Index climbing by 0.6% and South Korea's Kospi surging by 3.1%. However, major European markets moved to the downside, with the German DAX Index down by 0.9%, the U.K.'s FTSE 100 Index down by 0.6%, and the French CAC 40 Index down by 0.5% [8]

Core Insights - Federal Reserve policymakers largely agreed to maintain interest rates, with a 10-2 vote to keep the federal funds rate in the range of 3.5% to 3.75% despite some calls for cuts [3][8] - The FOMC minutes indicated that several policymakers supported the inclusion of language suggesting potential future rate hikes if inflation remains high [2][4] - Inflation continues to exceed the Fed's 2% target, with the personal consumption expenditures (PCE) index showing elevated levels, prompting caution against further rate cuts [3][10] Interest Rate Decisions - The FOMC's decision reflects a consensus on holding rates steady while monitoring inflation trends, with some members advocating for a two-sided approach to future rate adjustments [4][7] - Policymakers expressed that downward adjustments to the federal funds rate could be appropriate if inflation aligns with their expectations [7] Inflation Trends - The PCE inflation rate was reported at 2.8% in November, matching its highest level since October 2023, while core PCE also stood at 2.8% [11] - Fed Chair Jerome Powell noted that core PCE inflation would be slightly above 2% if not for tariff impacts on goods prices [12]

Group 1 - Several participants indicated support for a two-sided description of future interest rate decisions, suggesting the possibility of upward adjustments due to inflation concerns [1] - Officials expect inflation to decrease this year, but the pace and timing remain uncertain, with factors such as tariffs and housing prices influencing this outlook [2] - Some companies are automating operations to offset price increases, but progress towards the 2% inflation objective may be slower and more uneven than expected [3][10] Group 2 - Labor market conditions show signs of stabilization, with diminished downside risks, although concerns remain about labor supply [5][18] - Consumer spending is resilient, driven largely by higher-income consumers, while lower-income spending remains soft [6] - There are concerns about high asset valuations and low credit spreads, with vulnerabilities noted in the private credit sector and hedge funds [6][7] Group 3 - The focus of the January meeting shifted from jobs to inflation, with several participants noting the potential for inflation to stabilize at a higher than desired level [9][11] - The discussion included the impact of tariffs on prices, with concerns that tariff-related price increases may not fade as quickly as anticipated [10] - The economic burden of tariffs is primarily borne by U.S. companies and consumers, with various studies indicating that 90% or more of the costs are passed on to them [14][15]

Let's bring in Bloomberg's Adam Vincent right now and we'll start on the US equity story. And Ana was pointing out that volumes are going to be thin. We're getting some updates in terms of the story and Robert coming through with a new model.European stocks not far off record highs. The first 100 had a really decent session, fresh record high yesterday. What are you looking at in terms of what the impulse is going to be for the equity markets today.Yeah, So, you know, I mean, the price action we saw yesterd ...

Let's bring in Bloomberg's Adam Vincent right now and we'll start on the US equity story. And Ana was pointing out that volumes are going to be thin. We're getting some updates in terms of the story and Robert coming through with a new model.European stocks not far off record highs. The first 100 had a really decent session, fresh record high yesterday. What are you looking at in terms of what the impulse is going to be for the equity markets today.Yeah, So, you know, I mean, the price action we saw yesterd ...

Key TakeawaysGold prices retreated to $5,020 per ounce as traders engaged in profit-taking following the release of mild US inflation figures.Nikkei 225 futures jumped 1.0% in early Monday trade, extending a historic rally for Japanese equities amid domestic political stability.US Consumer Price Index (CPI) rose just 0.2% in January, easing market fears of further aggressive interest rate hikes by the Federal Reserve.10-year Japanese Government Bond (JGB) futures rose 0.07 point, reflecting a slight cooling ...

Core Viewpoint - AI is significantly disrupting the $450 billion software sector, leading to potential job losses and deflationary pressures in the economy [1][2] Industry Impact - Software companies, once dominant, are now facing existential threats due to AI displacement, which could shrink the software market and contribute to deflation [2] - The inflation outlook indicates that AI is contributing to disinflation, with core CPI projected to drop to 2.52%, aligning with pre-COVID inflation levels [3] Federal Reserve Outlook - The nomination of Kevin Warsh to the Fed is expected to lead to a dovish stance, with potential rate cuts as the economy adjusts to job losses and AI disruptions [4] - Historical Fed funds rates during 2017-2019 were between 1.5%-2.0%, suggesting significant room for rate cuts from current levels [4] Market Dynamics - A major market shift is occurring as investors rotate from the "Magnificent 7" tech giants to companies that provide AI infrastructure, such as energy providers and chip makers [5][6] - This rotation is anticipated to trigger a 10-20% decline in the U.S. market as capital flows out of the tech sector and into industrials and financials [7]