Investors are on the edge of their seats, eagerly awaiting Nvidia's earnings report. Why? Because it's like the Oscars for AI technologies. Will Nvidia's AI demand be the blockbuster hit of the season, or will it flop like a bad sequel? Meanwhile, over in China, DeepSeek has rolled out budget-friendly AI models, shaking up the tech industry.

In the United States, the House of Representatives has given a thumbs-up to President Donald Trump's $4.5 trillion tax-cut and border security agenda. It's now waiting for the Senate's nod of approval. This has lifted investor spirits, even as they navigate the murky waters of economic uncertainty. But not all is rosy. U.S. consumer confidence has taken a nosedive, the steepest in 3.5 years, thanks to inflation worries and the looming threat of new tariffs on copper imports. President Trump is on the case, ordering an investigation into these potential tariffs to boost U.S. production for electric vehicles and military hardware. Meanwhile, the U.S. and Ukraine have agreed on a draft minerals deal to help resolve the conflict with Russia. And in the world of U.S. Treasury yields, the 10-year yield has dipped below 4.3% for the first time this year.

The slide in U.S. tech stocks was evident yesterday, marking the fourth straight day of declines. The Nasdaq 100 has erased all its February gains, hovering near zero for 2025 with a modest increase of just 0.36%. Stocks linked to artificial intelligence are clearly losing momentum, with Nvidia dropping 2.8% yesterday and down 5.7% for the year. Cryptocurrency stocks are also faltering, as evidenced by MicroStrategy's 11% decline. Meanwhile, Tesla, the car company that seems to have forgotten it sells cars, isn't faring much better, down 8.4%. The so-called "magnificent seven"—Apple, Nvidia, Microsoft, Amazon, Alphabet, Meta, and Tesla—have collectively shed over 10% from their December highs, a threshold Wall Street dubs a "correction." In contrast, the Dow Jones is seizing the moment to stage a comeback, rising 0.4%. This is largely thanks to a trio of companies that harken back to a pre-digital era: Walmart, The Home Depot, and Sherwin-Williams, each boasting gains of more than 2.5% yesterday.

The recent downturn in major American stocks can be attributed to a mix of challenges: 

  • Concerns about the future level of investment in artificial intelligence. Investors are questioning whether the AI boom will continue at its current pace.
  • Some long-held beliefs are being scrutinized. Cryptocurrencies, once thought to be untouchable, are proving vulnerable, especially in terms of storage security. Meanwhile, Tesla's stock value seems to defy gravity, even as car sales decline, thanks to Elon Musk's influence over political figures like Donald Trump.
  • The impact of Donald Trump's policies on U.S. economic growth is becoming evident. Recent surveys show a dramatic drop in consumer confidence, which is understandably causing anxiety in the market.
  • Finally, the sky-high valuations of American stocks are under pressure. These valuations only make sense if we challenge the famous investment principle by John Templeton that the four most dangerous words in finance are: "this time it's different.

 While some factors might seem temporary, they have the potential to become recurring, or even permanent fixtures in the market landscape. Yet, each comes with its own caveat.

  • Take artificial intelligence, for instance. The consensus is clear: future investments in AI will be massive. The debate isn't about whether to spend, but rather about the seemingly limitless nature of these expenditures.
  • Then there's the stock market's beloved icons, like cryptocurrencies and Tesla. They've faced turbulence, yet their value remains significant. These market legends have weathered storms before; myths aren't easily dispelled.
  • Perhaps more crucially, concerns about U.S. economic growth are tempering pessimism regarding potential Federal Reserve rate cuts. The prevailing thought is that if the economy falters, the Fed might be compelled to ease monetary policy. In this topsy-turvy world, bad macroeconomic news—like declining confidence indicators—can be good news for stocks, as it might lead to lower borrowing costs. Bond yields are dropping, not always for the best reasons, but this aligns with the Trump administration's economic goals. However, a rapid downturn could spark fear, which is never good for markets. 
  • Investor sentiment is notoriously volatile. A ceasefire in Ukraine, unexpected trade deals, or a positive earnings report from Nvidia could all shift the mood. Investors are, after all, a hopeful and capricious bunch.

In the Asia-Pacific region this morning, caution still prevails in Japan (-0.4%) and to a lesser extent in Australia (-0.1%). China is rebounding, quite strongly even in Hong Kong (+3.2%). Taiwan, South Korea and India are showing moderate growth. European indices and Wall Street futures are dark green after the agreement between the United States and Ukraine.

Today's economic highlights:

Today's schedule includes: consumer confidence in France; in the United States, building permits, new home sales, GM new home sales, and DOE crude stocks. See the full calendar here.

  • Dollar index: $106.4
  • Gold: US$2,914
  • Crude Oil (BRENT): US$72.26
  • Rate United States 10 years: 4.33%
  • BITCOIN: US$87,740

In corporate news:

  • The Home Depot exceeded Q4 earnings expectations but projected a weaker full-year outlook.
  • Lowe's Companies Inc. reported higher Q4 earnings with an EPS increase to $1.99, beating FactSet estimates, and provided fiscal 2025 earnings guidance with expected EPS between $12.15 and $12.40.
  • Apple shareholders voted on diversity policies, negotiated iPhone sales in Indonesia, and partnered with Dassault Systèmes.
  • UnitedHealth is under investigation by the US Justice Department for potential Medicare billing fraud.
  • Tesla saw its stock value fall below $1 trillion due to a slump in European sales.
  • Intuit reported a surprise increase in second-quarter earnings and revenue, beating FactSet estimates.
  • Workday reported fiscal fourth-quarter results that exceeded expectations with a revenue of $2.21 billion.
  • Nvidia's latest earnings report has significant implications for the AI sector and the broader tech market.

Analyst Recommendations:

  • American Airlines Group Inc.: Redburn Atlantic upgrades to buy from neutral with a price target raised from USD 18 to USD 24.
  • Baxter International Inc.: Goldman Sachs upgrades to buy from not rated with a target price of USD 42.
  • Block, Inc.: Morgan Stanley upgrades to equal weight from underweight with a target price of USD 65.
  • Coca-Cola Europacific Partners Plc: Kepler Cheuvreux downgrades to reduce from hold with a target price raised from EUR 68 to EUR 73.
  • Coinbase Global, Inc.: Zacks upgrades to outperform from neutral with a price target reduced from USD 313 to USD 261.
  • Domino's Pizza Inc.: Argus Research Company downgrades to hold from buy.
  • Fair Isaac Corporation: RBC Capital upgrades to outperform from sector perform with a price target raised from USD 2040 to USD 2170.
  • Globant S.a.: Redburn Atlantic upgrades to neutral from sell with a target price of USD 140.
  • Harley-Davidson, Inc.: Zacks downgrades to underperform from neutral with a price target reduced from USD 27 to USD 23.
  • Honeywell International Inc.: Spin-Off Research upgrades to buy from dropped coverage with a target price of USD 238.
  • Lennox International Inc.: Barclays upgrades to overweight from equalweight with a target price raised from USD 665 to USD 702.
  • Quanta Services, Inc.: BMO Capital Markets upgrades to outperform from market perform and raises the target price from USD 338 to USD 316. 
  • Realty Income Corporation: BNP Paribas Exane downgrades to neutral from outperform with a price target reduced from USD 66 to USD 61.
  • Sprouts Farmers Market, Inc.: Zacks upgrades to outperform from neutral with a price target reduced from USD 169 to USD 165.
  • The Home Depot, Inc.: HSBC upgrades to hold from reduce with a price target raised from USD 356 to USD 410.
  • Walmart Inc.: DZ Bank AG Research upgrades to buy from hold with a price target raised from USD 91 to USD 110.
  • Cava Group, Inc.: Jefferies maintains its buy recommendation and reduces the target price from USD 195 to USD 148.
  • Celanese Corporation: Piper Sandler & Co maintains its underweight recommendation and reduces the target price from USD 77 to USD 50.
  • Doordash, Inc.: Argus Research Company maintains its buy recommendation and raises the target price from USD 190 to USD 230.
  • First Solar, Inc.: Mirae Asset Securities maintains its buy recommendation and reduces the target price from USD 290 to USD 217.
  • Live Nation Entertainment.: Huber Research Partners maintains its underweight recommendation with a price target raised from USD 95 to USD 142.
  • Moderna, Inc.: Deutsche Bank maintains its hold recommendation and reduces the target price from 46 to USD 35.
  • Philip Morris International, Inc.: Barclays maintains its overweight recommendation and raises the target price from USD 145 to USD 175.
  • Spotify Technology S.a.: Arete Research maintains a neutral recommendation with a price target doubled from USD 300 to USD 600.
  • Unity Software Inc.: CICC maintains its outperform recommendation and raises the target price from USD 23 to USD 32.
  • Wyndham Hotels & Resorts, Inc.: Susquehanna maintains a neutral recommendation with a price target raised from 80 to USD 110.