Market Wrap 2026-02-24
Today's US Market Wrap — Key Points
- Equities rise amid easing AI disruption fears; tech leads.
- Trump's tariff proposals & Iran/US relations impact markets.
- Key data: Australian CPI, German GDP. Nvidia earnings eyed.
- Dollar mixed; Yen weakens on BoJ rate hike concerns.
- Consumer confidence up; Fed speakers discuss AI & rates.
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MARKET SNAPSHOT
- Equities are up.
- Treasuries are down.
- Crude oil is down.
- The Dollar is up.
- Gold is up.
REAR VIEW
- Anthropic partnerships have eased concerns regarding AI disruption.
- Trump's proposed 10% global tariff rate is set to take effect.
- Iran's Deputy FM stated that Tehran is prepared to take any necessary action to reach an agreement with the US.
- Japan's PM reportedly expressed reservations to the BoJ about further rate increases.
- Trump is reportedly considering new national security tariffs following the SCOTUS agreement.
- An EU trade official stated that the US has reassured them of its commitment to the US-EU trade deal.
- A US 2-year Treasury auction was soft.
- META and AMD announced an AI deal.
- NVO is set to reduce US prices for Wegovy and Ozempic.
COMING UP
- Data releases scheduled: Australian CPI (Jan), German GfK (Mar), German GDP Final (Q4), Swiss Sentiment (Feb), Eurozone HICP Final (Jan).
- Scheduled speakers: US President Trump; RBA’s Bullock; Fed’s Musalem, Barkin, and Schmid.
- Supply: Germany, US.
- Earnings releases expected from: NVIDIA, Salesforce, Snowflake, TJX Companies, Lowe's, Synopsys, HSBC, Bayer, and Fresenius.
MARKET WRAP
US indices initially declined, driven by weakness in Nvidia, but subsequently reversed course, supported by the Anthropic presentation shortly after the market opened. This presentation boosted companies that have announced partnerships with Anthropic, potentially alleviating concerns about AI disruption. Many software companies that had been negatively impacted by AI disruption fears experienced a turnaround following the presentation. Most sectors are performing strongly, with Consumer Discretionary and Technology leading the gains. AMD (+8.7%) boosted the technology sector after signing a deal with META, while Salesforce (+4.1%) rose after Anthropic highlighted its role in "leading the transformation" during its presentation. Health and Energy are the only sectors showing losses. The Dollar's performance was mixed against other currencies, with activity currencies showing varying degrees of strength against the Greenback, supported by improved risk sentiment. The Yen underperformed among G10 currencies, impacted by reports that PM Takaichi raised concerns with BoJ Governor Ueda regarding further rate hikes. Crude oil prices experienced fluctuations but ultimately declined due to more constructive US/Iran relations, following remarks from Iran's Deputy Foreign Minister that Tehran is ready to take any necessary step to reach a deal with the US, and a strike on Iran is a real gamble. Treasury yields edged slightly lower in choppy trading, with movements continuing to be influenced by AI developments. Spot gold and Bitcoin both saw losses but recovered from earlier lows. US data releases on Tuesday were not significant enough to cause substantial market reactions. Remarks from a couple of Fed speakers also had little impact. Looking ahead, Trump's State of the Union address and Nvidia's earnings on Wednesday are key events to watch.
US
CONSUMER CONFIDENCE:
The cutoff date for the preliminary results was February 17, before the SCOTUS ruling on Friday that deemed Trump's IEEPA tariffs illegal, as well as Trump's 15% global tariff replacement. US Consumer Confidence increased more than anticipated in February, reaching 91.2 (expected 87.0) from 84.5 in January, supported by reduced pessimism among consumers regarding future economic conditions. The Present Situation Index decreased to 120.0 from 121.8, as consumers' views on current business conditions ticked higher for "bad", 19% from 17.3%, while only moved higher for good to 19.7% from 19.6%. Regarding the labor market, 28% of consumers reported that jobs were plentiful, compared to 25.8% in January, while 20.6% said jobs were "hard to get", up from 19.0%. The Expectations Index rose to 72.0 from 67.2, with consumers expressing less pessimism about future business conditions, a less negative outlook on the labor market, and slightly increased optimism about future income prospects. 21% expected business conditions to worsen (previous 23.7%), 26.1% anticipated fewer jobs (previous 28.7%), and 17.3% of consumers expected their incomes to increase (previous 17.2%). Consumers' year-ahead inflation expectations decreased in February, falling to 5.5% from 5.6%. The labor market differential—the share of consumers saying jobs are “plentiful” minus the share saying jobs are “hard to get”—rose 0.6% to +7.4%. Oxford Economics suggests that the labor market differential indicates the unemployment rate will rise to 5% in 2026.
FED’S COOK
(voter, neutral): Stated that the neutral rate could decline over time, particularly if AI-driven productivity gains are fully realized or if labor market transitions lead to greater income inequality, which could lower the neutral rate all else equal. However, she also noted that the current AI-driven investment surge may mean the neutral rate is presently higher than it was pre-pandemic. Cook highlighted that policymakers could face trade-offs between inflation and unemployment in such an environment, arguing that education and workforce policies may be better suited than monetary policy to address structural labor market challenges. She warned that in a productivity boom, rising unemployment may not necessarily signal economic slack, and conventional demand-side easing could risk fuelling inflation without resolving AI-driven job displacement. While the unemployment rate remains low at 4.3% and layoffs are subdued, she acknowledged uncertainty around the scale and intensity of the labor market transition, noting that job displacement could precede job creation, temporarily lifting unemployment and reducing participation.
FED's GOOLSBEE
(2027 voter, dovish): The Chicago Fed President is optimistic there can be more rate cuts this year, but reiterated not until inflation is heading back to target. He adds that progress on inflation has stopped and is concerned if it remains stuck above the target. Goolsbee notes it can't bank on coming productivity to lower inflation or use that as a rationale for rate cuts, and argued that it is not obvious that Fed policy is even restrictive. He described core services inflation ex-housing as stubbornly high. He stated that consumer spending, not AI investment, has been the main driver of economic growth, with economic growth and the labour market not seemingly fragile. The low hiring, low firing environment fuelled by uncertainty looks set to continue with the SCOTUS tariff ruling, he said. Goolsbee believes the job market and growth are quite steady.
FIXED INCOME
T-NOTE FUTURES (H6) SETTLED 2+ TICKS LOWER AT 113-09+
T-notes experienced two-way trading, with sentiment primarily influenced by AI. At settlement, the following changes were observed: 2-year +2.1bps at 3.461%, 3-year +1.8bps at 3.462%, 5-year +1.7bps at 3.598%, 7-year +1.4bps at 3.795%, 10-year +1.0bps at 4.037%, 20-year +0.2bps at 4.635%, 30-year −0.1bps at 4.694%.
THE DAY:
T-notes flattened on Tuesday, with the front-end leading the moves. Trading was choppy following a quiet overnight and European session. T-notes largely saw two-way price action in the US session, with market focus remaining on AI disruption. However, some of the recent fears were softened somewhat today as Anthropic announced a slew of new partnerships - many of the companies that were hit by Anthropic's abilities are actually partnering with Anthropic, helping software names rally. US data saw the FHFA house price index rise 0.1% M/M, under the 0.3% forecast, while the Case-Schiller house prices declined 0.1% M/M. Consumer Confidence beat, while ADP weekly employment also accelerated somewhat. The Dallas Fed Services index declined, while the Philly Fed non-manufacturing survey also worsened. The Atlanta Fed GDP Now estimate for Q1 was unchanged at 3.1%. Elsewhere, Fed speak largely centred around AI, but Cook said the neutral rate could fall over time if the labour market transition leads to a rise in income inequality. However, the AI-driven investment surge means it is possible that the current neutral rate is higher than before the pandemic. Goolsbee largely reiterated recent remarks, noting he is optimistic there can be more rate cuts this year, but not until inflation is heading back to target. He continues to emphasise concerns around core services prices.
SUPPLY
Bills
- The US sold 6-week bills at a high rate of 3.635%; B/C ratio was 2.82x.
- The US plans to sell USD 105bln in 4-week bills and USD 95bln in 8-week bills on February 26th, and to sell USD 69bln in 17-week bills on February 25th; all to settle to March 3rd.
Notes
- Overall, the 2-year auction was relatively soft. The US sold USD 69bln of 2-year notes at a high yield of 3.455%, tailing the when issued by 0.1bps. The tail is worse when compared to the prior stop through of 1.4bps and six auction average stop through of 0.5bps. The bid-to-cover ratio fell to 2.63x from 2.75x, in line with recent averages. Direct demand increased to 34.3% from 28.3%, above the 32.0% average. However, indirect demand slumped to 55.91% from 64.4%, below the 57.1% average. Dealers were left with 9.8% of the supply, above the prior but below recent averages.
- The US plans to sell USD 70bln of 5-year notes on February 25th and USD 44bln of 7-year notes on February 26th; all to settle March 2nd.
- The US plans to sell USD 28bln of 2-year FRN's on February 25th; to settle February 27th.
STIRS/OPERATIONS
- Market Implied Fed Rate Cut Pricing: March 0bps (previous 0bps), April 2.7bps (previous 3.2bps), June 12.0bps (previous 13.6bps), December 54.8bps (previous 57.3bps).
- NY Fed RRP operation demand was at 0.92bln (previous 0.88bln) across 17 counterparties (previous 7).
- SOFR was at 3.66% (previous 3.66%), with volumes at USD 3.197tln (previous USD 3.224tln) on February 23rd.
- EFFR was at 3.64% (previous 3.64%), with volumes at USD 97bln (previous USD 101bln) on February 23rd.
CRUDE
WTI (J6) SETTLED USD 0.68 LOWER AT 65.63/BBL; BRENT (J6) SETTLED USD 0.72 LOWER AT 70.77/BBL
Crude oil prices experienced two-way trading on Tuesday but ultimately declined amid more constructive US/Iran relations. WTI and Brent saw choppy trade overnight and through the European session to hit highs of USD 67.15/bbl and Brent 71.90, respectively, albeit in thin oil-specific newsflow. However, this soon changed, and immediate downside ensued in the space as Iran's Deputy Foreign Minister remarked that Tehran is ready to take any necessary step to reach a deal with the US, and a strike on Iran is a real gamble. As such, benchmarks fell to intraday lows as participants digested the comments, and continued grinding lower into the close to settle at troughs. Prior to these comments, oil did see some modest upside as White House, on Iran, said Trump's first option is always diplomacy, but is willing to use lethal force when and if necessary. On the supply front, Transneft has reportedly cut crude oil intake by 250k BPD after Monday's attack on a major pumping station, and Venezuela is reportedly readying larger crude cargoes for exports starting in March and exports of Venezuelan oil to expand to India. Ahead, traders await private inventory data after-hours, whereby current expectations are (bbls): Crude +1.5mln, Distillate -1.6mln, Gasoline -0.6mln.
EQUITIES
CLOSES:
- SPX +0.77% at 6,890
- NDX +1.09% at 24,977
- DJI +0.76% at 49,175
- RUT +1.20% at 2,652
SECTORS:
- Health -0.53%
- Energy -0.11%
- Communication Services +0.22%
- Real Estate +0.23%
- Financials +0.47%
- Consumer Staples +0.69%
- Materials +0.79%
- Utilities +1.09%
- Technology +1.17%
- Industrials +1.23%
- Consumer Discretionary +1.58%
EUROPEAN CLOSES:
- Euro Stoxx 50 +0.10% at 6,121
- Dax 40 +0.12% at 25,022
- FTSE 100 -0.04% at 10,681
- CAC 40 +0.26% at 8,519
- FTSE MIB -0.10% at 46,652
- IBEX 35 -0.54% at 18,190
- PSI +0.25% at 9,269
- SMI +1.08% at 13,994
- AEX +0.34% at 1,020
STOCK SPECIFICS:
- Diamondback Energy (FANG): Profit light.
- Hims & Hers Health (HIMS): Light next quarter revenue view.
- Home Depot (HD): Profit & rev. beat, raised div. 1.3% & SSS surprisingly rose
- JPMorgan (JPM): Q1 IB fees & trading rev. exp. to rise by a mid-teens percentage Y/Y; now sees FY NII of ~$104.5bln (prev. 103bln)
- Keurig Dr Pepper (KDP): EPS & rev. beat
- Keysight Tech (KEYS): Top, bottom line beat & issued stronger than exp. next quarter outlook.
- Meta (META) signs blockbuster AMD (AMD) deal to spend billions on AI gear & to acquire shares of AMD.
- Novo Nordisk (NVO) to cut Ozempic & Wegovy prices by up to 50% starting Jan. ‘27, WSJ reports.
- PayPal (PYPL) attracting takeover interest from banks & at least one large rival w/ with some parties considering the whole Co. & others specific assets
- Warner Bros. Discovery (WBD) confirmed that it has received a revised proposal from Paramount Skydance (PSKY), but the Netflix (NFLX) merger agreement remains in effect, and the Board continues to recommend in favour of the Netflix transaction.
- Anthropic unveiled 10 new ways for business customers to plug in its tech to key areas of work; could help with Investment Banking tasks like reviewing deals, Wealth-Management tasks such as portfolio analysis and HR related tasks. Other items include plug-ins for private equity, engineering and design. Novo Nordisk (NVO), Accenture (ACN), Infosys (INFY), Spotify (SPOT), Intuit (INTU), Factset (FDS), Thomson Reuters (TRI), DocuSign (DOCU), LegalZoom (LZ), and Intercontinental Exchange (ICE) moved higher as partnerships with these companies were mentioned, raising concerns that AI will disrupt software-related names.
- Citron Research is short SanDisk (SNDK) , "The market is pricing SanDisk like it's Nvidia (NVDA). There's one problem: NVIDIA has a moat. SanDisk sells a commodity."
- Unity Software (U) reportedly considering selling China business, according to Bloomberg.
- Apple (AAPL) shareholders approve all co. proposals at annual meeting, including note on executive pay, but reject shareholder proposal asking for report on China entanglements, via Apple AGM; CEO Cook said co. continues to plan for an annual increase to the dividend.
- Klaviyo (KVYO) and Google (GOOGL) announce strategic partnership to power autonomous customer experiences.
- Stripe is considering an acquisition of all or parts of PayPal (PYPL), Bloomberg reports.
FX
The Dollar's performance was mixed against its peers on Tuesday. The DXY's modest gains were primarily due to JPY weakness rather than US-specific factors. Risk-off sentiment at the start of the week, stemming from AI disruption concerns, eased following optimistic announcements between AI firm Anthropic and software-related companies, allowing currencies like the AUD to reverse earlier weakness. Elsewhere, focus was on data and Fed speak. US Consumer Confidence rose in February, with consumers feeling less pessimistic about future economic conditions, while ADP's weekly private job figures picked up, and the Richmond Fed Manufacturing Index contracted at a faster rate in February. Fedspeak highlights included Goolsbee (2027 voter) reiterating that more progress is needed on inflation before resuming rate cuts.
The JPY was weighed down by two reports. The first, in overnight trading, followed a Nikkei report stating that several senior US officials said the “rate checks” carried out when the JPY weakened in January were initiated by US Treasury Secretary Bessent rather than at Japan’s request. Later, a more significant move occurred following Mainichi reports that Japan's PM Takaichi relayed to BoJ Governor Ueda reservations about further rate hikes, being stricter than their previous meeting, sources said. Shortly after the news, USD/JPY hit session highs of 156.28 before retreating to ~155.79 at the time of writing.
The GBP remained muted amid numerous remarks from BoE policymakers. The main takeaway is that a rate cut in April/May remains an open question for markets, with Governor Bailey saying a rate cut in April is a genuinely open question. Pill kept hawkish, issuing concerns over future policy easing with risks still to the upside on achieving the inflation target. Cable finished the session flat at ~1.3498 from earlier 1.3537 highs.
The HUF was modestly firmer against the EUR following the NBH's decision to cut rates by 25bps, as expected, to 6.25%. Governor Varga reiterated a data-dependent approach, with the 25bps cut the only option discussed at the meeting.
