Welcome back,

Eurozone inflation is heating up while home prices are cooling back here in the US. Student loan debt is surging, and student loan debt headed to the Supreme Court today.

Let’s keep it concise.

Market Headlines 👀

• Meta’s (META) bet on AI is bringing back some advertisers, but some remain wary.

• The deadline to transition to SOFR from LIBOR is looming, but more than $1T of risky US loans remain shackled to it.

• China's local state is on the verge of a debt crisis.

• Tesla’s (TSLA) $2.9B battery supply deal sends South Korea’s L&F surging.

  • Mexican president Andrés Manuel López Obrador (“AMLO”) reports Tesla plans to build a Northern Mexico EV plant, after a call with Musk.

• Elon Musk is recruiting a team to develop OpenAI's ChatGPT rival for Twitter (TWTR).

• Apple (AAPL) suppliers are racing to exit China.

• Microsoft (MSFT) adds new Bing to Windows computers in its AI effort.

• Goldman Sachs (GS) CEO David Solomon said the bank was considering “strategic alternatives” for its failing consumer strategy.

  • GS kicked off investor day with a report card on Solomon’s performance so far.

• Bank of America (BAC) thinks the Fed may raise rates to 6%.

• Amazon (AMZN) employees can now use their stock as collateral for buying a house through Better.com.

• Opposition parties in Nigeria are calling for an election rerun due to alleged voting rigging.

• Canada’s December GDP rose +2.3% year-over-year, missing its target of +2.7%.

  • Its 3Q GDP gain was revised down to 2.3% annualized (prev. 2.9%).

• Spain’s CPI inflation for February rose to 6.1% year-over-year (est. 5.9%; prev. 5.9%).

• France’s CPI inflation for February rose to a record-high 6.2% year-over-year (est. 6.1%; prev. 6.0%).

• The US 10-Year Treasury Yield rose to 3.98%, its highest since November 10.

• Home prices in the US declined for a sixth straight month, sending a key index of values down 2.7% from its peak in June.

Earnings 💸

• Target (TGT)

  • EPS: $1.89 beats (exp. $1.48)

  • Revenue: $31.4B beats (exp. $30.48B)

• Norwegian Cruise Line (NCLH)

  • EPS: -$1.04 misses (exp. -$0.87)

  • Revenue: $1.52B beats (exp. $1.5B)

• Rivian (RIVN)

  • EPS: -$1.73 beats (exp. -$1.96)

  • Revenue: $663M misses (exp. $729M)

• AMC (AMC)

  • EPS: -$0.26 misses (exp. -$0.20)

  • Revenue: $990.9M misses (exp. $1.03B)

• Axon (AXON)

  • EPS: $0.70 beats (exp. $0.51)

  • Revenue: $336.14M beats (exp. $305.87M)

• HP (HPQ)

  • EPS: $0.75 beats (exp. $0.74)

  • Revenue: $13.83B misses (exp. $14.13B)

Recap Around the Street 🧠

The US Consumer Confidence Index fell from 106.0 to 102.9 in February, well below expectations. Meanwhile, Europe’s latest inflation prints all came in higher than expected. But Treasury Secretary Janet Yellen just declared “so far, so good” on the inflation battle yesterday.

The US has now seen 5%+ inflation for 21 consecutive months. That, paired with the fastest rising rates in recent history and record amounts of consumer debt, means that even if inflation comes down next month, it’s not nearly as fast as investors are hoping.

With the next US CPI report due March 14th, current predictions have inflation decreasing to 5.9% (from 6.4%), with core CPI at 5.4% year-over-year (from 5.6%).

The S&P 500 (SPX) recorded its third-worst month in the past 25 years this February. Today marks its last day, as traders wrap up a tough month for the stock market.

Despite a solid start to the year, the major indexes are on pace for their second negative month in three. The Dow (DIJA) is down 4% for the month and is down year to date. The S&P 500 and Nasdaq Composite have lost about 2.5% and 1% in February, respectively, but are still higher year-to-date.

The U.S. 2-Year Treasury Yield just hit its highest since March 2007 (4.83%). A year ago this yield was at 1.54%, and two years ago it was at 0.12%.

Meanwhile, the 1-Year Treasury now pays 5%. That makes it 3x higher than the dividend yield on the S&P 500. The spread between the S&P 500’s earnings yield and the one-year U.S. Treasury note's yield is now the smallest in more than a decade.

Yet according to Bloomberg’s aggregate index of high-grade government and corporate bonds, bonds have already taken a round trip. The reason? As investors reverse their views on the likely future path of interest rate rises, the record-breaking global bond market rally since the start of the year has already fizzled out.

Fed chair Powell is sounding the alarm on the debt limit…again. The debt limit has become a contentious issue in recent years, as the US has repeatedly come up against the limit. Powell maintains failing to raise the limit could result in "severe damage" to the economy.

For a briefer: The debt limit is how much the US can borrow to pay its bills. It’s the total amount of money the government is authorized to borrow to meet its existing legal obligations.

If the debt limit is reached, the US can no longer borrow money and may be unable to pay its bills on time. That impacts services like Social Security, Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.

The Supreme Court is hearing arguments today in two cases challenging President Joe Biden's student loan debt forgiveness program. The Supreme Court likely won’t announce its decision until the end of its current term (typically end of June or early July).

Meanwhile, student loan debt has more than doubled since 2010. Student loan payments were paused during the pandemic for nearly three years. They are set to resume 60 days after the court issues its ruling. If the court hasn’t decided by June 30, payments will resume 60 days after that.

Market Preview 🎞️

• Wednesday: Tesla (TSLA) has its first investor day tomorrow, with Musk set to unveil his third master plan.

• Wednesday: China manufacturing PMI, non-manufacturing PMI, Caixin manufacturing PMI, Eurozone S&P Global Manufacturing PMI, US construction spending, ISM Manufacturing, light vehicle sales

• Wednesday: Lowe’s (LOW), Kohl's (KSS), Snowflake (SNOW), Salesforce (CRM), Nio (NIO), Okta (OKTA), Splunk (SPLK) and Veeva (VEEV) report Q4 earnings.

• Thursday: Eurozone CPI, unemployment

• Friday: Eurozone S&P Global Services PMI, PPI

Thats all for today, folks! We’ll be back around the same time tomorrow with a curated list of important news, economic data and market highlights. 

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