MARKET WRAP

Stocks closed in the red, but the session could have been much worse. A hotter-than-expected CPI sent SPX down to test the 6000 level pre-market before bouncing back and spending most of the day hovering around 6050, finishing down -0.3% (more on that level’s significance below). QQQ eeked out a small gain, while rate sensitive IWM closed -0.9%. The equity rebound from lows came despite a sharp rise in yields that held all day. The 10-year yield climbed +0.09, now sitting at 4.63%—up from 4.42% on February 4th. TLT is now 87.23. Oil was down nearly -3%. The VIX dipped slightly below 16. Tomorrow morning we get a second inflation reading in PPI.

Some of today’s reversal from lows may be linked to traders betting on seasonality effects in January inflation data—something Liz breaks down in today’s MRKT Call. On the RiskReversal Pod, Jeff Richards of Notable Capital joins to discuss all things tech stocks. Enjoy!

MRKT MATRIX: February 12, 2025

Today’s Top Stories:

• Dow drops 200 points after hotter-than-expected CPI report (CNBC)

• Eggs Soar 15% in a Month With US Grocery Shelves Empty (Bloomberg)

• How Car Insurance Would Help Tariffs Cast a Long Inflation Shadow (WSJ)

• America’s Most Famous Stock-Market Measure Is More Broken Than Usual (WSJ)

• Nvidia Shares No Longer Bulletproof as DeepSeek Fears Linger (Bloomberg)

• China's purchases of chipmaking equipment to decline in 2025, consultancy says (Reuters)

• Alibaba Becomes China’s New AI Darling With $87 Billion Rally (Bloomberg)

• Taiwan's Foxconn says it can plan production around Trump tariffs (Reuters)

• YouTube Viewing on TV Now Surpasses Mobile, Desktop in U.S. (Variety)

Today’s MRKT Call is Presented by SoFi

What To Buy If Rates Stay High

Liz, Guy, and Dan kick things off with the equity and bond market reaction to CPI. Guy analyzes the 10-year yield chart, while Dan notes that if the Fed holds off on rate cuts this year, we could see the 10-year push above 5%. They then discuss layoffs and whether the Fed is in a tough spot. Liz highlights seasonal inflation trends, pointing out that January tends to see both peak inflation prints and the largest forecast misses from Wall Street. She also breaks down key indicators to watch in case this isn’t the peak. Next, she dives into how different sectors respond to bear steepening. Dan then presents the Chart of the Day, focusing on homebuilders and XHB, followed by the Call of the Day on UPST, with comparisons to similar setups in AFRM, CVNA, and potential patterns emerging in ZM, ROKU, and KWEB (China). The team wraps up with a look at earnings reports, what signals they’re sending, your questions, and a discussion on Deere.

Click here to access all of the charts mentioned in today’s MRKT Call.

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Today’s RiskReversal Podcast is Presented by Betterment and iConnections

Jeff Richards on the AI Revolution: Winners, Losers & Investment Opportunities

Dan and Guy welcome Jeff Richards, Managing Partner at Notable Capital, for an in-depth conversation on tech trends and market movements. The discussion covers Q4 results, the performance and future outlook of major tech players like NVIDIA, Google, Meta, and Microsoft, and the evolving landscape of generative AI. Jeff shares insights about public and private markets, the impact of AI on business efficiency, and the potential of small-cap software companies. The conversation also explores interest rates, labor market dynamics, and the future of autonomous driving, touching on strategic M&A opportunities. Jeff highlights the importance of innovative leadership and looks forward to the potential for new IPOs in the tech space.

What’s Next?

Stocks slid after a hotter-than-expected CPI report sent Treasury yields climbing, but equities showed resilience, holding key support at the 6000 level on the S&P 500. At its worst today the SPX had an intraday drop of about 1.2%. The higher inflation print reinforced concerns about the Fed’s rate path, pushing yields higher across the curve. Despite the initial weakness, dip buyers stepped in to limit the downside. Some of that may have been a result of a bet that recent seasonality of inflation prints has tended to peak in January. The bond market did not have that same level of optimism intraday as yields spiked and stayed there.

Traders see a lower chance of a big equity reaction from tomorrow’s PPI unless it reinforces today’s hotter-than-expected CPI (or confirms shaking off today’s hot CPI). Right now, the options market is pricing in about a 0.6% expected move—slightly less than the 0.7% for CPI. With Powell’s testimony wrapped up, that also removes some intraday headline risk.

For the rest of the week, keep an eye on the 6050 level, which has significant gamma positioning. This could be contributing to rallies above being sold and today’s dip being bought. If SPX remains near 6050 heading into Friday, it may settle around that level into the long weekend. To see sign of that already note the action in SPX from about noon today until the close. Again, a surprise PPI could get the SPX away from that level, but for now it’s acting as a magnet and becomes more so into Friday should the index hover nearby.

To the upside, 6100 is still a key level, but more significant resistance lies near 6160, where a large amount of upside calls—just above prior highs—have been sold into the March expiration. If stocks push past 6100, that area could act as a ceiling in the near term.


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