MARKET WRAP

A mixed day for equities with the SPX unchanged, the QQQ up +0.4%, and the IWM -0.2%, but it wraps up a solid week overall. Traders shrugged off hotter-than-expected inflation data, tariff headlines and disappointing retails sales, pushing the S&P 500 up about 1.5%, at the the door of all-time highs. The most notable development this week was the roundtrip in Treasuries following the CPI. Yields spiked on Wednesday but have moved lower since. The US 10-year yield is back 4.48%. If yields avoid another spike near term, it could give equities the momentum they need to break through to new highs. Additionally, the VIX dropped below 15 into the long weekend. (More on that below and on this weekend’s email). Good friend Stephanie Link joins the RiskReversal Pod with sector-specific predictions and more. Enjoy!

MRKT MATRIX: February 14, 2025

Today’s Top Stories:

• Stocks are little changed as Wall Street takes a pause after a strong week (CNBC)
  US Retail Sales Drop by Most in Two Years Amid Fires, Storms (Bloomberg)

• Corporate America is complaining about ‘currency headwinds.’ What it means for investors (CNBC)

• S&P 500 Earnings Season Update: February 14, 2025 (FactSet)

• Tech stocks return to December ‘scene of the crime’, raising concern of another pullback, BTIG warns (CNBC)

• Tesla Dip Buyers Face a Treacherous Path Amid Bearish Signals (Bloomberg)

• TSMC Considers Running Intel’s US Factories After Trump Team Request (Bloomberg)

• Apple, Google Restore TikTok App After Assurance From Trump (Bloomberg)

• Google Gemini now brings receipts to your AI Chats (TechCrunch)

• DeepSeek Sparks Investor Pessimism on SoftBank’s $500 Billion Stargate Push (Bloomberg)

• Trump Says New Tariffs on Autos Coming Around April 2 (Bloomberg)

• Vance Wields Threat of Sanctions, Military Action to Push Putin Into Ukraine Deal (WSJ)

Today’s RiskReversal Podcast is Presented by CME Group, iConnections, and Robinhood

Stephanie Link: 2025 Market Outlook & Sectors To Watch

Guy Adami and Dan Nathan are joined by Stephanie Link, Chief Investment Strategist and Portfolio Manager at Hightower. They delve into Stephanie's insights on the economy, market outlook, and sector-specific predictions for the coming year. Stephanie also shares her experiences working with Jim Cramer and offers a detailed analysis of the current state of various sectors, including financials, industrials, and technology. They discuss the potential impacts of fiscal policies, deregulation, and interest rates on the market, as well as significant market trends such as cybersecurity and AI. The conversation highlights specific stocks like Boeing, Broadcom, and Amazon, underscoring the importance of market structure and individual stock volatility. The episode provides listeners with a comprehensive understanding of the market's potential movements and where to look for investment opportunities.

What’s Next?

We've been here before. Each recent attempt at new highs has been derailed by a news headline or a yield spike, but stocks have remained impressively resilient through a few weeks a bad headlines. Equities closed out a volatile but strong week, with the SPX entering the three day weekend just shy of its closing high of 6118 and its intra-day all time high of 6128.

Looking ahead, traders have dialed down implied volatility to extreme lows, both because of the upcoming three-day weekend but also the market's resiliency. That “buy the dip” or “climbing a wall of worry” means traders begin to discount the possibility of future negative headlines because recent history tells them its a head fake. SPX at-the-money volatility for next week has slipped into single digits—a rarity, more akin to the quietest stretches of Summer. If this low-volatility environment persists on Tuesday’s open, history suggests the market may continue a steady grind higher next week. Next week we do get FOMC minutes on Wednesday and S&P Global PMIs on Friday. The largest (known) catalyst for renewed volatility (according to the options market) looms February 26-28th, with the PCE report and Nvidia's earnings.

However, even those events are currently being priced with relatively low volatility expectations. More on low implied volatility along with a preview of next week's key market drivers this weekend. Check you inbox Monday evening.

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