"The great investors operate in an unemotional fashion." - Howard Marks, Co-Chairman of Oaktree Capital Management 

1. Fed Fears, Growing Economy and Tariff Chaos 

2. Markets Rise Despite Fed’s Cautionary Tale  

Stocks are facing a one-two punch of elevated interest rates and tariff fallout. Nevertheless, the markets are managing to hold their own this week, with the S&P 500 and Dow Jones Industrial Average posting modest gains on Tuesday while the tech-heavy Nasdaq retreated. Federal Reserve Chairman Jerome Powell warned that the central bank is in no hurry to lower interest rates in 2025 because the economy is humming along just fine, with no sign of a recession in sight. 

However, inflation continues to rear its head and evade the Fed’s 2% target, and consumers are beginning to push back. McDonald’s (NYSE: MCD) missed its Q4 revenue targets in a performance reminiscent of the pandemic era as consumers held tight to their wallets, leaving McDonald’s to grapple with menu offerings and prices. On the flip side, Coca-Cola (NYSE: KO) reported sales that surpassed estimates, owing to robust consumer demand for its drinks. 

Markets are also facing the uncertainty from a tariff war that has escalated after President Trump implemented hefty 25% global tariffs on both steel and aluminum imports, placing a target on the back of the auto industry. Ford CEO Jim Farley clapped back at the tariffs, saying at an investment conference, “So far, what we’re seeing is a lot of cost and a lot of chaos.” 

Carson Group VP and global macro strategist Sonu Varghese advised investors to take a long-term view, saying, “Ultimately, the strength of the U.S. labor market and potential opportunities like tax cuts are likely to outweigh the threats of tariffs and elevated rates.” 

Penny Pinching

The U.S. penny will be going the way of the dinosaur. President Trump, at the urging of the Elon Musk-led Department of Government Efficiency (DOGE), has ordered the U.S. Treasury to stop minting pennies. After all, the penny comes with production costs of three-cents per coin, or a hefty price tag of $179 million each year. NBA Hall of Famer Scottie Pippen isn’t too happy about the loss of the penny, calling it the “end of an era.” 

Image courtesy of Scottie Pippen on X

With 114 billion pennies currently in circulation, economists aren’t too worried about the fallout, saying it will be “minimal.” 

Tuesday Markets Snapshot: Tuesday Close 

S&P 500 6,068.50 🠉2.06 🠉0.03%

Dow Jones Industrial Average 44,953.65 🠉123.24 🠉0.28%

Nasdaq 19,683.86 🠋70.41 🠋0.36%

AI Market Movers 

• Apple (Nasdaq: AAPL) stock climbed 2% higher on Tuesday after the company reportedly chose to shun China rival Deepseek and instead partner with Alibaba to implement AI features into iPhones in China. 

• Intel (Nasdaq; INTC) may not be a member of the Magnificent 7, but its stock has been on fire this week, rising about 9% in response to its latest chip set release. U.S. Vice President J.D. Vance, a former venture capitalist investor, pledged to commit AI chip production to domestic companies.

• Meta (Nasdaq: META) stock has clinched its 17th straight day of gains amid a heightened focus on AI spending.

Super Bowl Bump 

This year’s Super Bowl attracted record viewership, with an average of 127.7 million U.S. viewers across TV and streaming channels. That is good news for companies that doled out millions of dollars to run ads during the big game, including the following stocks: 

• Hims & Hers Health (HIMS), a telehealth company, showcased its alternative weight loss offerings during the game, drawing criticism from lawmakers amid safety concerns. 

• Nike (NYSE: NKE) highlighted high-profile female athletes like Caitlin Clark in its ad as the company seeks to capitalize on rising attention around women’s sports.

• Duracell showed an ad featuring NFL great Tom Brady as a robot. While Duracell isn’t publicly traded, it’s owned completely by Warren Buffett’s Berkshire Hathaway (NYSE: BRK-B). 

• OpenAI also featured an ad in this year’s game, thrusting generative AI and chatbots further into the mainstream. Microsoft (Nasdaq: MSFT) is a backer of OpenAI.  

Image courtesy of Adweek

Hedge Fund Trades

While Punxsutawney Phil has predicted six more weeks of winter, investors don’t have to sleep on their investment portfolios. Instead, they can copy hedge fund manager David Tepper of Appaloosa Management. His portfolio holdings as of Q4 were just published, showing he is bullish on China and less bullish on U.S. technology. Here are some of his portfolio’s key moves: 

Image courtesy of The Right Answer on X

• China’s Alibaba Group Holdings: Tepper added 18.43% of shares for a total value of $1 billion in his portfolio. This proved to be serendipitous considering Alibaba’s most recent tie-up with iPhone maker Apple. 

• Amazon (Nasdaq: AMZN): He reduced his position by 18.75%.

• Meta Platforms (Nasdaq: META): Tepper reduced his position by 21.60%, missing out on the stock’s recent rally. 

• Oracle (Nasdaq: ORCL): He lowered his position in the software maker by 11% 

• Intel: reduced his position in the chipmaker by 60%, missing out on this week’s sudden gains.

Stock Market Fact

Rainy days and Mondays tend to get the stock market down, at least in 2025. While it’s still early in the year, the markets have a tough go of it on Mondays and Fridays so far, falling 95% of the time on Mondays and 42.8% of the time on Friday, according to Carson Investment Research. However, it’s worth pointing out that stocks, with the exception of the Nasdaq, bucked the wider trend this week, posting gains on Monday, Feb. 10.  

Image courtesy of Carson Investment Research on X

Big News

Tesla Shares Drop After Chinese Rival BYD Partners with DeepSeek

Shares of the electric vehicle maker fell 6% on Tuesday and have dropped for five straight days, wiping out over $200 billion in market cap. Chinese rival BYD has announced plans to develop autonomous vehicle technology with DeepSeek. News also revealed that Must is aiming to ead an investor group in the purchase of OpenAI.

 Looking Ahead

• On Wednesday, the markets will get the latest inflation reading from the Consumer Price Index (CPI).

• Fed officials will be making the speaking rounds throughout the week.  

On Tuesday, Federal Reserve Chair Jerome Powell addressed Congress and reiterated the central bank's cautious stance on cutting interest rates amid stubborn inflation and policy uncertainties under Trump.

The January CPI report is set to be released on Wednesday at 8:30 a.m. ET. Consumer prices are expected to have risen 0.3% over the prior month, a slight deceleration from the 0.4% increase in December. Prices, excluding food and gas, are expected to have climbed 3.1% year-over-year. In addition to the CPI report, investors will watch Powell’s testimony before the House Committee on Financial Services.