Trump to announce new Fed Chair today

General market commentary

Most major equity indices ended lower yesterday amid mixed results from key tech companies and ongoing geopolitical uncertainty. The Nasdaq dropped by nearly 1%, with tech giants such as Microsoft and SAP suffering significant losses. Microsoft shares fell 10% after its cloud-revenue growth disappointed investors, raising concerns about the returns on its heavy investment in AI through its OpenAI partnership. Meta, on the other hand, saw a 10% rise after it raised its revenue outlook, buoyed by higher AI spending. Elsewhere, the Dow saw a small gain, while the S&P 500 ended down slightly. Commodities also experienced volatility, with WTI crude rising over 3% to $65 per barrel following heightened geopolitical tensions in the Middle East. Precious metals initially surged on the back of these concerns but lost most of their gains by the end of the day.

The tech sector remained under the spotlight, with AI investments becoming a key theme as investors assess whether heavy spending will lead to future profits. Microsoft’s disappointing performance and SAP's revenue forecast miss indicated that AI-related investments may not yet be yielding quick returns. Meanwhile, Meta's positive results highlighted the potential for companies with a clear AI strategy to drive revenue growth. With tech performance mixed and geopolitical tensions looming, the market remains cautious, although broader economic conditions, including solid growth and a more stable labour market, offer some support to equities. Investors are likely to stay focused on earnings and AI trends in the coming days.

Latest market and economic update

Most Asian equities fell on Friday, led by declines in Chinese and Hong Kong shares, as profit-taking took hold after strong January gains. U.S. losses overnight and concerns over Microsoft’s AI spending weighed on sentiment. In contrast, South Korean shares rose, buoyed by strong earnings from chipmakers. Japan’s inflation data kept BOJ tightening expectations alive.

US equity futures fell slightly overnight, following mixed earnings results. Apple shares rose 0.6% after surpassing Q1 expectations, while Sandisk surged nearly 15% on strong guidance. KLA Corp dropped over 8% due to weaker margin forecasts. Investors now await earnings from Exxon, Chevron, American Express, and Verizon, among others.

European shares closed lower on Thursday, with the STOXX 50 falling 0.7% and the STOXX 600 down 0.2%. SAP plummeted 16% after disappointing cloud results, while Infineon dropped nearly 4% due to weak AI infrastructure demand. ABB rose 8.5%, and Roche gained 2.7%. Nokia and Sanofi also underperformed, with mixed earnings reports.

The US dollar index rose towards 96.5 on Friday but is set for its second consecutive weekly decline, influenced by geopolitical tensions and shifting US policies. With the euro at 1.1930, investor sentiment remains cautious amid President Trump's tariff threats, potential military actions, and uncertainty over the Federal Reserve's leadership.

Oil prices fell in Asian trade on Friday after the Trump administration eased sanctions on Venezuela’s energy sector, potentially boosting supplies. Brent crude dropped 1.5% to $69.66, while WTI fell 1.6% to $64.36. Markets are also focused on potential U.S. action against Iran and an OPEC+ meeting, with output expected to remain unchanged.

President Donald Trump announced he will reveal his pick to replace Federal Reserve Chair Jerome Powell later today, with speculation centring on former Fed Governor Kevin Warsh. Trump has pressured the Fed for deeper rate cuts. Other potential candidates include BlackRock’s Rick Rieder and Fed Governor Christopher Waller. Trump’s decision follows months of speculation.

U.S. lawmakers reached an agreement on a package of six spending bills to avoid a government shutdown this week, with funding for most agencies secured. However, negotiations over the Department of Homeland Security and immigration reforms are ongoing. Lawmakers have until midnight Friday to approve funding, or a shutdown may occur.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Apple forecast revenue growth of 13% to 16% for the March quarter, driven by strong iPhone 17 demand, a rebound in China, and accelerating sales in India. Q1 revenue rose 16% to $143.8 billion, surpassing estimates, with iPhone sales hitting a record. However, supply constraints and a memory-chip shortage may pressure Q2 margins and impact hardware sales.

SpaceX is reportedly considering a merger with Tesla or a combination with AI company xAI, ahead of a planned public offering later this year. Discussions include bringing Musk’s ventures, including SpaceX, Starlink, X, and Grok AI, under one umbrella. Tesla shares rose 3% following the news, with potential interest from infrastructure funds.

OpenAI is reportedly preparing for an IPO by Q4 2026, seeking to raise $100 billion at a valuation of $830 billion. The AI firm is in discussions with Wall Street lenders and major investors like Microsoft and NVIDIA. The move comes as OpenAI accelerates its efforts to go public, fearing competition from rival Anthropic.

Visa exceeded first-quarter profit and revenue estimates, driven by strong holiday season card usage and resilient U.S. consumer spending. Global payment volumes rose 8%, while cross-border volumes grew 12%. The company reported $6.1 billion in adjusted net income and $10.9 billion in revenue. Visa is also exploring stablecoin integration into its payment systems.

Mastercard's fourth-quarter profit rose to $4.06 billion, or $4.52 per share, driven by strong consumer spending. Gross dollar volume increased 7%, and net revenue grew 17.6% to $8.81 billion. Despite tariff uncertainties, household spending remained resilient, with shoppers focusing on essentials and seeking deals, boosting transaction volumes.

Caterpillar’s Q4 results were boosted by AI-driven demand, with power and energy sales rising over 20%, surpassing construction as its largest segment. Adjusted EPS was $5.16 on $19.1 billion revenue, above estimates. The company warned of $2.6 billion in 2026 tariff costs, limiting margin expansion, while construction segment recovery is expected next year.

SAP shares fell 16% after its 2026 cloud revenue forecast of 23–25% growth missed expectations, despite full-year results meeting estimates. Cloud backlog growth is set to decelerate, partly due to longer government and defence projects. Full-year cloud revenue rose 26% to €21 billion, backlog climbed 30%, and a €10 billion buyback was announced.

Stryker raised its full-year profit forecast to $14.90–$15.10 per share, citing strong sales of implants and medical devices. Q4 earnings beat estimates, driven by a 17.5% rise in its surgery and neurotechnology unit. Despite tariff impacts expected to reach $400 million, the company remains optimistic, with revenue of $7.17 billion for the quarter.

Adidas reported a 10% currency-neutral growth in Q4, with an 11% rise excluding Yeezy products. Shares rose 4% following the announcement. The company plans a €1 billion share buyback in 2026, its first since 2022. Q4 operating margin improved to 2.7%, with gross margin beating expectations. Full-year results and guidance will be presented in March.

Nasdaq exceeded fourth-quarter profit estimates, driven by a surge in new listings and market volatility. CEO Adena Friedman forecasted accelerated capital market activity in 2026, supported by Fed cuts and a strong pipeline of private companies. Nasdaq reported over $5 billion in annual net revenue and a 16% rise in market services revenue.

Royal Caribbean forecast 2026 profit above Wall Street estimates, driven by strong demand from affluent travellers and a robust start to the January–March Wave booking season. About two-thirds of capacity is already booked at record pricing. Shares jumped over 18%, with revenue up 13% in Q4. New ships, land destinations, and expanded itineraries support growth.

Valero Energy posted strong fourth-quarter profits, driven by a 61% increase in refining margins and higher throughput volumes. The company reported adjusted net income of $3.82 per share, surpassing expectations. Valero also highlighted its plans to benefit from Venezuelan crude and announced the closure of its Benicia refinery by April.

AI startup Perplexity has signed a $750 million, three-year deal with Microsoft to use its Azure cloud service, running AI models from OpenAI, Anthropic, and xAI. Despite the new partnership, Perplexity has not shifted its spending from Amazon Web Services. The company is also facing a lawsuit from Amazon over its automated shopping feature.

Robinhood’s shares rose 2% in afterhours following reports that the U.S. government is considering selecting the fintech firm to oversee the new "Trump accounts" for children. Robinhood has begun internal preparations to serve as a trustee for the program, which could boost its credibility, expand its user base, and strengthen its position in the financial services sector.

Innodata gained 14.4% after being chosen by Palantir to provide training data and data engineering for AI-enabled rodeo analysis. The company will process video, imagery, and sensor data to support computer vision models, while integrating into Palantir’s workflows. The partnership highlights Innodata’s growing role in high-quality AI data services.

Barclays upgraded ASML to Overweight, raising its price target to €1,500 due to record orders and accelerating AI-driven demand. The bank highlighted a surge in orders to €13.2 billion, with a 2026 revenue forecast of €34-39 billion. Barclays sees significant upside potential, including from AI adoption and resilient China demand, despite concerns.

Rosenblatt Research upgraded Fortinet to Buy from Neutral, raising its price target to $100, citing improving demand ahead of Q4 results in early February. Strong reseller feedback points to a hardware refresh cycle replacing older Cisco firewalls, boosting growth in secure access products. Attractive valuation, high margins, and tax incentives support a potential beat-and-raise quarter.

BTIG dismissed recent allegations against Carvana’s DriveTime dealings as largely unfounded, disputing claims on leverage, servicing fees, and a $900 million loan write-down. Misinterpretations of securitisations and cash flow metrics were cited, with 2024 Adjusted EBITDA and warehouse debt deemed manageable. The firm reaffirmed its Buy rating and maintained estimates.

Upcoming data and events

Today’s focus is on the Producer Price Index (PPI) for inflation insights, alongside the Chicago PMI, Baker Hughes rig count, and Federal Reserve Governor Michelle Bowman’s comments on monetary policy. Earnings season continues with key reports from Exxon Mobil, Chevron, American Express, Regeneron Pharmaceuticals, and Colgate-Palmolive expected on Friday.

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