U.S. Indexes pared into initial losses, led by weakness in Nvidia, but soon reversed and buoyed by the Anthropic presentation just after the open, which boosted many names that Anthropic has announced they are, or will be, partnering with, potentially quelling some AI disruption fears surrounding these names. A lot of the names hit from AI disruption fears like software are turning around amid the presentation. Sectors are predominantly firmer, with Consumer Discretionary and Technology atop of the breakdown, with the latter boosted by AMD (+8.7%), after they signed a deal with META, while Salesforce (+4.1%) gained after Anthropic, in their presentation, noted they are “leading the transformation”. Health and Energy are the only sectors in the red. The Dollar was mixed against peers, with activity currencies all seeing strength to varying degrees against the Greenback and supported by the turnaround in risk sentiment. The Japanese Yen was the clear G10 underperformer and hit on reports that PM Takaichi raised reservations about rate hikes to Bank of Japan Governor Ueda. The crude complex saw two-way trade, but ultimately lower amid more constructive US/Iran relations, as Iran’s Deputy Foreign Minister remarked that Tehran is ready to take any necessary step to reach a deal with the US, and a strike on Iran is a real gamble. Treasuries were slightly lower in choppy action, as moves continue to be dictated by AI. Spot Gold saw losses, as did Bitcoin, but is off its earlier lows. No real US data was of note on Tuesday as market reactions were limited, while there were a couple of Fed speakers, but they did not say much to move the needle. Ahead, President Trump’s State of the Union address is in focus ahead of Nvidia earnings on Wednesday. Consumer Confidence: Note, the cutoff date for the preliminary results was February 17, namely before the SCOTUS ruling on Friday that deemed Trump’s IEEPA tariffs illegal, as well as Trump’s 15% global tariff replacement. US Consumer Confidence rose more than expected in February to 91.2 (exp. 87.0) from January’s 84.5. supported by consumers’ feeling less pessimistic about future economic conditions. The Present Situation Index fell to 120.0 from 121.8, as consumers’ views on current business conditions ticked higher for “bad”, 19% from 17.3%, while only moved higher for good to 19.7% from 19.6%. On the labour market, 28% of consumers said jobs were plentiful, versus 25.8% seen in January, while 20.6% said jobs were “hard to get”, up from 19.0%. The Expectations Index rose to 72.0 from 67.2, with consumers less pessimistic about future business conditions, less negative about the labour market and slightly more optimistic about income prospects in the future. 21% expected business conditions to worsen (prev. 23.7%), 26.1% anticipated fewer jobs (prev. 28.7%), 17.3% of consumers expected their incomes to increase (prev. 17.2%). Consumers’ year-ahead inflation expectations declined in February, lowering to 5.5% from 5.6%. The labour market differential—the share of consumers saying jobs are “plentiful” minus the share saying jobs are “hard to get”—rose 0.6% to +7.4%. Oxford Economics notes that the labour market differential still suggests the Unemployment rate will rise to 5% in 2026. Fed Member Cook said the neutral rate could fall over time, particularly if AI-driven productivity gains are fully realised or if labour market transitions lead to greater income inequality, which could lower the neutral rate all else equal. However, she also noted that the current AI-driven investment surge may mean the neutral rate is presently higher than it was pre-pandemic. Cook highlighted that policymakers could face trade-offs between inflation and unemployment in such an environment, arguing that education and workforce policies may be better suited than monetary policy to address structural labour market challenges. She warned that in a productivity boom, rising unemployment may not necessarily signal economic slack, and conventional demand-side easing could risk fuelling inflation without resolving AI-driven job displacement. While the Unemployment rate remains low at 4.3% and layoffs are subdued, she acknowledged uncertainty around the scale and intensity of the labour market transition, noting that job displacement could precede job creation, temporarily lifting unemployment and reducing participation. Goolsbee the Chicago Fed President is optimistic there can be more rate cuts this year, but reiterated not until inflation is heading back to target. He adds that progress on inflation has stopped and is concerned if it remains stuck above the target. Goolsbee notes it cannot bank on coming productivity to lower inflation or use that as a rationale for rate cuts, and argued that it is not obvious that Fed policy is even restrictive. He described core services inflation ex-housing as stubbornly high. He stated that consumer spending, not AI investment, has been the main driver of economic growth, with economic growth and the labour market not seemingly fragile. The low hiring, low firing environment fuelled by uncertainty looks set to continue with the SCOTUS tariff ruling, he said. Goolsbee believes the job market and growth are quite steady. Elsewhere, Oil closed higher by 0.75% while Gold reversed some of Monday’s gains with a loss of 1.8% on Tuesday.
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