Oil prices jump after Iran says critical Strait of Hormuz to remain shut
The 10-year Treasury bond yield has fallen below 4%, and mortgage rates are below 6%, which is the lowest rate since 2022. There is a flight to quality underway as nervous investors flee stocks due to “AI derangement syndrome” on the fears that unemployment will continue to soar as AI replaces workers. Although Nvidia’s founder Jensen Huang said that Wall Street was mistaken that AI was bad for software stocks, the AI fear continues to perpetuate.
The best way to describe the recent earnings announcement season was how much things remained the same. Naturally, Nvidia (NVDA) was the grand finale on Wednesday. I must add that Nvidia had been acting well this week, almost like investors could smell imminent sales and earnings surprises, plus positive guidance. The company posted a 3% revenue surprise and a 5.2% earnings surprise. More importantly, the company raised its guidance above the analysts’ consensus estimate.
Nvidia CEO Jensen Huang told investors in a news release that “Computing demand is growing exponentially — the agentic AI inflection point has arrived.” Although Nvidia got hit with profit taking after its earnings announcement, as I have repeatedly warned, all the covered call option writing on the stock sometimes makes “the tail wag the dog.” The stock should hit $300 per share by the end of 2026 and $500 per share by the end of the decade, so back up the truck and keep buying Nvidia on any dips.
The January PPI is actually a lot better when you focus on wholesale goods prices. The Labor Department reported on Friday that its Producer Price Index (PPI) rose 0.5% in January, which was substantially higher than economists’ consensus estimate of a 0.3% increase. The core PPI, excluding food, energy, and trade margins, rose 0.3%. Wholesale service costs surged 0.8% in January, which is the largest increase since last July, while wholesale goods costs actually declined 0.3%, which represents the third time in the past five months that goods prices have fallen. Wholesale food prices declined 1.5% in January, while wholesale energy prices fell 2.7%. A 2.5% surge in trade services distorted the PPI, just like it did in December when it rose 1.8%.
FedEx was the first large company to sue for tariff refunds in the U.S. Court of International Trade, and it will be interesting to see how many other companies follow. Apparently, it is now being reported that about 1,800 companies have filed with the U.S. Court of International Trade to get their tariff money back. Interestingly, the Supreme Court did not address whether the federal government would have to pay back the tariff revenue it already collected.