Good Morning!
On Wednesday, February 19, the S&P 500 closed at 6,144.15, up 0.44% from the previous trading session. The NASDAQ was up 0.3%, finishing at 20,056.25. The Dow Jones Industrial Average rose 0.28% closing at 44,627.59. Meanwhile, the Russell 2000 was flat (+0.18%), ending the session at 2,282.46.
Crypto Highlights
Bitcoin (BTC): Currently trading at $97,730, up 1.62% over the past 24 hours.
Ethereum (ETH): Up 1.73%, trading at $2,761 per coin.
Solana (SOL): Up 2.87%, currently trading at $175.49.
Ripple (XRP): Surged 4.75% in the last 24 hours, now trading at $2.72 per coin.
Headlines
Trump Calls Zelensky a ‘Dictator’ as Tensions Rise Over the Russia-Ukraine War
President Donald Trump escalated tensions with Ukraine on Wednesday, calling President Volodymyr Zelensky a "dictator without elections" and urging him to negotiate a settlement with Russia swiftly or risk losing his country. "Zelensky better move fast or he is not going to have a country left," Trump warned in a post on Truth Social, criticizing Ukraine’s wartime decision to postpone elections and accusing Zelensky of prolonging the conflict for financial gain. In response, Zelensky pushed back, stating, "We have seen this disinformation. We understand that it is coming from Russia." His remarks prompted Vice President JD Vance to caution him against publicly criticizing Trump, saying, "Everyone who knows the president will tell you that is an atrocious way to deal with this administration."
Microsoft Unveils First Quantum Computing Chip Using New State of Matter
Microsoft has introduced Majorana 1, its first quantum computing chip, marking a breakthrough that the company claims required the creation of a new state of matter called a topological state. This chip, which includes eight topological quantum bits (qubits), was developed using indium arsenide, a semiconductor, and aluminum, a superconductor. The achievement follows nearly two decades of research and positions Microsoft alongside other quantum leaders such as Google, IBM, IonQ, and Rigetti Computing. Unlike traditional qubits, topological qubits promise greater stability, potentially paving the way for more scalable quantum computing systems.
While Majorana 1 won’t be immediately available via Microsoft’s Azure cloud, the company sees it as a foundational step toward building quantum processors with a million qubits. Microsoft is handling its own fabrication in the U.S., rather than relying on third-party manufacturers like Taiwan Semiconductor. The company plans to first engage with national laboratories and universities for research collaborations before commercializing the technology.
Bank of Japan Expected to Raise Interest Rates to 0.75% in Q3
The Bank of Japan (BOJ) is expected to implement one more interest rate hike this year, likely in the third quarter, bringing rates to 0.75%, according to a Reuters poll of economists. The survey, conducted between February 12-18, revealed that over 65% of respondents anticipate the rate increase in either July or September. The BOJ, which raised rates to 0.50% in January for the first time since the 2008 financial crisis, remains one of the few major central banks still tightening monetary policy while others, including the U.S. Federal Reserve, prepare for rate cuts amid concerns over former President Donald Trump’s tariff policies.
The expected rate hike is tied to Japan’s ongoing wage growth, with analysts predicting a 5% increase in pay during annual labor negotiations—near last year’s 33-year high. BOJ officials have stressed the need to assess whether wage gains are sustainable and whether inflation risks justify further tightening. Some analysts believe the central bank will wait until after Japan's Upper House elections before taking further action.
BOJ’s Rate Hikes Expected to Boost Japanese Demand for U.S. Corporate Bonds
The Bank of Japan’s (BOJ) recent interest rate hikes are expected to lower currency hedging costs for Japanese investors, making U.S. investment-grade corporate bonds more attractive, according to a Bank of America (BofA) report. The BOJ raised its key policy rate last month to its highest level since 2008, with further hikes anticipated as inflation projections remain elevated. As a result, foreign exchange hedging costs—largely determined by the difference between U.S. and Japanese interest rates—are likely to continue falling, enhancing the relative value of U.S. corporate debt.
Japanese demand for U.S. bonds has already been increasing, with three-month dollar-hedging costs reaching their lowest level since September 2022. The Federal Reserve’s decision to lower its benchmark interest rate in September for the first time in four years has further supported this trend. With U.S. high-grade corporate bond yields averaging 5.31% as of Tuesday, major financial firms like Invesco Ltd. are looking to expand their base of Japanese bond buyers. As BOJ rate hikes flatten Japan’s yield curve and improve the outlook for overseas investments, analysts expect a continued shift of Japanese capital into the U.S. corporate debt market.
China Launches Quantum-Resistant Encryption Standards, Diverging from US Efforts
China has launched an independent initiative to develop post-quantum cryptographic (PQC) algorithms, signaling a strategic shift away from US-led encryption standards. The Institute of Commercial Cryptography Standards (ICCS), operating under China’s Cryptography Standardization Technical Committee, is soliciting proposals for encryption methods that can withstand quantum attacks. This effort aims to establish national standards covering public-key cryptography, cryptographic hash functions, and block ciphers while inviting international participation. However, experts suggest China’s move reflects concerns over potential US intelligence "back doors" in American-developed encryption and a broader push for technological self-reliance.
General Atomics Eyes Major MQ-9 Drone Sale to Saudi Arabia
General Atomics is in the early stages of negotiating a major sale of MQ-9B SeaGuardian drones to Saudi Arabia, a deal that could generate tens of thousands of U.S. jobs if finalized. Speaking at the IDEX arms fair in Abu Dhabi, General Atomics Aeronautical Systems President Dave Alexander confirmed the Kingdom’s strong interest in acquiring a “large number” of MQ-9Bs, with potential local industry involvement. While details remain scarce, the proposed package marks a significant shift in Saudi defense procurement, as the country has previously relied on Chinese and Turkish drone manufacturers.
The potential deal comes as former U.S. President Donald Trump’s administration is expected to fast-track defense agreements in the Gulf, removing previous restrictions that had frustrated regional allies. Alexander expressed optimism that Trump’s policies would facilitate smoother arms sales, particularly with Saudi Arabia and the United Arab Emirates, where a long-delayed deal for 18 MQ-9Bs was previously linked to an F-35 agreement. With Saudi-U.S. relations warming after a strained period under the Biden administration, the MQ-9B sale could signal a broader realignment in military partnerships in the region.
Saab CEO Remains Optimistic on Sweden Sending Gripen Jets to Ukraine
Saab CEO Micael Johansson remains hopeful that Sweden will approve the delivery of JAS 39 Gripen fighter jets to Ukraine, complementing U.S.-supplied F-16s and French Mirage 2000s. Speaking at the Munich Security Conference, Johansson emphasized that while the decision is ultimately political, he envisions a long-term agreement that would allow Ukrainian pilots to train in Sweden before receiving the first squadron of Gripen C/D aircraft. He also suggested that Ukraine could eventually receive the more advanced Gripen E, though he acknowledged that such a move would require further political approval.
Exxon and SLB Explore Lithium Investments in Chile
Exxon Mobil and oilfield services giant SLB are expressing interest in lithium projects in Chile, signaling a strategic push into the growing market for electric vehicle battery materials. According to a government registry and a source familiar with the matter, Exxon is planning meetings with Chilean officials to discuss potential investments, while SLB has already met with mining authorities to explore collaborations. These meetings mark the first publicly known steps by the companies to tap into Chile’s lithium sector, the world’s second-largest producer of the metal.
Apple Unveils First Custom Modem Chip, Reducing Dependence on Qualcomm
Apple has introduced its first in-house modem chip, the C1, marking a significant step away from its reliance on Qualcomm for wireless connectivity. The new chip, featured in the $599 iPhone 16e, is part of Apple’s broader C1 subsystem, a collection of components designed to improve battery efficiency and integrate more tightly with Apple's processors. While Apple plans to roll out its modem technology across more devices in the coming years, executives have not disclosed a specific timeline for phasing out Qualcomm’s chips entirely.
Chevron Announces 20% Workforce Reduction Amid Cost-Cutting Drive
Chevron is set to lay off up to 20% of its global workforce—approximately 8,000 employees—as part of a restructuring effort aimed at reducing costs and improving efficiency. The decision, announced during a company-wide town hall on February 12, follows concerns that Chevron has become too complex and slow in decision-making, falling behind competitors like Exxon Mobil. Despite posting a $18.3 billion profit in 2024, down from $24.7 billion in 2023, Chevron executives cited rising costs and industry challenges as key reasons for the cuts. The layoffs are part of a broader strategy to achieve $3 billion in cost savings by 2026.
While some employees acknowledged that the layoffs were expected, others expressed frustration at the timing, given that oil prices have remained relatively stable. The job cuts come amid wider industry cost-cutting efforts, with Shell and BP also reducing their workforces. Chevron's challenges have been compounded by its stalled $53 billion acquisition of Hess, currently tied up in arbitration due to legal disputes with Exxon and CNOOC over Guyana’s oilfields.
BMW Vision Driving Experience: A Radical Quad-Motor Test Mule Shaping the Future of Neue Klasse EVs
BMW has unveiled the Vision Driving Experience (VDE), a high-performance, quad-motor test vehicle designed to develop next-generation vehicle dynamics for its upcoming Neue Klasse electric models, including the highly anticipated electric M3. Featuring a groundbreaking Heart of Joy computer system that integrates powertrain and driving dynamics into a unified control unit, the VDE is a "laboratory on wheels" aimed at pushing BMW’s EV technology to new heights.
Rather than being a direct prototype for the next electric M3, BMW describes the VDE as a one-off test rig for honing performance systems that will be used across its EV lineup. The test vehicle’s quad-motor setup delivers an astonishing peak torque of 13,269 lb-ft, though BMW remains tight-lipped on power output.
One of the VDE’s most radical innovations is its five impeller fans, which generate 1,000kg of downforce without aerodynamic drag. Each fan requires 50kW of power to operate and works to literally suck the car to the ground, enabling extreme cornering stability.
Mercedes-Benz Warns of Lower 2025 Profits, Cites Tariff Threats and Weak Demand
Mercedes-Benz has cautioned that its profits will be "significantly" lower in 2025 as the company grapples with declining demand in key markets and the looming threat of U.S. import tariffs. The German automaker reported an 8.1% profit margin for 2024, down from 12.6% the previous year, and forecasted margins between 6% and 8% for 2025. However, this estimate does not account for potential tariff increases, with CFO Harald Wilhelm warning that if former U.S. President Donald Trump raises import duties on European vehicles from 2.5% to 10%, it could shave up to one percentage point off the company’s car margins. Trump has also floated the possibility of a 25% tariff on imported cars, which could severely impact Mercedes-Benz, as over half of the 374,000 vehicles it sold in the U.S. last year were imported.
Beyond trade policy risks, Mercedes-Benz continues to struggle with falling demand in Europe and intense competition in China, particularly in the luxury car segment. The company's net profit dropped 28% to €10.4 billion in 2024, while revenue declined by 5% to €146 billion. In response, CEO Ola Källenius has announced a plan to cut production costs by 10% by 2027, following negotiations with Germany’s IG Metall union over potential job reductions. The company also aims to revive sales with a dozen new model launches, beginning with its electric CLA. Meanwhile, rival Renault has also warned of margin pressures in 2025 due to stricter EU emissions regulations and increased incentives for electric vehicle sales.
GM CFO: U.S. Tariffs Could Force Shift in Plant Locations
General Motors CFO Paul Jacobson warned on Wednesday that if former U.S. President Donald Trump’s proposed 25% tariffs on automobiles become permanent, the company may need to reconsider its plant locations. Speaking at a Barclays conference, Jacobson emphasized that while no decisions have been made, GM is closely monitoring the impact of tariffs on vehicles and parts from Canada, Mexico, and other regions. The automaker has already been moving more inventory across borders in anticipation of potential trade disruptions and is exploring additional cost-mitigation strategies.
Trump announced on Tuesday that the 25% auto tariffs will take effect in April, with a temporary one-month delay on similar duties for Mexico and Canada. Jacobson cautioned that the long-term effects of such tariffs remain uncertain, particularly if GM is forced to invest billions in relocating manufacturing operations, only for trade policies to change again. Automakers are now weighing the risks of shifting production versus absorbing higher costs, as the industry braces for potential supply chain disruptions and increased vehicle prices in the U.S. market.
Renault CEO Leaves Door Open for Potential Return to Russia
Renault CEO Luca de Meo has not ruled out a return to Russia, stating that the automaker will consider business opportunities as they arise. The comments come as former U.S. President Donald Trump pushes for a rapid peace deal to end the Ukraine war, raising questions about potential shifts in Western economic policies toward Russia. Renault had one of the largest exposures to Russia before the conflict, holding a nearly 68% stake in Avtovaz, the manufacturer of Lada vehicles. The company exited the Russian market in 2022, selling its stake for just 2 roubles in a move that resulted in a €2.2 billion writedown. However, Renault retained an option to repurchase its interest in Avtovaz within six years.
Continental to Cut Thousands of Jobs Amid Struggles in Automotive Sector
German auto parts giant Continental announced on Tuesday that it will cut 3,000 research and development jobs in its automotive division by the end of 2026, citing financial struggles and a downturn in Germany’s automotive industry. More than half of the job cuts will impact facilities in Germany, including the closure of the company’s Nuremberg plant, with additional layoffs affecting sites in Hesse and Bavaria. Despite prior cost-cutting measures—including the elimination of 7,150 jobs in 2024—Continental warned that it will still fall short of financial targets. The company’s automotive division head, Philipp von Hirschheydt, emphasized that Continental remains committed to investing in forward-looking technologies while seeking to strengthen its competitiveness.
Yesterday's Earnings
Analog Devices (ADI): Actual EPS: $1.63 (Beat by 5.84%), Expected EPS: $1.54, Actual Revenue: $2.42B (Beat by 2.54%), Expected Revenue: $2.36B, Market Cap: $120.04B
Garmin (GRMN): Actual EPS: $2.41 (Beat by 26.18%), Expected EPS: $1.91, Actual Revenue: $1.82B (Beat by 10.30%), Expected Revenue: $1.65B, Market Cap: $46.52B
ANSYS (ANSS): Actual EPS: $4.44 (Beat by 10.17%), Expected EPS: $4.03, Actual Revenue: $882.2M (Beat by 1.20%), Expected Revenue: $871.72M, Market Cap: $29.43B
Trimble (TRMB): Actual EPS: $0.89 (Beat by 1.14%), Expected EPS: $0.88, Actual Revenue: $983.4M (Beat by 3.88%), Expected Revenue: $946.62M, Market Cap: $18.60B
CF Industries (CF): Actual EPS: $1.89 (Beat by 17.39%), Expected EPS: $1.61, Actual Revenue: $1.52B (Met Expectations), Expected Revenue: $1.52B, Market Cap: $14.59B
Nordson (NDSN): Actual EPS: $2.06 (Miss by 1.44%), Expected EPS: $2.09, Actual Revenue: $615M (Miss by 3.81%), Expected Revenue: $639.4M, Market Cap: $12.41B
Host Hotels & Resorts (HST): Actual EPS: $0.15 (Beat by 15.38%), Expected EPS: $0.13, Actual Revenue: $1.43B (Beat by 4.38%), Expected Revenue: $1.37B, Market Cap: $11.94B
Charles River Laboratories (CRL): Actual EPS: $2.66 (Beat by 4.72%), Expected EPS: $2.54, Actual Revenue: $1B (Beat by 1.51%), Expected Revenue: $985.18M, Market Cap: $8.44B
Earnings Today
Walmart (WMT): Actual EPS: $0.66 (Beat by 3.13%), Expected EPS: $0.64, Actual Revenue: $180.55B (Beat by 0.39%), Expected Revenue: $179.85B, Market Cap: $832.10B
Booking (BKNG): Expected EPS: $36.13, Expected Revenue: $5.19B, Market Cap: $169.14B
MercadoLibre (MELI): Expected EPS: $8.05, Expected Revenue: $5.79B, Market Cap: $105.09B
Copart (CPRT): Expected EPS: $0.3717, Expected Revenue: $1.13B, Market Cap: $57.60B
Newmont Goldcorp (NEM): Expected EPS: $1.07, Expected Revenue: $5.15B, Market Cap: $53.40B
Targa Resources (TRGP): Actual EPS: $1.89 (Beat by 1.07%), Expected EPS: $1.87, Actual Revenue: $4.41B (Miss by 0.23%), Expected Revenue: $4.42B, Market Cap: $45.67B
Quanta Services (PWR): Actual EPS: $2.94 (Beat by 12.21%), Expected EPS: $2.62, Actual Revenue: $6.55B (Miss by 0.91%), Expected Revenue: $6.61B, Market Cap: $43.18B
Live Nation Entertainment (LYV): Expected EPS: -$1.09, Expected Revenue: $5.67B, Market Cap: $35.37B
Consolidated Edison (ED): Expected EPS: $0.9475, Expected Revenue: $3.59B, Market Cap: $32.94B
VICI Properties (VICI): Expected EPS: $0.6752, Expected Revenue: $968M, Market Cap: $32.10B
CenterPoint Energy (CNP): Actual EPS: $0.40 (Met Expectations), Expected EPS: $0.40, Actual Revenue: $2.55B (Beat by 4.08%), Expected Revenue: $2.45B, Market Cap: $22.20B
Insulet (PODD): Expected EPS: $1.03, Expected Revenue: $582.7M, Market Cap: $19.93B
Builders FirstSource (BLDR): Actual EPS: $2.31 (Beat by 6.45%), Expected EPS: $2.17, Actual Revenue: $3.82B (Miss by 1.55%), Expected Revenue: $3.88B, Market Cap: $16.60B
Alliant Energy (LNT): Expected EPS: $0.7113, Expected Revenue: $1.11B, Market Cap: $15.80B
Baxter (BAX): Actual EPS: $0.58 (Beat by 11.54%), Expected EPS: $0.52, Actual Revenue: $2.75B (Beat by 2.99%), Expected Revenue: $2.67B, Market Cap: $15.74B
Akamai (AKAM): Expected EPS: $1.52, Expected Revenue: $1.01B, Market Cap: $15.03B
EPAM Systems (EPAM): Actual EPS: $2.84 (Beat by 3.27%), Expected EPS: $2.75, Actual Revenue: $1.25B (Beat by 3.31%), Expected Revenue: $1.21B, Market Cap: $14.55B
Pool (POOL): Actual EPS: $0.98 (Beat by 6.52%), Expected EPS: $0.92, Actual Revenue: $987.5M (Beat by 2.86%), Expected Revenue: $960M, Market Cap: $12.97B
LKQ (LKQ): Actual EPS: $0.80 (Beat by 6.67%), Expected EPS: $0.75, Actual Revenue: $3.36B (Miss by 2.04%), Expected Revenue: $3.43B, Market Cap: $10.26B
Hasbro (HAS): Actual EPS: $0.46 (Beat by 27.78%), Expected EPS: $0.36, Actual Revenue: $1.1B (Beat by 7.84%), Expected Revenue: $1.02B, Market Cap: $8.54B
