Markets mixed as consumer confidence data weighed on investors

Dow finished up 159 in choppy trading, advancers over decliners 3-2 & NAZ dropped 260.  The MLP index slid back 1+ to the 319s & the REIT index jumped 5 to 415.  Junk bond funds continued to be mixed & Treasuries had heavy buying which sharply reduced yields.  Oil remained weak, down 1+ to 69, & gold tumbled 39 to 2923 on profit taking (more on both below).

Dow Jones Industrials

An expensive stock market didn’t prevent traders from getting more bullish as investors increasingly bet that the bull run could keep chugging along, according to Charles Schwab's new quarterly client survey.  The bulls continue to outnumber the bears among traders by 51% to 34%, said the survey, which polled 1040 active traders last month.  Young traders under the age of 40 especially showed a spike in optimism, with bullishness jumping to 59%.  That compares to 47% in the 4th qtr.  The positive sentiment came even as 2/3 of the traders believe the market is overvalued.  “It’s clear that the majority of traders believe there’s some froth in the market but on balance they also feel like there’s still more room for the bulls to run,” said James Kostulias, head of trading services at Charles Schwab.  “More than half of traders plan to move additional money into stocks in Q1.”  While bullishness indicates positive views on the market, it can also be seen as a contrary indicator when there are signs of excess.  In terms of sectors, traders are most bullish on energy, tech, finance & utilities.  These sectors are typically beneficiaries under the Trump administration due to potential deregulation.  The survey also detected a significant drop in the number of traders who believe a recession will occur in the US, only a 3rd of the respondents called it “somewhat likely,” compared to 54% in the prior qtr.  The majority of traders also didn’t see a reacceleration in inflation, with 2/3 of them seeing price pressures holding steady.

More traders turn bullish despite market showing signs of fatigue, Schwab survey says

US banking sector profits rose 2.3% to $66.8B in the 4th qtr of 2024, a bank regulator reported, as it also announced moves to update how so-called problem banks are tracked.  In its latest quarterly report, the Federal Deposit Insurance Corporation (FDIC) said it is revising its "problem bank" list to say only how many banks have been downgraded by regulators.  The FDIC will no longer disclose how many assets are held at those banks.  FDIC Acting Chair Travis Hill said that the practice of disclosing how many assets are at problem banks, first established in 1990, has become problematic because the growth of large firms has made it "comparatively easier" to identify when a big bank is added to the list.  Hill said disclosing assets could spur a bank run if the public saw a large jump in total assets on the list & tried to determine which large firm was deemed problematic by watchdogs.  Bank supervisors may also be reluctant to downgrade a large bank, knowing the jump in total assets at problem banks could spark instability, Hill added.  The FDIC reported 66 problem banks in the 4th qtr, down from 68 the prior qtr.  Overall, the banking sector reported healthy numbers, posting a 5.6% increase in 2024 year-long profits to $268B.  The FDIC said the boost in 4th-qtr profits was mainly due to recent short-term interest rate cuts, which helped boost net interest income by $3.8B for banks, as interest expenses shrank more than interest income.  The amount of funds banks set aside for potential losses was also down, dipping 5.5% from the prior qtr to $22B & unrealized losses on securities held by banks jumped 32.5%, & now total $482B.  However, that level is only 1% higher than levels seen 1 year prior.

US bank profits climb as regulator adjusts 'problem bank' tracking

Nvidia (NVDA) stock continued its recent slide as investors weighed potential delays in the ramp-up of its AI Blackwell chips & a report of possible new export rules from the Trump administration.  The stock dropped after a reported that the Trump administration is looking to further tighten US export rules on the chip sector in an effort to restrict China's advancement in the AI space.  Trump is looking to sanction specific Chinese companies & further restrict intl companies from maintaining semiconductor gear in the country.  The news comes more than a month after Chinese firm DeepSeek introduced new, cost-efficient AI models that rocked US markets.  NVDA stock fell 3.65.

Nvidia drops as investors weigh Trump export rules, Blackwell delays

Gold's price has hit a new all-time high yesterday at $2956, just hours before the Trump administration issued more details on upcoming tariffs.  The precious metal trades at $2940 currently, after Pres Trump's administration communicated it plans to impose more limitations on China's technological developments.  A tougher stance on semiconductor restrictions & pressuring other allies to corner China is part of that strategy.  The news creates a negative tone in gold markets today.  Traders are fleeing into bonds as a safe haven, which is pressuring yields for more downside (inverse correlation bond price to yield).  Equities are also being slaughtered, with red numbers across the board from Asia to Europe, including  US equities.

Gold consolidates Tuesday's losses with markets digesting latest tariff move from President Trump

Oil prices fell 3% to a 2-month low on weak economic news from the US & Germany that fed fears of slower energy demand, along with signs from several countries that oil output was on track to increase.  Brent futures fell $1.99 (2.7%) to $72.79, while US West Texas Intermediate (WTI) crude fell $1.92 (2.7%) to $68.78.  Brent was on track for its lowest close since Dec 23 & WTI for its lowest since Dec 10.  US data showed consumer confidence in Feb deteriorated at its sharpest pace in 3½ years, with 12-month inflation expectations surging.  Analysts said Pres Trump's stated plans for higher tariffs have raised inflation worries at the US Federal Reserve.  This could lead the Fed to keep interest rates higher, which in turn could slow economic growth & energy demand.  Trump said tariffs against Canadian & Mexican imports scheduled to start on Mar 4 are on time & on schedule, which could actually boost oil prices by reducing supplies from both countries.  Also weighing on oil prices, the German economy shrank by 0.2% in the final qtr of 2024 from the previous qtr.  German election winner Friedrich Merz ruled out a quick reform to state borrowing limits known as the "debt brake," which some investors have urged to boost the economy.

Oil Hovers at 2-Month Low

Stocks fell when Pres Trump revived tariff threats & potential toughening of China curbs weighed on market optimism & the chances of interest rate cuts.  Consumer confidence also plummeted in Feb, notching its biggest monthly decline in more than 4 years as 12-month inflation expectations jumped & recession fears escalated.