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From Bespoke:

Well, we made it through Nvidia (NVDA).  The hype surrounding last night’s earnings report was as high as we can remember for any stock reporting earnings in the past and reminiscent of Cisco (CSCO), Intel (INTC), or Microsoft (MSFT) reports in the late 1990s, or Apple (AAPL) reports in more recent years. NVDA’s report wasn’t great, but it wasn’t bad either. The company managed to report better-than-expected EPS and sales, while slightly raising sales guidance. That was good enough (so far) for investors who had set the bar low in recent weeks. The stock is currently trading just about 2.5% higher in the pre-market, and Nasdaq and S&P 500 futures are riding its coattails trading higher by more than 0.5%. Bulls will take it, but as the last few days have shown us, we’re in a market environment where what the market is doing right now is hardly indicative, no less a guarantee, of where we’ll be an hour from now let alone by the end of the day. Add to that a ton of economic data and several Fed speakers on the calendar, and it’s sure to be an eventful day! What happened to sentiment? Everywhere you look, fear has set into the collective mood. Indices that measure economic uncertainty have shot up to record highs, even taking out their prior extremes from the early days of Covid. The latest measures of consumer sentiment from the University of Michigan and the Conference Board also showed much larger than expected declines in their latest readings. But nowhere has the negative turn in sentiment been more pronounced than in the equity market. The CNN Fear & Greed Index gauges stock market behavior by looking at momentum, breadth, options activity, strength in the junk bond market, and demand for safe havens. As of this morning, the index was at 21, putting it in the “Extreme Fear” range.

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Over the last year, the current level of the CNN Fear & Green Index is among the lowest. The only time it was lower was in early August when markets briefly sold off as the Japanese equity market crashed over 10% in a single day.

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The Fear & Greed Index isn’t just an outlier either. The weekly results of the American Association of Individual Investors (AAII) survey just came out, and the bears are out in full force. Starting with bullish sentiment, it dropped from 29.2% last week to 19.4%, the lowest reading since March 2023 when Silicon Valley Bank and other smaller regional banks collapsed. Back then regulators had to take extraordinary measures to ensure the soundness of the banking system, and the S&P 500 was down close to 8% from its recent highs. Today, there’s no crisis to speak of (at least that we know of), and the S&P 500 is down just over 3% from an all-time high.

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The surge in bearish sentiment has been even more dramatic than the collapse in bullish sentiment. After dropping to 40.5% last week, negative sentiment shot up to over 60% for its largest weekly increase since August 2019. As shown in the chart below, current levels are now higher than any point in the current bull market (since October 2022). In the entire history of the AAII sentiment survey, there have only been six other weeks when bearish sentiment was higher, and these occurred during the 1990 recession and Iraq’s invasion of Kuwait, late in the Financial Crisis, and most recently, back in September 2022 right before the market lows. A key difference between now and those periods is that in each one, the S&P 500 was down at least 10% from a 52-week high when bearish sentiment exceeded 60%. Today, the S&P 500 is down just over 3%. It takes a lot less to strike some fear into investors than it has in the past. If there is one word to describe the state of investor sentiment right now, complacent it is not.

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From JC;

We've never seen anything like this. The S&P500 hit new all-time highs just last week. The All Country World Index is set to close the month at the highest levels of all time. But this week we just saw the 7th highest bearish reading among individual investors EVER. Yes that's right. Ever. The numbers just came in, and over 60% of individuals are bearish over the next 6 months. Less than 20% of them are bullish. How is that even possible? What are they all so scared about?

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I understands this sort of thing happens. Investors get bearish. That makes sense. But with the S&P500 just 2.4% from a new all-time high? And more and more countries around the world joining the bull market? Yes. Despite all of that, we just had the 7th highest reading among bears ever.

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It's wild. To me, this is just more of a reason to be spending our time looking for stocks to buy, not looking for stocks to sell. Yesterday, meanwhile, was the most important earnings release of the season. I would be the first one to tell you that it wasn't. Here's the quick cheat sheet as to why $NVDA matters so much: Nvidia = 17.9% of the Semiconductors Index Fund $SMH Nvidia = 7.4% of the Nasdaq100 Index Fund $QQQ Nvidia = 12% of the S&P Technology Index Fund $XLK Nvidia = 9.3% of the Russell1000 Growth Index Fund $IWF NVIDIA just dropped its Q4 earnings last night, and the market didn’t waste any time making its move. Was it just a nothing burger or are we setting up a much bigger move?

Yet more Trump:

 

[ATTACH=full]194313[/ATTACH] Breaking: Gene Hackman, 95 — the prolific Oscar-winning actor whose studied portraits ranged from reluctant heroes to conniving villains, and made him one of the industry's most respected and honored performers — was found dead along with his wife, Betsy Arakawa, and their dog at their home in Santa Fe, N.M. His life story.

  1 big thing: The hard truths about Trump tax cuts [ATTACH=full]194314[/ATTACH]

Illustration: Aïda Amer/Axios

 

Most politicians agree on three truths: We have a spending problem(too much), a tax problem (too high or too low), and a debt problem (way too much).

• Yet the typical response is: Make all three worse, Jim VandeHei and Mike Allen write in a "Behind the Curtain" column.

Why it matters: This truism sits at the very heart of Republicans' fight over a grand budget deal.

• They're trying to convince their members, and the American public, that you can take in less money (taxes), spend more on defense — and somehow reduce deficits without touching the programs that cost the most.

Washington is a city of magical thinking — both parties practice it. Hence, insane deficits under Presidents Biden, Trump, Obama and Bush. We'll grow our way of it! Even if we never do.

• Washington is not a city of math thinking. It's too inconvenient to apply common-sense arithmetic. Instead, you get wonky "dynamic scoring," "budget windows" and "future growth."
• Our favorite new D.C. math: Republicans are backing word and math fog called "current-policy baseline," which allows them to "score" lower taxes as costing nothing. Why? Because they're just extending expiring tax cuts. Make sense? That's the magic of D.C. math.
• A true tell: The solution is always in a future that never comes.

The Trump/Republican budget plan is no different. It's basically a bet that lowering taxes further will juice so much growth that our math problems will ease or even disappear.

• We walked you through the spending reality in our last column. This is our attempt to explain clinically the reality of the current tax system and how Republicans want to attack it with up to $5 trillion in tax cuts.

Let's start with the indisputable facts:

The tax fight could consume Congress for all of 2025. It's truly epic in scale and complexity, Jim and Mike write.

• As TD Cowen policy expert Chris Krueger puts it: A behemoth tax bill is impossible — yet inevitable.

[ATTACH=full]194315[/ATTACH] Zoom in: If Republicans fail to move a bill, taxes on American families will rise back to their 2017 levels next year — something every elected Republican views as unacceptable.

• Figuring out the details, and passing them through narrow congressional majorities, is the hard part.
• Democrats are likely to vote in lockstep against the legislation, seeing it as primarily benefiting the very wealthy. If the legislation is paired with Medicaid cuts, as House Republicans envision, that would further energize Democratic opposition.

How taxes work: The IRS collects around $5 trillion in annual taxes from over 200 million taxpayers. Filers who make less than $50,000 pay little to nothing in income taxes after credits and exemptions.

• The difference between what we spend and what we take in = our annual deficit. Total annual deficits rolled together over time = total debt ($36.2 trillion today).

Republicans have long argued tax cuts juice the economy with growth, creating more taxable income and wealth. Some do; some don't.

• But keep in mind: Since Trump signed his 2017 taxes into law, deficits are up 248%! So any growth they helped achieve has been swamped by spending. Hence, America's financial jam.
• The deficit is now running about 7% of GDP — roughly triple the economy's growth rate. Every year that continues, the government will be in a deeper financial hole.

The bottom line: Senate Republicans privately predict they'll punt on taxes for a bit and instead ... spend more. They want $340 billion in increased spending for defense border security and deportation efforts, TD Cowen's Krueger writes in his Washington Research Group newsletter.

• How will they pay for that? Tax cuts and spending cuts. When? later!

• Fact 1: Republicans want to cut taxes by a minimum of $4.5 trillion over 10 years (and by a maximum topping $5 trillion). That's mainly extending President Trump's first-term Tax Cuts and Jobs Act of 2017 — which cut income taxes for most American families and reduced the corporate income tax rate from 35% to 21%.
• Fact 2: Some tax cuts — like encouraging businesses to invest more in equipment and infrastructure — can juice the economy. That's the beating heart of supply-side tax thought.
• Fact 3: Other tax cuts don't spur growth. Trump wants to exempt tip income and overtime pay from taxation, and loosen a cap on the deductibility of state and local taxes. Those provisions, Axios chief economic correspondent Neil Irwin writes, would shift the tax burden away from specific classes of people (servers, people who put in a lot of overtime, and residents of high-tax states) and leave less room for pro-growth tax cuts.
• Fact 4: Trump has tossed tariffs into the mix. In his mind, big tariffs mean other nations will pay the cost of running the U.S. government. Business leaders, mainstream economists and many Republican lawmakers view them as destructive to growth, and ultimately borne by U.S. businesses and consumers. The reason: Higher tariffs typically result in higher costs. If foreign aluminum costs 20% more, someone has to eat the costs — either the company, or you.
• Fact 5: Trump offers conflicting guidance on what he wants in terms of taxes — and any cuts to pay for all of this. He talks of returning more savings to people with tax rebates ... balancing the budget (a mathematical impossibility absent gutting social programs) ... and never touching those actual social programs.
• Fact 6: You could solve the deficit problem by raising taxes enough to erase it. Republicans hate the idea. But Democrats have long held that higher taxes on rich people and corporations could help wipe out deficits without touching social programs. No shot of that in this Congress. But it's an option!

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Bitcoin treasury company Strategy (formerly MicroStrategy) acquired an additional 20,356

for approximately $1.99 billion at an average price of $97,514 per bitcoin between Feb. 18 and Feb. 23, according to an 8-K filing with the Securities and Exchange Commission on Monday.

The company now holds 499,096 BTC, worth over $47 billion. Strategy’s total holdings were bought at an average price of $66,357 per bitcoin, a total cost of around $33.1 billion, including fees and expenses, according to the company's co-founder and executive chairman, Michael Saylor. To put that in perspective, Strategy holds more than 2.3% of bitcoin’s total 21 million supply.

The bitcoin acquisitions follow the completion of Strategy's latest $2 billion zero-coupon convertible note offering, announced earlier on Monday, which also granted initial purchasers the option to buy up to $300 million in additional notes. The company did not sell any additional shares of class A common stock under its at-the-market equity offering program during the period.

Saylor again hinted at the acquisition announcement on Sunday, posting on X, "I don't think this reflects what I got done last week," referring to a tracker of Strategy's bitcoin purchases. This latest set of acquisitions is Strategy's fifth-largest, according to the tracker.

Strategy did not purchase any bitcoin the week prior. However, it did flag profitability risks in its annual report on Tuesday, particularly if there is a significant decrease in the market value of its bitcoin holdings as its enterprise analytics software business did not generate positive cash flow in 2024. The firm also warned it may be exposed to greater tax liabilities than anticipated, confirming unrealized fair value gains on its bitcoin could be subject to taxation.

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I think we trade lower. SPY 575 is on the cards. The Mag 7 which dragged the market higher are overbought by a long way and as they correct, so SPY will correct.

jog on

duc