Wall Street Breakfast: What Moved Markets

Stocks finished mixed Friday, with the S&P 500 concluding its second straight weekly decline, as Federal Reserve officials reinforced the message that interest rates need to rise. Fed Bank of Richmond President Thomas Barkin said he favors a quarter-point move to give the central bank flexibility, and Fed Governor Michelle Bowman said the central bank should keep raising rates until there is much more progress on inflation. Former Treasury Secretary Lawrence Summers and economist Mohamed El-Erian were among noted market watchers warning an aggressive Fed risks damaging the economy. For the week, The S&P shed 0.3%, the Dow Jones edged 0.1% lower, and the Nasdaq Composite climbed 0.6%.

Out of stock

China had warned of retaliation over the downing of a balloon earlier this month, but the latest salvo in tension-filled U.S.-Sino relations came over arms sales to Taiwan. Beijing imposed sanctions on Lockheed Martin (NYSE:LMT) and a subsidiary of Raytheon Technologies (NYSE:RTX) by adding them to a so-called “unreliable entity list” that aims to punish firms that jeopardize its national security. It comes on top of fines that are based on the contract value of their arms sales to Taiwan, which the Chinese Communist Party considers as part of its sovereign territory. The Pentagon is also reviewing its arms stockpiles after seeing how fast ammunition has been drained during the war in Ukraine. General Mark Milley, chair of the Joint Chiefs of Staff, said the analysis could result in an increase in the U.S. military’s $817B annual budget – especially as concerns grow over the security environment should another war break out in the Taiwan Strait – but SA contributor Zoltan Ban doesn’t see that as a reality due to excessive government debt. (149 comments)

Bumpy disinflation

A mixed inflation report resulted in a mixed day for the market indices. Following the release of the latest Consumer Price Index report, the Dow and S&P 500 finished the choppy session on Tuesday marginally in the red, while the Nasdaq posted a modest advance. It came as investors debate the direction of the Fed after the upcoming meeting in March and the probability of changes to U.S. monetary policy. On display was a headline CPI figure that inched down to 6.4% Y/Y in January – marking the seventh straight month of easing inflation – though the cooling is moderating, with the CPI rising 0.5% M/M, compared with a previous 0.1% increase in December. Stocks later fell on Thursday following the release of January’s Producer Price Index, with wholesale costs coming in hotter than expected. (331 comments)

Fed departure

Lael Brainard announced that she’ll leave the No. 2 role at the Fed to head up the National Economic Council, where she’ll coordinate economic policymaking across the executive branch amid a battle over the debt ceiling. While she was passed over once to become Fed Chair, the new move could put her within reach of the top spot – or becoming a future Treasury Secretary – as she builds rapport within the Biden administration’s inner circle. Brainard was also known as one of the most “dovish” members of the FOMC, urging a somewhat less aggressive approach in the fight against inflation, and providing a counterweight to the spectrum of policy especially when compared to “hawks” like Minneapolis Fed President Neel Kashkari and Governor Christopher Waller. While President Biden could nominate a new Fed Vice Chair with a similar stance, it may not be as easy for the appointee to forge policy consensus through persuasion compared to the institutional respect Brainard received by serving on the Fed’s board since 2014. (3 comments)

Changing of the guard

One of the most prominent women in tech, YouTube (GOOG, GOOGL) CEO Susan Wojcicki, also said she’d step down from her position to focus on “family, health, and personal projects.” Wojcicki was one of Google’s earliest employees, having rented out her garage to co-founders Larry Page and Sergey Brin in 1998, and later shepherding YouTube to a premier position in online video. Her departure comes at a time when YouTube is under pressure from falling advertising revenue, as well as intense competition from TikTok (BDNCE), Facebook Reels (META) and streamers like Netflix (NFLX). Wojcicki will be replaced by her longtime lieutenant Neal Mohan, a senior ad and product executive who joined Google in 2008. (32 comments)


Lawsuits have been piling up against freight rail operator Norfolk Southern (NYSE:NSC), which is facing a public backlash and investor scrutiny over a series of train derailments. One led to a chemical disaster in East Palestine, Ohio, on Feb. 3, while another said to be carrying hazardous materials overturned on Thursday outside of Detroit, Michigan. NSC shares have gone off the tracks over the past two weeks, falling 10% to below the $230-level, though some like Cowen analyst Jason Seidl are looking at historical precedent, believing the unfortunate events may not have much of a long-term impact. Norfolk Southern CEO Alan Shaw even penned a letter to address the concerns, but for investors looking for other players in the freight railroad sector, check out recent SA analysis on CSX Corp. (NASDAQ:CSX), Union Pacific (NYSE:UNP) and Canadian Pacific Railway (NYSE:CP) (which is expected to close its acquisition of Kansas City Southern by the end of Q1). (38 comments)