Markets rise on tariff pause, but earnings disappoint

U.S. President Donald Trump on Monday paused tariffs on Mexico and Canada (but, notably, not China), and, in so doing, also stemmed the dip in stocks, at least for now. Major U.S. benchmarks snapped a two-day losing streak in a relief rally.

With the temporary respite in U.S. tariffs on key countries, investors could turn their attention to earnings. But what they saw on Tuesday wasn’t likely to comfort them after the turmoil wreaked by tariffs.

Alphabet’s scorecard for its fourth-quarter performance missed the “A” grade so many expect from Big Tech names. Meanwhile, AMD’s data center sales, a key part of its business, missed estimates.

Investor disappointment was immediate: Shares of both companies slumped in extended trading, signaling that corporate fundamentals remain critical to stock performance.

Tech revenue falls short of estimates
Alphabet fourth-quarter results missed revenue expectations, causing shares to fall around 7% in extended trading. CEO Sundar Pichai said in the earnings release that Google expects to invest “approximately $75 billion in capital expenditures in 2025.” Meanwhile, fourth-quarter data center sales of Advanced Micro Devices missed estimates, while net income dropped to $482 million from $667 million a year ago. Shares of AMD slumped nearly 9% in extended trading.

Roadblocks for Japanese automakers
Honda and Nissan are calling off merger talks, according to a Wednesday report by Asahi Shimbun, citing sources. Honda had proposed making Nissan a subsidiary of the merged entity, an idea opposed by the latter, the report said. Separately, Toyota Motor reported fiscal third-quarter operating profits that dropped 28% from a year earlier and missed LSEG estimates. The results mark Toyota’s second consecutive fall in quarterly profit.

Markets shake off tariff fears
U.S. stocks climbed on Tuesday as investors’ worries were assuaged by Trump’s pause of tariffs on Mexico and Canada. The S&P 500 rose 0.72%, the Dow Jones Industrial Average added 0.3% and the Nasdaq Composite climbed 1.35%. Asia-Pacific markets mostly rose Wednesday. South Korea’s Kospi index advanced more than 1%, and Japan’s Nikkei 225 ticked up 0.1%, but mainland China’s CSI 300 fell around 0.6% after returning from the Lunar New Year break.

Palestine, Trump’s ‘Riviera of the Middle East
The United States “will take over the Gaza Strip,” and “we’ll own it,” Trump said Tuesday at the White House during a joint news conference with Israel’s Prime Minister Benjamin Netanyahu. The former New York real estate developer suggested that Gaza eventually could be “the Riviera of the Middle East,” where “the world’s people” could make their homes — and the 2 million Palestinians currently living in Gaza should leave and be placed in other countries in the Middle East.

[PRO] An under-the-radar opportunity in AI
Ark Invest’s Cathie Wood thinks there’s an under-the-radar investing opportunity in the artificial intelligence boom, and one of her high-conviction bets is up nearly 10% for the year so far. Wood also told CNBC she’s moving away from hardware, and looking at software plays in the artificial intelligence space.

The Fed could find itself in a policy Catch-22 if tariffs spike inflation and slow growth

When Trump launched tariffs in his first term, inflation was low and the Fed was raising rates as it sought a “neutral” level. A manufacturing recession ensued in 2019. This time around, the targeted tariffs that Trump had previously used have been replaced by the threat of blanket duties — which could slow growth and raise prices, putting the U.S. Federal Reserve in a position where it has to weigh economic expansion against controlling inflation.