On Monday, the main indexes on Wall Street got a heavy metal remix of a 2024 classic: Alongside a rise in Nvidia and other tech stocks, shares of US steel and aluminum companies were in the driver’s seat, bolstered by a fresh round of tariff threats from the Trump administration. If it isn’t clear already, there will likely be more reactive equities swings as long as the new administration keeps up its breakneck pace. But there’s also some evidence that the initial shock and awe has worn off.

Developing Nerves of Steel

Earlier this month, Trump announced his blanket tariffs on Canada and Mexico suddenly on a Saturday — and they’ve now been postponed a month pending negotiations with the countries.

This time around, he announced plans to introduce 25% tariffs on all steel and aluminum imports to the US, in addition to existing duties, on Super Bowl Sunday, giving reporters the news aboard Air Force One as they headed to New Orleans. But unlike the first trading day after the Canada and Mexico tariffs were announced — when equities tumbled before the one-month pause went into effect — markets took the announcement in stride on Monday:

• The very obvious thing happened: American metals producers who stand to benefit from the tariffs had a day for the ages. Nucor rose 5.6%, Steel Dynamics 4.8%, Cleveland-Cliffs a whopping 17%, Century Aluminum 10%, Alcoa 2.3%, and US Steel 4.8%. Trump said last week that U.S. Steel, of note, would now benefit from a heavy investment by Japan’s Nippon Steel rather than be purchased outright for $14.9 billion, as previously proposed.
• Less obvious was the strong day for Nvidia, up 2.9%, and other tech stocks, as well as the S&P 500’s modest reaction to an escalating trade war with a 0.7% increase. “People are getting used to it a little bit already,” Alexis Investment Partners president Jason Browne told Reuters of Trump’s earthquake-level policy pronouncements. 

“The first time we started to hear, ‘Oh my gosh, here come the tariffs,’ we saw some pretty big pullback,” Browne added. “We get the announcement of the steel tariffs today, and you really don’t see much market reaction. There’s this overall sense of ‘Let’s let this play out a little bit’ because it’s happening within the backdrop of a pretty strong economy, pretty good overall earnings and a lot of moving parts.”

About Those Earnings: Fourth-quarter reporting is roughly halfway over on Wall Street, and analysts now expect S&P 500 companies to post year-over-year earnings growth of 14.8%, compared with 10% to start the year, according to LSEG I/B/E/S. According to a FactSet report last month, analysts also happen to expect that exact same figure — 14.8% — in S&P 500 earnings growth for the 2025 calendar year.

Punxsutawney Phil may see six more weeks of winter, but hedge funds aren’t waiting to emerge from their bearish slumber. 

After over a month of straight selling, hedge funds last week emerged as major buyers of US equities, according to a Goldman Sachs’ report published Monday. In fact, hedge funds are now in the midst of one of their hottest buying streaks in years. What gives?

Over the Hedge

There’s no shortage these days of headwinds facing US equities. The early days of Trump 2.0 haven’t exactly been, shall we say, predictable. Meanwhile, DeepSeek’s emergence in January appeared to undercut the entire AI narrative served up by the very same massive tech firms that have fueled broader market gains the past two years. In January, hedge funds sold equities in virtually every sector and geographic region excluding real estate stocks, Goldman noted earlier this month, while heavily shorting US industrial stocks.

But last week’s unexpectedly strong batch of earnings reports has created a counter-narrative, particularly in tech, where Goldman says hedge funds are now seemingly back to being all in. In other words, they’re buying the DeepSeek dip:

• Following five straight weeks of net selling, Goldman says hedge funds last week bought equities at their fastest pace since November. Last week also marked the heaviest net buying of single stocks in over three years.
• The week also marked hedge funds’ second-largest buying spree in the past five years of information services sector equities, led by semiconductor and software stocks in particular.

The moves “suggests that hedge funds became more constructive on and started leaning into the AI theme following the DeepSeek-induced selloff on Jan 27th,” Vincent Lin, Goldman’s co-head of prime insights and analytics, wrote in a note to clients.

Goldman Touch: That AI theme may well exclude the Big Tech names that investors are used to hearing. In fact, Goldman Sachs also noted on Monday that in earnings calls last week, zero of the six Magnificent Seven companies that have reported so far announced a positive sales surprise. If Nvidia doesn’t surprise when it reports later this month, it’d mark the first time the block has gone without a positive sales surprise since 2022. It’s why Goldman keeps recommending investors shift from “Phase 2” AI stocks — a.k.a., the mostly Big Tech firms that offer AI hardware and platforms — into “Phase 3” AI stocks, or those that can create incremental revenue from selling software and IT tools. Maybe small and mid tech is due for a renaissance after all.

Luckily for McDonald’s, there’s no place like home.

McDonald’s published its fourth-quarter earnings on Monday, revealing that it had notched a small increase in sales — breaking its unlucky two-quarter streak of declines — thanks to surging international revenue. While that was a happy meal for investors and the share price ticked up, the results also showed a decrease in US sales, where the company has aggressively marketed value meals to whet the appetites of cost-conscious consumers.

You Can’t Keep a Clown Down

This summer saw fast-food chains jostling to bring out meal deals as a way of enticing customers to return after menu inflation finally drained their patience. McDonald’s brought out a $5 meal deal which was supposed to run for the month of June, but ended up being extended all the way through the end of December. It was introduced just as the Golden Arches admitted in its second-quarter earnings that sales had fallen year-on-year for the first time since 2020.

McDonald’s most recent quarterly filing is good news for the company as a whole, but the numbers from the US market show the meal deal math isn’t quite mathing yet:

• Sales in the US fell 1.4% year-on-year in the fourth quarter, and McDonald’s noted that the decline was largely due to a decrease in the average check. It did point out, however, that the contraction in its US sales was mitigated by higher guest counts, so the value meals are pulling in more customers.
• Last quarter also saw unusually depressed sales due to an E. coli outbreak, and McDonald’s executives stressed on an analyst call that they expect sales to recover by the beginning of the second quarter, per CNBC.

Foreign Exchange: International markets picked up the sales slack, led by Japan and the Middle East, which was a welcome signal to investors that the Middle Eastern boycott of the company was starting to ease. It wasn’t all wins overseas, though; the company noted that sales also fell in some international markets led by the UK — cue the McCrumpet.