Good morning. Andrew here. The stock market has been on a roller coaster this week, despite Nvidia’s better-than-expected earnings. What’s driving the disconnect? The truth is that inflation remains persistent (which makes the Fed reluctant to lower interest rates). But at the same time, unemployment appears to be climbing (in which case, you’d want the Fed to lower rates). All the while, stock valuations are near record highs — leading some on Wall Street to say that a comedown could be due. On Main Street, though, the watchword of the moment is “affordability.” We get into all of this below along with some A.I. hacks that a C.E.O. uses to get feedback about his own work. (Was this newsletter forwarded to you? Sign up here.)
“Fallen apart”Buckle up. Global stocks and Bitcoin are falling again today as Wall Street tries to make sense of the volatile trading that has rocked the markets in recent days. Market veterans see several potential catalysts, including doubts about the Fed’s interest rate policy, jitters about artificial intelligence and spillover from a crypto sell-off. Some analysts are also growing antsy that strong quarterly results from Walmart and Nvidia failed to restore market calm. The latest:
Are tech valuation jitters to blame? Nvidia’s stellar results have so far failed to dispel investor concerns over Big Tech’s lavish spending on A.I. On Wednesday, Jensen Huang, the company’s C.E.O., pushed back firmly against bubble talk during a call with analysts. Privately he grumbled that “the market did not appreciate” what Nvidia had just pulled off. “If we delivered a bad quarter, if we’re off by just a hair, if it just looked a little bit creaky, the whole world would’ve fallen apart,” Huang told employees yesterday, according to Business Insider. (But Cathie Wood, the prominently bullish tech investor, cheered the results, with one of her funds buying a slug of Nvidia shares yesterday.) Is the Fed also a factor? Anna Paulson, the Philadelphia Fed president, was the latest central bank official to caution against bold action on interest rates. Futures traders currently see just a 33-percent chance that the Fed would cut rates next month, fueling investor fears that higher-for-longer borrowing costs could dampen appetite for risky assets. Is crypto playing a role, too? Bitcoin is on an 11-day losing streak and has fallen more than 30 percent in the past six weeks. Given the record level of leveraged trading in digital tokens, some market watchers are worrying that investors are being forced to sell other assets, like stocks, to cover crypto margin calls. “I think crypto is a canary in the coal mine,” Salman Ahmed, the global head of macro strategy at Fidelity, told Bloomberg Television this morning.
U.S. banks are said to have scrapped a $20 billion bailout plan for Argentina. JPMorgan Chase, Bank of America and Citigroup have dropped an effort to create an enormous loan for the embattled South American nation as part of the Trump administration’s efforts to help President Javier Milei, according to The Wall Street Journal. The banks are now reportedly weighing a $5 billion repurchase plan for Argentina to exchange investments for dollars and later issue bonds to repay the lenders. The Trump administration reportedly pushed Davos organizers to change their agenda. President Trump agreed to attend the World Economic Forum in person in January — after organizers made assurances that certain issues wouldn’t be featured prominently at the gathering of political and business leaders, according to The Financial Times. Among the topics that U.S. officials asked to be played down or avoided: female empowerment, climate change and international development finance. First-round takeover bids for Warner Bros. Discovery are in. Netflix, Paramount and Comcast all submitted offers for the media giant by a deadline yesterday, The Times reports. Paramount emphasized it wanted to buy all of Warner Bros. to create a new entertainment colossus; Comcast is seeking to buy Warner Bros.’ Hollywood studio and combine it with Universal, which it owns; and Netflix has made an unusual pledge to continue releasing Warner Bros. movies theatrically. The economy’s affordability albatrossFor politicians and business executives alike, the message of the times can be summed up in one word: affordability. It is the topic that has dominated the White House’s economic policies and messaging since Democrats scored unexpectedly big gains in elections earlier this month. (It’s also expected to be a major topic of today’s scheduled meeting between President Trump and Zohran Mamdani, New York City’s mayor-elect.) It’s also weighing heavily on consumer-facing companies. Signs of the times:
Even higher-income households are making adjustments. They’re feeling more confident than their less-affluent counterparts. The University of Michigan researchers found that sentiment among the top third of consumers, as determined by the size of their stock holdings, went up 11 percent between October and November. But McMillon noted that upper- and middle-income households were driving Walmart’s growth, and that the retailer will “continue to benefit from higher-income families choosing to shop with us more often.” How much longer will affordability loom over Trump’s domestic policy agenda? The president has already made moves, such as lowering tariffs on some food items, to address Americans’ affordability concerns. But one of his most prominent recent promises — $2,000 tariff “dividend checks” to be sent to Americans — may face longer odds of becoming reality, after the Congressional Budget Office found that his levies will reduce deficits by $1 trillion less than previously estimated. And companies warned that they remained on guard for price-increase drivers. McMillon told analysts yesterday that Walmart would “continue working to resist the upward pressure on our cost of goods.” In the familyWhether it be through crypto or real estate deals, the Trump family has had a banner year in business since Donald Trump became president in January. Now The Times has found that the family of Howard Lutnick, the Commerce secretary, has experienced a similar boom in deals. The investigation focuses on the secretary’s sons, Kyle and Brandon, who have profited from a series of projects that their father has boosted during his role as a federal official. There was no evidence that Lutnick had intervened in policy discussions with the intention of driving business to his family, The Times found. But as he promoted one top administration priority — the construction of artificial intelligence data centers — business has flowed to Newmark Group, a real estate firm controlled by Cantor Fitzgerald where Lutnick was the C.E.O. until this year. The deal-making from Washington has also drawn in at least one major Republican donor and U.S. trading partners. From the report: In that role, Mr. Lutnick has twisted the arms of American allies, dangling policy favors in exchange for investments in U.S. industrial projects. At times, these tactics have created opportunities for his family’s clients to gain access to much-needed foreign capital, The Times found. Mr. Lutnick, for example, demanded that the South Korean government invest billions of dollars in U.S. industry to reduce tariffs. Newmark recently announced it had completed more than $25 billion worth of data center deals in the past year, taking a fee on each transaction. “We are having our best year ever,” Brandon Lutnick said at a conference in Switzerland last month.
Talking A.I. with the C.E.O. of Booking.comEvery week, we’re asking a leader how he or she uses artificial intelligence. Glenn Fogel, who leads Booking Holdings, the parent company of brands including Booking.com, Kayak and OpenTable, told DealBook’s Sarah Kessler that A.I. helps critique his communication style. His answers have been condensed and edited. How do you personally use A. I.? If you put a recording of a presentation or meeting into an A.I. model and ask it to analyze what you could have done better, it will give you feedback. And it’s not trying to suck up to the boss. It has been very honest to me at times, and I’m glad it’s just between me and the model. Have you given any directives to your team about what you want them to do with A. I.? I’ve talked with some C.E.O.s who, for example, have set goals for increasing productivity by a certain percentage. Everything is so new and changing so rapidly that it’s hard to guess the future. It can be difficult to measure productivity increases, even after the fact. For example, we believe we are coding more efficiently. But the actual writing of the code is only one part of a developer’s job. You can ask how many lines of code are produced by each developer. But that’s probably not a good measurement, because some of the code that’s produced by an A.I. model is very verbose. And so do you now have to do more checking of the code because it is produced by a model? It’s not easy to pinpoint how much efficiency has really been created. We know it has. But to come back with a measurement, that is not so easy to do yet. What does that difficulty mean for your decision-making? It doesn’t inhibit us. But in our budget process, it’s more difficult. How many more developers do we think we’ll need next year? I guess the conclusion is it just requires us to be very, very agile. We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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