The first trading day of February was an eventful one with tariff news front and center. We learned that this is a “drug war” not a “trade war”. Already the tariffs on Mexico are on pause for one month in exchange for Mexico agreeing to put 10,000 of their soldiers on their border. Following the news of at least the temporary halting of the tariffs on Mexico was viewed positively by markets, allowing the S&P 500 to significantly reverse earlier losses. At the lows of the day the S&P was down nearly 2%, but it managed to finish down ~0.75%, at 5,994.
The 2y was up a few bps to 4.26% and the 10y is 4.55%.
After the bell, Canada also announced steps to secure their border against illicit drug flow including the addition of 10,000 personnel and a fentanyl czar all backed by $200mm. The result is also a 30-day pause on tariffs.
Speculation remains that China may be looking at a broader negotiation ahead of potential April tariffs.
Irrespective of whether or not tariffs are designed to increase American manufacturing, yesterday’s ISM Manufacturing index posted 50.9, an expansionary reading and solid internals including a fourth straight month of higher prices.
Away from tariffs, the Trump administration seemed to secure a “win” with Panama as the President of Panama indicated they were ceasing their involvement with China’s belt and road initiative and will consider voiding other agreements.
And I guess the Fed can take a win on the day as well, as Trump said he agreed with their decision to hold rates.
Of course we also got some AI news, with OpenAI’s deep research model.
JOLTs on the day ahead.
XTOD: The real tax is society forcing otherwise productive people to pay attention to politics.
XTOD: Too many things happening right now, but there's a decent chance the most important announcement in the last 48 hours is confirmation that the frontier AI labs have taken significant steps toward building autonomous digital workers that can "navigate the web, process information across all modalities, and take meaningful action in the world" (
@emollick ). So, a disembodied silicon brain that can accomplish complex multi-hour, or multi-day research projects—search on the Internet, read, synthesize, write, and even PowerPoints—in a matter of minutes. If you're still on team "AI is a waste of time," I genuinely don't know what you think the white-collar economy is.
XTOD: "If you do average work for average pay, AI is going to be able to do it cheaper than you." — Seth Godin
XTOD: AgustÃn Carstens discusses how central banks can apply lessons from the recent inflation surge to their monetary policy frameworks during the current round of reviews
@stlouisfed https://bis.org/speeches/sp250204.htm
XTOD: Our levels of desire, patience, persistence, and confidence end up playing a much larger role in success than sheer reasoning powers. Feeling motivated and energized, we can overcome almost anything. Feeling bored and restless, our minds shut off and we become increasingly passive.
https://x.com/NavalismHQ/status/1886234904155095533
https://x.com/DKThomp/status/1886406037718082016
https://x.com/tferriss/status/1886426400728441324
https://x.com/BIS_org/status/1886559064554967114
https://x.com/RobertGreene/status/1886414367434141750
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