Markets Rebound, Palantir Beats, Metals Bounce

Good morning investors,

Markets rebounded strongly Monday with the Dow jumping 1%, the S&P 500 rising 0.5% to 6,976, and the Nasdaq gaining 0.6%. The 7,000 level remains just out of reach, but the tone shifted dramatically from Friday's precious metals carnage. What strikes me most is how quickly the narrative has swung. Two days ago, the commentary was dominated by end of world predictions and calls for a major selloff. Now the same voices are championing AI and calling for all time highs. Be careful who you listen to. If someone's narrative changes that quickly, they're reactive to the market, not proactive in their approach.

Palantir crushed earnings with 70% revenue growth and guidance that beat by nearly a billion dollars, validating the enterprise AI adoption thesis at a moment when software stocks needed a win.

S&P 500 ($SPY ( ▲ 0.07% )) futures up 0.1%, Nasdaq ($QQQ ( ▲ 0.21% )) futures gaining 0.4%, with Palantir ($PLTR ( ▲ 1.77% )) surging 11% premarket after its blowout quarter. Teradyne jumped 22% on strong guidance driven by AI related demand in compute, networking, and memory testing.

Gold ($GLD ( ▲ 2.49% )) and silver ($SLV ( ▲ 2.94% )) rebounded sharply as investors snapped up the metals following their steepest two day decline in decades. The bounce was expected after such violent selling, but I continue to believe precious metals need more consolidation before any sustained recovery.

The partial government shutdown has once again disrupted economic data. Today's JOLTS report is postponed, and Friday's jobs report faces delay. ADP's employment data Wednesday will carry more weight with official figures unavailable.

Palantir delivered a standout quarter that removes any doubt about whether this company can translate AI hype into cash flow. Q4 adjusted EPS of $0.25 beat the $0.23 expected, revenue of $1.41 billion topped the $1.33 billion forecast, and year over year revenue growth hit 70%.

The segment performance tells the real story. U.S. government revenue surged 66% to $570 million while U.S. commercial revenue exploded 137% to $507 million. Defense remains a major growth driver, highlighted by the up to $10 billion Army contract, while commercial momentum reflects Palantir's expanding role as the operating layer that brings structure, security, and accountability to large language models.

But the guidance is what sent shares flying. Q1 revenue outlook of $1.532 billion to $1.536 billion crushed the $1.32 billion expected. Full year 2026 guidance of $7.18 billion to $7.20 billion beat estimates by almost a billion dollars.

Valuation debates will continue after the stock's strong run. But fundamentally, Palantir is no longer speculative. It's a scaled, profitable platform benefiting from sustained government demand and accelerating enterprise adoption. CEO Alex Karp's rhetoric is characteristically blunt, but the numbers back it up. Expectations were high for a reason, and this quarter cleared them decisively.

Disney shares dropped over 7% despite the experiences unit posting $10 billion in quarterly revenue for the first time. Parks and cruises delivered record results with domestic attendance up 1% and per customer spending rising 4%. The division generated $3.31 billion in operating profit, three times the entertainment segment's $1.1 billion.

The market focused on higher costs and lower overall profit, but the bigger story is succession. Bloomberg reported that Josh D'Amaro, head of the theme parks division, is nearing the CEO job to succeed Bob Iger. Putting the parks executive in charge might seem anachronistic in a digital media world, but the numbers speak for themselves.

D'Amaro inherits significant challenges: a TV business in structural decline, streaming competition, political tensions affecting foreign tourism, and AI disruption across content creation. Iger himself warned that "trying to preserve the status quo is a mistake."

CFO Hugh Johnston framed recent accomplishments as a jumping off point: "Turbocharging the parks, bringing streaming to profitability and double digit margins, and improving the theatrical business bodes well for a new CEO." That's the optimistic spin. The same achievements are also the very challenges that brought Iger back after Disney fired Bob Chapek.

The White House unveiled Project Vault, a $12 billion initiative to stockpile strategic metals and reduce China dependence. MP Materials, USA Rare Earth, and other rare earth names initially jumped before paring gains.

The structure is notable. Roughly $1.67 billion in private capital pairs with a $10 billion, 15-year Export Import Bank loan. Unlike typical government stockpiles, manufacturers commit upfront to buying specific volumes at preset prices, then must repurchase those same amounts later.

Markets are pricing in what amounts to a "White House put," a synthetic floor on rare earth stocks that protects against Beijing's export controls or predatory pricing. This blurs the line between policy and direct market participation. By absorbing the China risk, the administration is effectively re-rating speculative commodity plays into something closer to regulated utilities.

Execution still matters. Details remain sparse and policymakers must deliver. But the de-risking of a historically boom-bust sector into national security infrastructure is a meaningful shift.

Elon Musk announced SpaceX will merge with his AI company xAI. The rationale involves satellite based internet and a future where data centers get power and cooling from space. Vertical integration taken to its logical extreme.

The consequences remain unclear, but one conclusion is obvious: the transformational narrative around Musk's companies will stay firmly in focus. SpaceX's eventual IPO will likely feature a similar dream based valuation multiple that has defined Tesla's stock for years.

The Labor Department confirmed the partial government shutdown will delay the jobs report, leaving critical economic data hostage to politics without an end in sight. Today's JOLTS data is postponed. Friday's payrolls report faces the same fate unless funding resumes.

This elevates ADP's private employment data Wednesday to greater importance. It's the second time in recent months that shutdown politics have disrupted the data flow that markets, economists, and the Fed depend on for decision making.

Pfizer beat Q4 estimates with adjusted EPS of $0.66 versus $0.57 expected and revenue of $17.56 billion versus $16.95 billion forecast. The beat came despite continued decline in Covid product demand. Pfizer showed promise from its $10 billion Metsera acquisition, reporting mid stage obesity data demonstrating a once monthly injection driving solid weight loss.

The company reaffirmed its modest 2026 guidance that rattled investors in December: $59.5 billion to $62.5 billion in revenue and $2.80 to $3.00 in adjusted EPS. Covid vaccine and Paxlovid sales are expected to fall $1.5 billion year over year to $5 billion, with another $1.5 billion drop from patent expirations.

Merck fell in premarket after guiding 2026 revenue of $65.5 billion to $67 billion, below the $67.6 billion expected. Patent losses on diabetes drug Januvia and other medicines are hitting harder than analysts projected. Keytruda remains the growth engine at $31.7 billion in annual sales, up 7% in Q4 to $8.37 billion.

PepsiCo topped Q4 estimates with adjusted EPS of $2.26 versus $2.24 expected and revenue of $29.34 billion versus $28.97 billion forecast. Organic revenue grew 2.1%, showing sequential improvement.

But volume declines persist, particularly in North America. Food volume fell 2% globally, and North American beverages saw volume shrink 4% despite organic sales rising 2%. Inflation weary consumers continue pushing back against higher prices.

The company plans to lower prices on North American food products to improve competitiveness and purchase frequency, offsetting the impact with productivity savings. This follows December's deal with Elliott Investment Management that included commitments to slash the U.S. product lineup by 20% and cut costs across operations.

Reuters reported that OpenAI is unsatisfied with some of Nvidia's latest AI chips and has sought alternatives since last year, potentially complicating the relationship between the two highest profile AI players. This comes as the companies are in investment talks.

Nvidia CEO Jensen Huang dismissed reports of tension as "nonsense" over the weekend, saying Nvidia plans a "huge" investment in OpenAI. But the emergence of inference chip alternatives represents a meaningful test of Nvidia's AI dominance. The relationship between the largest chip supplier and largest AI model developer bears watching.

My view remains unchanged: expect choppy trading. The market has shown incredible resilience this year. While some Mag Seven names trade well below their highs and other large tech names are down 20% to 50% from peaks, the averages have remained strong. The broadening theme continues.

I do think people are starting to like AI again. The narrative has shifted from most loved to most hated and now back toward acceptance as valuations have compressed. The chop is producing unpredictability where the Nasdaq (QQQ) could hit all time highs today or fall back to $620, and neither would be surprising.

I still favor the outlook for small caps and international stocks. The rotation thesis remains intact even as Big Tech attempts to stabilize. Remember winners will be found in this current environment, where the market has incorrectly written off a company.

Palantir's quarter validates that enterprise AI adoption is accelerating, not slowing. Revenue growth of 70% and guidance beating by nearly a billion dollars silences the skeptics who claimed AI software would struggle to monetize. The defense and commercial segments are both firing, and the company has proven it can translate government relationships into durable cash flows.

The precious metals bounce was expected after Friday's historic selloff, but I remain cautious on silver in particular. Violent corrections often produce relief rallies before more consolidation. The debasement trade thesis hasn't changed, but the technical damage needs time to repair.

Today brings AMD and Super Micro after the close, providing crucial reads on the AI chip supply chain beyond Nvidia. Alphabet and Amazon report later this week, completing the Mag Seven earnings parade. The market's unforgiving reaction to Microsoft's deceleration means these reports carry heightened scrutiny.

The shutdown induced data blackout is frustrating but familiar. Markets have learned to navigate these political disruptions. ADP data Wednesday and initial claims Thursday will fill some gaps, but the full employment picture remains clouded.

As always, feel free to reach out with questions about positioning.

Dan Sheehan

[email protected]

This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.