Good morning investors,
Friday's Supreme Court ruling blew a hole in the current tariff landscape, and the Trump administration spent the weekend patching it up. In a 6-3 decision, the Court struck down the administration's use of IEEPA to impose sweeping tariffs, ruling that the statute does not give the president authority to levy wide ranging import duties. Within hours, Trump announced a 10% global tariff using Section 122 of the Trade Act of 1974. By Saturday, that rate was raised to 15%, effective immediately. We are all still figuring out what this means for markets and the economy.
Stocks initially rallied on Friday after the ruling before pulling back and then recovering again, finishing the session higher with the S&P 500 up 0.7%, the Dow gaining 0.5%, and the Nasdaq rising 0.9%. All three major indexes finished the week higher, with the S&P 500 returning 1.1%, the Nasdaq 1.3%, and the Dow a narrow 0.3%. The muted reaction reflects the reality that while the legal foundation shifted, tariff revenue will likely remain near current levels as the administration pivots to alternative authorities.
Opening Bell
Futures are slipping this morning as renewed tariff uncertainty unsettles investors. S&P 500 ($SPY ( ▼ 0.51% )) futures are down around 0.4%, Nasdaq ($QQQ ( ▼ 0.28% )) down 0.5% and the Dow ($DIA ( ▼ 0.67% )) down 0.3% as traders digest Trump's 15% global tariff announcement over the weekend. Bitcoin ($BTC ( ▼ 0.57% )) fell below $65,000 before recovering to around $66,300, remaining down 1.6% as the cryptocurrency's sharp sell-off continues.
Today's economic calendar is light, with factory orders the main release. Earnings feature Domino's Pizza, Dominion Energy, ONEOK, Diamondback Energy, and Keysight Technologies. Tomorrow brings the State of the Union address and Consumer Confidence data. The main event this week is Wednesday's Nvidia earnings, which will be the most important read on the AI trade since the sell-off began.
Tariffs: Where We Stand
Let me trace out what happened and where we go from here.
The Supreme Court ruled that IEEPA, the legal foundation for nearly all of Trump's second-term tariff agenda, does not authorize the president to impose import duties. This invalidates the reciprocal tariffs from Liberation Day, the fentanyl-related duties on Mexico, Canada, and China, and the broad global tariffs that generated roughly 52% of customs duties collected last month.
The administration collected approximately $175 billion under these IEEPA tariffs. That money may now be refunded to importers, though the administration appears likely to drag its feet. The question of refunds will go before trade courts in Washington, but companies that depend on imports are already preparing requests to US Customs and Border Protection.
Trump's pivot to Section 122 tariffs has important limitations. These duties can only remain in place for a maximum of 150 days without Congressional approval. Both Trump and Treasury Secretary Bessent have indicated they intend to replace the IEEPA tariffs using Section 232 of the Trade Expansion Act and Section 301 of the Trade Act, which respectively require Commerce Department findings on national security threats or USTR determinations on unfair trade practices.
These actions may face legal challenges, but the administration can take comfort in the courts' willingness to let tariffs remain in place through lengthy review processes. If tariff revenue remains near current levels of roughly $30 billion per month through year end, the next few months may still see inflation ramping up as companies pass on costs to consumers. However, the impact on year over year inflation should fade out entirely by early 2027.
For markets, tariff uncertainty remains an overhang on corporate planning, supply chains, and consumer prices. But the legal landscape has shifted in a way that creates more optionality for eventual resolution. Europe and the UK are already expressing alarm about what the new framework means for trade deals struck last year.
I would love to chuck out that the refund checks go to the consumer. We already are in a tough spot regarding affordability and the consumer has likely eaten some of the tariff cost. The administration will be looking for positive news during a mid-term year, so a stimulus check could be a way for him to go.
Friday's Economic Data: Stagflation Lite
The economic data on Friday painted a concerning picture. GDP came in at 1.4% versus 2.5% expected. Final sales printed 1.2% versus 2.6% expected. Core PCE hit 3.0% versus 2.9% expected. Monthly inflation was 0.4% versus 0.3% expected.
Growth slowed. Inflation did not. That is the exact mix the Fed does not want.
Growth is slowing fast enough to raise caution. Inflation is sticky enough to block quick rate cuts. Core PCE hit its highest level since late 2023. The GDP deflator printed 3.7% against expectations of 2.9%. And monthly inflation came in hotter across the board. The Fed already signaled hesitation about cutting further. This report reinforces that stance.
For markets, this is not a crash signal. It is a volatility signal. When growth cools but inflation holds, policy stays restrictive longer and every data release becomes a potential catalyst. That is exactly the environment that keeps markets chopping sideways instead of trending, which is what we have been seeing for weeks. The clean soft landing narrative is fraying. We are now in a data dependent tug of war between slowing growth and stubborn inflation.
Iran: The Geopolitical Wildcard
Oil prices spent 2025 trending steadily down but are now up 15% since the start of 2026, finishing the week up roughly 5.5%. The driver is Iran. President Trump said last week that Iran has 10 days to make a deal with the US, raising tensions over the possibility of military action.
Markets pay close attention to the Strait of Hormuz, a critical shipping chokepoint that sees roughly 20 million barrels of petroleum products per day cross its waters. In a small, targeted US action scenario, prices would likely spike roughly $10 per barrel before quickly rebalancing. A sustained military campaign, especially one prompting Iranian retaliation against regional oil infrastructure, could produce a sustained price increase of roughly $15 per barrel.
Even without immediate military action, prolonged uncertainty alone can sustain a geopolitical risk premium. This is worth monitoring closely as a potential market moving catalyst this week.
The Week Ahead: Nvidia Takes Center Stage
All eyes will be on Nvidia's fourth quarter results Wednesday after the close. Earnings from the world's most valuable company will be a key bellwether on the state of the AI trade. The stock is one of only two Magnificent Seven names to have eked out a gain this year, but the company will need to reassure investors that its artificial intelligence investment strategy remains intact amid the broader tech sell off.
The news that Nvidia is close to finalizing a $30 billion investment in OpenAI, part of a fundraising round seeking more than $100 billion, highlights the increasingly intertwined relationships among major technology companies racing to build advanced AI systems. OpenAI is targeting roughly $600 billion in total compute spend through 2030 as it lays groundwork for an IPO that could value it at up to $1 trillion.
Salesforce results on Wednesday will offer a read on the state of the software sell off that has crushed the sector throughout February. Home Depot Tuesday and Lowe's Wednesday will give investors a proxy on the housing market. Constellation Energy and Dominion Energy will offer insight into the power market.
Friday brings the Producer Price Index, offering a read on upstream input costs as inflation remains stubbornly above target. Consumer Confidence Tuesday and weekly jobless claims Wednesday round out the economic calendar.
Corporate Developments
Gilead Sciences is acquiring cancer therapy developer Arcellx for an implied equity value of $7.8 billion, paying $115 per share in cash plus a $5 contingent value right, an 87% premium to the last close.
Novo Nordisk's next-generation obesity drug CagriSema was less effective than Eli Lilly's tirzepatide in a head-to-head trial, a setback in the race for dominance in the weight-loss drug market. The trial was designed to show CagriSema was at least as effective, but failed to meet that goal.
Microsoft announced gaming head Phil Spencer is retiring after 38 years, naming Asha Sharma as the new executive vice president and CEO of the gaming division. Sharma said she would renew focus on the Xbox console and recommit to core Xbox fans.
Software companies are facing higher borrowing costs and tougher scrutiny as AI threatens their business models, with some delaying debt deals as lenders demand more favorable terms.
Final Thought
The market got two major catalysts on Friday with a stagflationary data print and a historic legal ruling that reshapes the trade landscape. These forces pull in different directions, which is why sharp moves without clear direction remains the base case.
But here is the other side. Sentiment is already excessively bearish. Short interest has reached levels that historically precede squeeze moves. If you are waiting for perfect clarity to buy, you will miss the turn. The entry points being created in quality names right now will matter when the next rotation arrives.
I do not expect tech to instantly reassert leadership, but there comes a point where the market has beaten these names down enough that a sharp bounce becomes inevitable. Tech could fall a little further from here, but it is starting to look attractive. We will need tech to participate for the S&P 500 to push through 7,000, and the entry points being created now will matter when that rotation occurs.
I still favor international and small-cap exposure as my primary positioning. The Supreme Court ruling reinforces these themes. Small caps and international stocks stand to benefit most from tariff relief. Consumer staples, already having their best start to a year since 1990, get another tailwind as input cost pressure potentially eases. And quality tech names that have been beaten down now have one less headwind standing in their way.
As always, feel free to reach out with questions about positioning for these evolving market dynamics.
Best regards,
Dan Sheehan [email protected]
Subscribe: https://substack.com/@dansheehan3
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.