Stocks plunge as tariff uncertainty, growth fears prompt big risk-off move. (0:15) XPeng promises flying cars and humanoid robots in '26. (3:58) Hedge funds bail on China trade. (4:55)
Our top story so far, the White House may have forgotten what a real recession looks like, according to one economist, but the financial markets are on full alert for a slowdown.
Stocks and bond yields are tumbling again as the prospect of a soft landing for the U.S. economy looks further away amid on-and-off-again tariff announcements and the potential impact of mass government layoffs.
The S&P 500 (SP500) off -2% and the Nasdaq (COMP.IND) is off -3.5%. Both are testing lows not seen since September.
Dario Perkins, economist at TS Lombard, says: "Both Scott Bessent and Elon Musk have said it might be necessary to inflict some pain on the US economy in 2025 -- in the hope it will emerge stronger from any short-term downturn. They have said activity is being 'inflated' by government spending, and perhaps a dose of "detox" can force public debt onto a more sustainable trajectory."
This has fueled talk of a 'Bessent put' in US bonds (NOT equities), and it has amplified talk of a potential recession and that "sort of thinking is risky," Perkins adds.
"Perhaps the new US administration has forgotten what a 'real' recession is like. There hasn't been a real US recession in 17 years, and the fake COVID-19 downturn may have given them an inflated sense of omnipotence. The US rebounded quickly from the pandemic and returned to full employment without any long-term scars. But that is only because (i) the recession was largely man-made (the result of lockdowns) and (ii) officials deployed the biggest fiscal and monetary policy response since WW2," he added.
In the bond market, the 10-year Treasury yield (US10Y) is back down near 4.2% and just 30 basis points above the 2-year yield (US2Y).
Kathy Jones, chief fixed income strategist at Schwab, noted: "It looks like the bond market has decided to bypass short-term inflation concerns (of trade barriers and immigration limits) and focus on the long-term prospects (of slower growth)."
And the VIX (VIX) volatility index, also known as the fear gauge, is back, setting new highs for 2025.
David Bahnsen, CIO of The Bahnsen Group, says stock market volatility "is much less about the bad news of tariffs and much more about the uncertainty of tariffs," while "talk of tariffs is in a lot of ways worse than the implementation of them. The tariff talk, reversal, speculation, and chaos only fosters uncertainty."
He says he does not believe "the administration knows how the tariff situation will play out, but if I were a betting man I would say that it will persist long enough to do damage to economic activity for at least a quarter or two, and ultimately result in a deal with different countries that make everyone wonder why we went through all the fuss."
Among active stocks, Rocket (RKT), parent of Rocket Mortgage, agreed to acquire real estate broker Redfin (RDFN) in a deal valued at $1.75 billion that will combine one of the most-visited brokerage websites with the largest mortgage lender.
The online lending platform will pay $12.50 per RDFN share in an all stock transaction, representing a premium of about 63% over the volume-weighted average of the stock for 30 days through Friday.
Also, in M&A, Veren (VRN) and Whitecap Resources (OTCPK:SPGYF) will combine an all-stock transaction valued at about $15 billion including debt to create a leading light oil and condensate producer in the Alberta Montney and Duvernay plays.
Veren shareholders will receive 1.05 common shares of Whitecap for each Veren common share. The company will have 370,000 boe/day of combined production and becomes the largest Canadian light oil focused producer as well as the seventh-largest producer in the Western Canadian Sedimentary Basin.
And Susquehanna upgraded Credo Technology (CRDO) to Positive from Neutral, keeping its $60 price target and noting that the company has a growing portfolio of key AI connectivity technologies that are underappreciated.
Analyst Christopher Rolland said, on paper, the January (quarter) results were fantastic, with strong follow-through into the April guidance, but customer concentration spooked investors. Credo had derived 86% of its Q3 revenue from Amazon Web Services (AMZN).
In other news of note, "Back to the Future" promised us flying cars by 2015. "Blade Runner" promised Nexus 6 Replicants by 2019. XPeng (XPEV) wants to bring us both next year.
The Chinese EV maker is planning to mass-produce flying cars by 2026, CEO He Xiaopeng told state-owned newspaper China Daily.
"We are integrating vehicle control with AI to develop a new flight control system into such flying cars, making it safer and more user-friendly," he said.
XPeng aims for its Level 3 autonomous driving technology to surpass global competitors across the board this year.
"By 2026, XPeng aims to explore L4 driverless capabilities in parking scenarios, including fully driverless parking and vehicle retrieval in parking lots."
The CEO added that the company is also targeting mass production of industrial humanoid robots with L3 capabilities by next year, "which involves fully integrating their hands, feet, mouth, eyes, and brain."
And in the Wall Street Research Corner, Hedge funds are falling out of love with the China trade, selling China equities for the fourth-straight week. That's according to Goldman Sachs' prime brokerage desk.
Sales were driven by both shorts and longs at a ratio of 2.3 to 1.
Goldman said: "Macro Products and Single Stocks were both net sold and made up 77% and 23% of the total notional net selling, respectively. Onshore and offshore equities were net sold on the week, led by ADRs and H-Shares."
"Post DeekSeek (DEEPSEEK), China was by far the most notionally net bought market on the Prime book YTD through Feb 17th, around which HFs have reversed course - net flow in Chinese equities (FXI) is now roughly flat on a YTD basis."