Another hot inflation report rattled traders, knocking stocks lower early before major indexes clawed back some ground.

⚡ Closing Bell:

• Dow Jones: ⬇️ -0.5% › 44,368.6 › Energy led declines.

• S&P 500: ⬇️ -0.3% › 6,052.0 › CPI shock weighed on sentiment.

• Nasdaq 100: ➡️ Flat at 19,650 › Tech held steady despite rate fears.

• Russell 2000: ⬇️ -0.9% › 2,255.5 › Small caps took the biggest hit.

Market Movers:
➝ CPI Surprise (Not): Inflation came in hotter than expected at 3.0% YoY, with core inflation stuck at 3.3%—the fastest pace in nearly a year.

➝ Fed Watch: Powell acknowledged progress but said policymakers are “close but not there yet” on inflation. Rate cut hopes? Pushed further out.

➝ VIX Oddly Calm: Even with inflation shock, the VIX fell, signaling that markets may have already priced in higher-for-longer rates.

Macro Moves:
➝ 10-Year Yield: ⬆️ 8.8 bps › 4.63%
➝ 2-Year Yield: ⬆️ 6.7 bps › 4.36%

❗ Next on Deck: PPI lands today, adding another layer to the inflation picture.
Also, Airbnb, Coinbase, and Palo Alto Networks report earnings.

#TRUTH:
❗❗❗ “Patience, persistence, and perspiration make an unbeatable combination for success.” ~ Napoleon Hill

Volatility Check:

Stocks stumbled after a hotter-than-expected CPI, yet the VIX fell 2.4%—not the usual reaction when markets take a hit. What gives? Here’s what could be happening:

① Slow Motion Sell-Off → No panic, just a steady de-risking process. If traders aren’t dumping stocks in a frenzy, there’s no rush for hedges.

② Pre-Hedged Traders → If investors already braced for a hot CPI—via put options or defensive positioning—there’s no fresh demand for downside protection.

③ Dealer Flows & Options Decay → Market makers could be absorbing pressure. If dealers are long gamma, they hedge by buying dips, keeping volatility in check. Also, if traders are unwinding hedges post-event, it suppresses the VIX.

④ Macro Over Shock Event → This isn’t a banking crisis or sudden credit blowup—it’s a policy-driven sell-off. When markets drop due to inflation and rate expectations rather than a black swan event, volatility tends to stay tame.

⑤ Risk Already Priced In → No major surprises = no panic bid for protection. Traders had already prepared for the CPI number, so the downside move lacked urgency.

Final Take:

• The VIX often rises sharply when there’s an unexpected shock—but inflation being sticky is not a new shock.

• The drop in VIX suggests no immediate fear of systemic stress—just recalibrating rate cut bets.

• Watch if vol sellers (who have been shorting VIX) start unwinding—if they do, VIX could spike quickly.

Accounting Magic=$2.9B Profit Boost

Meta pulled a classic corporate accounting move—extending the lifespan of its AI servers—and it’s about to save them $2.9 billion in depreciation costs for 2025.

Why does this matter? Less depreciation = higher reported profits without changing cash flow. Investors love it, but accountants know the trick: shifting costs down the road.

The Playbook: Big Tech is adjusting depreciation timelines.
• Meta → Now expects servers to last 5.5 years (up from 4-5).
• Microsoft & Oracle → Extended their server lifespan in 2022 & 2023.
• Amazon → Did the opposite, cutting server life from 6 to 5 years, which shaved $700M off earnings.

❗The Risk: Depreciation delays can lead to larger future write-offs, especially as tech evolves fast.
✶ The Reward: In the short term, higher earnings, stronger margins, and happier investors—which explains why Meta stock has been on a record 17-day winning streak.

With Big Tech expected to spend $300B on AI infrastructure in 2025, these accounting tweaks will only get more attention. Smart move or just earnings magic? Investors should take note.

Reddit’s Data Firehose:

Wall Street is officially getting in on the Reddit effect. Intercontinental Exchange (ICE)—the parent company of the NYSE—is striking a deal with Reddit to tap into its vast pool of user discussions for financial market insights.

Why does this matter?
The same platform that fueled meme stock frenzies and retail investor uprisings is now being leveraged for institutional trading strategies. With millions of daily posts, comments, and trends, Reddit offers a real-time sentiment engine that could shape trading strategies, risk models, and market predictions.

How Wall Street Plans to Use Reddit Data
• ICE → Will process and distribute Reddit-driven datasets and analytics to financial professionals.
• Hedge Funds & Traders → Could tap into sentiment trends and early signals from retail investors.
• AI & Machine Learning → ICE will apply data science models to Reddit’s firehose of posts to detect emerging trends before they hit mainstream media.

The Risk: Can Social Media Predict Markets?
Market sentiment is volatile and unpredictable—what’s trending today could be irrelevant tomorrow. Using Reddit for trading insights sounds innovative, but chasing retail-driven hype could lead to misreads, false positives, and market overreactions.

Pros: A Competitive Edge in Alternative Data
For ICE and its customers, this deal is a strategic goldmine. Alternative data has become a key battleground for firms looking to stay ahead, and Reddit’s raw, unfiltered discussions might offer first-mover advantages on sentiment shifts before they impact stock prices.

With Wall Street embracing Reddit data at scale, the lines between social chatter and financial market signals are blurring fast. Whether this results in smarter trading strategies or just more noise, one thing’s for sure—the finance world is listening.

Highlights of the Day:

① CVS Crushes It ✅
➝ CVS (CVS) +14.95% → Earnings blew past estimates, and 2025 guidance came in strong.

② AI & Tech Rally ✅
➝ Alibaba (BABA) +4.9% → Apple partnership + AI expansion = stock in rally mode.
➝ Intel (INTC) +7.25% → Bullish options activity and renewed chip optimism.

③ Delivery Boom ✅
➝ DoorDash (DASH) +4.04% → Strong order growth and upbeat forecasts pushed shares higher.

④ Super Micro’s Rebound ✅
➝ Super Micro (SMCI) +2.8% → Recovered losses after management reassured investors about its Nasdaq filing.

⑤ Reddit’s Reality Check ❌
➝ Reddit (RDDT) -16% (After Hours) → User growth missed estimates, and Wall Street didn’t like the excuse.

⑥ Housing Market Blues ❌
➝ Zillow (ZG) -10.73% → Weak housing outlook sent shares tumbling.

⑦ Chip Pressure ❌
➝ Micron (MU) -2.56% → CFO warned of margin pressures—investors weren’t thrilled.

⑧ Industrial Drag on the Dow ❌
➝ Caterpillar (CAT) -6.15% → Biggest weight on the Dow, erasing 63 points.
➝ Home Depot (HD), UnitedHealth (UNH), and Sherwin-Williams (SHW) also dragged the Dow lower.

⑨ Biotech & Industrial Struggles ❌
➝ Westinghouse Air Brake (WAB) -9.1% → Weak earnings sent the stock sinking.
➝ Biogen (BIIB) -4.3% → Warned of lower 2025 revenue, and the market didn’t take it well.

⑩ Power Surge ✅
➝ Generac (GNRC) +7.6% → Q4 earnings beat powered the stock higher.

Commodities Check : ✔️

• Oil: ⬇️ -1.0% › $71.33/bbl as rising U.S. crude inventories pressured prices.

• Gold: ⬇️ -0.4% › $2,885.53/oz retreating from record highs amid Fed caution.

• Silver: ⬇️ -0.7% › $31.84/oz tracking gold’s decline.

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Disclaimer

This letter is not offering investment, trading, or investment advice nor is based on any individual portfolio or business operation. We are not a registered investment, stock nor commodity advisor. One should consult with their own registered advisor to discuss investment strategies that are appropriate for their business or personal goals, risk tolerance and financial situation. Information in this report and on any website is derived from a variety of source believed to be reliable however no representation is made that the information is accurate, complete or correct. These lessons, newsletter and site content is not intended nor shall not constitute or be construed as an offer or recommendation to “buy”, “sell”, “trade” or invest in any securities, commodities, futures, options or other asset referred to in said lessons, reports or newsletters. Rather, this research is intended to identify situations and circumstances that those in the trading community should be aware of to better help assess and improve their own risk management skills.