Tensions in the Middle East: Trump considers limited strikes on Iran; Fed's rate cut expectations shift.

Tensions Rise Between the US and Iran

Trump Warns of Military Action

Former President Donald Trump stated on Thursday that the US and Iran must reach a meaningful agreement within the next ten days, or "bad things" could happen. Israeli Prime Minister Netanyahu has warned that Israel is prepared for any situation and is working closely with the US to address threats from Iran. The Director General of the International Atomic Energy Agency noted that the US military buildup in the Middle East indicates that Iran's diplomatic options are closing.

Potential Military Strikes

Reports indicate that the US military is prepared to launch a limited military strike against Iran as early as this weekend. Trump is considering a "limited scale" military action to compel Iran to accept US nuclear agreement demands. If authorized, the operation could target a few military or government facilities in Iran, aiming to apply pressure rather than initiate full-scale war.

Supreme Court to Rule on Trump's Tariff Policy

Market Predictions

The US Supreme Court is set to release a new batch of rulings on February 20, which may include a decision on Trump's tariff policy. Market predictions suggest a mere 28% chance that the court will support Trump's tariffs, which could trigger over $130 billion in tariff refunds and reshape US trade policy.

Federal Reserve's Stance on Interest Rates

Shift in Rate Cut Expectations

Federal Reserve Governor Stephen Miran has revised his earlier stance advocating for significant interest rate cuts this year, citing stronger-than-expected labor market data. He now believes that the Fed may not need to cut rates as aggressively as previously thought.

Trade Deficit and Economic Indicators

December Trade Deficit

Despite efforts to reduce the trade deficit, the US recorded a trade deficit of $901.5 billion for the year, only slightly down from the previous year's record. The December trade deficit expanded, indicating persistent trade imbalances.

Stock Market Overview

Major Indices Decline

The three major US stock indices closed lower, with the Dow Jones down 0.54%, the Nasdaq down 0.31%, and the S&P 500 down 0.28%. Notable declines were seen in large tech stocks, while energy and defense stocks showed strength.

Earnings Reports

• Opendoor Technologies reported Q4 revenue of $736 million, with a net loss of $1.096 billion, but exceeded expectations in revenue and adjusted EBITDA.
• Amazon surpassed Walmart in annual revenue for the first time, with $716.9 billion compared to Walmart's $713.2 billion.

International Developments

Alphabet's Investment in India

Alphabet's CEO Sundar Pichai announced a $15 billion investment in AI infrastructure in India, emphasizing the importance of international cooperation in AI governance.

Conclusion

As geopolitical tensions escalate and economic indicators fluctuate, the upcoming decisions from the US Supreme Court and the Federal Reserve will be closely watched by markets and investors alike.