Markets at the Edge of Certainty

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Around the Market

A sell-the-news reaction, shifting Fed expectations, and growing pressure on AI leaders

The S&P 500 (via SPY) pushed back to all-time highs to $697.84 last week but could not hold the handle. We saw a classic sell-the-news reaction on Friday, with markets dipping across the board after the White House tapped Kevin Warsh to succeed Jerome Powell.

Warsh was considered the most hawkish of the candidates. The Street is now wrestling with whether he stays true to his sound money roots or pivots to suit the administration’s low-rate appetite. That uncertainty, combined with his hawkish lean, appeared to trigger a violent liquidation in precious metals. Gold and silver posted their worst sessions in years.

Earnings were a mixed bag that hinted at AI exhaustion. Microsoft (MSFT) and Meta (META) showed massive CapEx commitments, but the show-me-the-money phase has officially begun. Investors are rewarding potential less these days. They want realized margins, which may help explain Microsoft’s selloff.

Tactical Focus

• The Warsh Factor: Watch the 10-year yield. If it jumps on hawkish confirmation fears, tech multiples could compress.

• AI Fatigue: Microsoft and Meta remain under the microscope. If big tech can’t lead, the odds increase that buyers rotate into value or small caps.

• Earnings on Deck: Alphabet (GOOGL) and Amazon (AMZN) report this week. These are major pillars. If they wobble, dreams of pushing meaningfully higher go back on ice.

Other key market moves this past week:

The Week Ahead

Economic Calendar

• ISM Services PMI (Wed 2/4 10:00a ET)

• Non Farm Payrolls & Unemployment Rate NFP (Fri 2/6 8:30a ET)*

• Michigan Consumer Sentiment (Fri 2/6 10:00a ET)

• Consumer Retail Sales (Tue 2/10 8:30a ET)*

*Data release may be delayed due to federal government shutdown

Notable Earnings

• Advanced Micro Devices AMD (Tue 2/3 after close)

• Uber Technologies UBER (before open Wed 2/4)

• Alphabet GOOGL (Wed 2/4 after close)

• Amazon AMZN (Thu 2/5 after close)

Not an exhaustive list — just a few I’m watching closely for potential market impact.

On My Radar

Silver’s historic unwind and a pivotal earnings test for Alphabet

When I wrote about silver last week, there was no way I was anticipating what unfolded on Friday. Silver suffered its worst one-day move since 1980, falling more than 30%, with selling pressure continuing into Monday. The catalyst may have been the Warsh nomination, which appeared to firm up the dollar through expectations of higher yields. More likely, though, positioning drove the intensity of the move.

When price accelerates to the upside, late buyers pile in and stop losses can accumulate just below recent range lows. Once price slips and those stops are triggered, the selling can feed on itself since stop losses are effectively market sell orders. That cascade is how you get violent moves in the opposite direction.

Silver did appear to find some footing around the 50-day simple moving average and is attempting to avoid a deeper downtrend with futures up 9% Tuesday morning. I’m giving it until mid-week to see how price and volatility settle before considering a position, either long or short.

While silver moves to the back burner, the tape is leaning into a heavy week. Big Tech is back in the spotlight, and Alphabet (GOOGL) reports after the close on Wednesday. The stock has been a quiet leader, rallying nearly 30% since October.

Expectations call for EPS of $2.58 on roughly $94.7 billion in revenue. The narrative is no longer just about search dominance. It is about the Gemini effect. Analysts are laser-focused on Google Cloud growth, which is expected to jump more than 35%. Traders are pricing in a 5% implied move. That is wide, signaling high conviction with little room for a miss.

The real tension lies in CapEx. Alphabet is spending billions on data centers. If that investment does not translate into clear AI monetization, stoic buyers may turn into sellers. The stock is already trading near it’s all-time high of $349. A break above could open the door to new records. A failure suggests the priced-for-perfection crowd is taking profits.

Focus Points

• Cloud Acceleration: Looking for revenue to clear the $16.2 billion mark to validate AI infrastructure spending.

• Search Resilience: Assessing whether AI Overviews protect market share or cannibalize traditional ad margins.

• The Apple Factor: Watching for commentary on the Gemini-Siri integration licensing deal.

What’s Top of Mind

Howard Marks, AI, and the danger of extremes

I recently read Howard Marks’ latest memo on AI and whether we are seeing a bubble that will inevitably burst, a topic many of us have likely thought about. Marks has a way of cutting through the noise that aligns with how we read the tape. He’s not interested in hype. He focuses on crowd psychology and the structural integrity of a trend. Here are my biggest takeaways.

We may be looking at an inflection bubble.

Most people think of bubbles as mean-reversion events. Low-quality assets get pumped before crashing back toward their intrinsic value. Think mortgage-backed securities. An inflection bubble is different. It forms around a transformational technology that genuinely changes the world. The internet was one. AI is likely another. The catch is that even when the technology is real, the investment outcome can still be disastrous for the undisciplined before adoption becomes ubiquitous.

History is a graveyard of first movers. In the early 1900s, there were more than 2,000 automobile companies. Only a handful survived. AI will likely follow a similar path. Some players will go to zero while the eventual winners consolidate power.

The market is wrestling with a paradox. It’s impossible to say with certainty whether we’re in a bubble today because the potential upside is so large it defies traditional valuation metrics.

In environments like this, extremes are the enemy. Going all-in is gambling. Going all-out ignores the data. The edge lives in the middle, where flexibility matters.

There is nothing wrong with jumping onto a generational shift. I felt the same way about Bitcoin and blockchains. The mistake is letting the narrative overpower price action when real risk is on the line.

My Keys

• Watch circular deals: Monitor revenue quality. If companies recycle capital to inflate growth, the foundation is weak.

• Respect leaders, but do not worship them: Leadership is temporary. Watch challengers and accept that only a few winners may emerge.

• Monitor debt: Debt financing isn’t inherently bad, but it may not be the right tool for AI buildout.

• Size matters: This is not the environment for hero bets. Proper position sizing keeps you in the game when volatility hits.

As always, stay patient, stay objective.

If you’re curious about the memo, it’s worth the time. Marks also explores AI’s impact on jobs and one’s sense of purpose. Whether you agree with him or not, his perspective forces you to think.

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Hitting the Bid content is for informational and entertainment purposes only. The information contained is not, nor is it intended to be, trading or investment advice or a recommendation of any security, futures contract, digital asset or alike. I may hold a position in the trading vehicles discussed. Trading and investing contains risk. All investors should evaluate their own risk tolerance, financial situation, and investment duration before entering any trade or investment.