The Olympia Looping car stands on its head in the ride’s largest loop while traveling through the roller coaster.

The Olympia Looping roller coaster at Munich Oktoberfest (Felix Hörhager/Picture Alliance via Getty Images)

Forced buyers

“FOMO feedback loop” to juice the US stock market, Goldman says

The unwind of election-related hedges effectively provides demand for stocks.

11/7/24 1:28PM

The stock market’s jubilation following the US election has a long way to run, according to Goldman Sachs.

Scott Rubner, managing director for global markets, has been banging the table that US stocks will finish the year strong. He’s looking for “mechanical rebalance flows to create institutional ‘FOMO’ feedback loop into the best seasonals of the year,” according to an email to clients on November 6. “The year-end rally starts today and may be higher than investors were expecting.”

The S&P 500 is up more than 3% since the election as of midday Thursday, trending toward 6,000.

There are many classes of buyers who are primed to boost their stock-market exposure no matter what, he argues. That kind of fundamental support — and lines on charts going up and to the right — can entice more discretionary potential stock buyers to add to their holdings.

Who’s buying, per Rubner?

For starters, the unwind of election-related hedges effectively provides demand for stocks. We’ve already seen this in how much the VIX Index, which tracks the implied volatility of the S&P 500, has gone down since the vote; VIX down typically means equities up, as it entails less demand for protection against a near-term market storm.

And November 5 wasn’t just a big day for the nation’s voters, but also a big one for so-called volatility control funds — that is, investing vehicles whose level of exposure to the market is governed by how volatile the market has been over time. Any fund that uses a three-month look-back window to determine its degree of stock ownership is now seeing August 5, the day when volatility exploded to the highest levels outside of Covid and the 2008 financial crisis. So there’s a strong likelihood that these funds will be buyers of equities, because the recent past will suddenly look a lot more calm.

Another source of support for equities comes from corporate buybacks. As Rubner has long flagged, November is typically the busiest month for companies repurchasing their own shares.

These factors should drive institutional investors — who had taken some chips off the table heading into the election, per Goldman’s prime brokerage team — to reengage with a rising market, Rubner says.

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J. Edward Moreno2/27/26

Trump says he has ordered all federal agencies to cease use of Anthropic’s products

President Trump said he has ordered all federal agencies to “IMMEDIATELY CEASE all use of Anthropic’s technology” as the AI startup and the federal government disagree over safety guardrails.

Anthropic has reportedly clashed with the Pentagon after its tools were used to surveil and ultimately detain Venezuela’s president, Nicolás Maduro, which the company says is against its policies. The startup had until today to reach a deal with the government, and the president’s statement suggests an accord wasn’t reached.

“The Leftwing nut jobs at Anthropic have made a DISASTROUS MISTAKE trying to STRONG-ARM the Department of War, and force them to obey their Terms of Service instead of our Constitution,” the president wrote in a Truth Social post. “Their selfishness is putting AMERICAN LIVES at risk, our Troops in danger, and our National Security in JEOPARDY.”

Trump said agencies like the Pentagon will phase out Anthropic’s products over the next six months.

“Anthropic better get their act together, and be helpful during this phase out period, or I will use the Full Power of the Presidency to make them comply, with major civil and criminal consequences to follow,” Trump said.

Tasha Matsumoto

2/27/26

Tech and financials weigh on stocks as credit risks rise

Markets shifted to risk-off mode on hotter-than-expected producer prices and rising credit risks.

Staley Da Bear mascot sits in the endzone during the game between the Chicago Bears and the Green Bay Packers at Soldier Field on September 13, 2015 in Chicago, Illinois.

Matt Phillips2/27/26

Rocket Lab dives on new delay for Neutron

Shares of retail favorite Rocket Lab plunged Friday after the company pushed back plans for the first launch of its bigger Neutron rocket to the fourth quarter of 2026.

Neutron was originally set launch in late 2025. That plan was scrapped in November, with the new target date set broadly for the middle of 2026.

As CEO Peter Beck laid out for Sherwood News in an interview, Neutron is the cornerstone of the money-losing company’s plans to leap to profitability, as it will enable Rocket Lab to enter the market for larger, and more lucrative, payload launches. That market is currently dominated by Elon Musk’s SpaceX.

In January, one of Neutron’s fuel tanks ruptured during a test, necessitating construction of another, as well as some design changes. During the company’s post-earnings conference call last night, Beck told analysts Neutron’s first launch is now expected during the fourth quarter of 2026.

“Neutron is still scheduled to come to market in an incredibly aggressive time frame,” Beck said.

Judging by the stumble for the shares, which by around 1:30 p.m. ET were on track for their worst drop since last fall, investors are not buoyed by those assurances.

Rocket Lab beats expectations on Q4 sales, per-share loss

“Neutron is still scheduled to come to market in an incredibly aggressive time frame,” Beck said.

Judging by the stumble for the shares, which by around 1:30 p.m. ET were on track for their worst drop since last fall, investors are not buoyed by those assurances.

Matt Phillips2/27/26

Dorsey swings the axe at Block in “extreme step” to “replace human labor with compute power”

The market clearly loves it. Jack Dorsey’s decision to axe some 4,000 workers has kicked off what is on track to be Block’s best day in the stock market in over three years.

The takeaways from analysts who have followed the stock — down about 80% from its August 2021 peak — are a bit more nuanced:

Evercore ISI: “Mgmt is explicitly redesigning Block as an ‘AI-native’ organization — embedding automation and efficiency tools across product development, underwriting, operations, and customer interfaces. The financial implications are significant: FY26 Adjusted Operating Income guidance of $3.2B (26% margin) sits materially above mgmt’s prior expectations at the Investor Day just a few months ago, signaling confidence that AI-driven efficiencies can expand margins structurally while sustaining or potentially accelerating product velocity.”

Morgan Stanley: “Cutting 40% of employees (to ~6,000 from ~10,000) encapsulates XYZ’s undertaking that it is now prepared to replace human labor with compute power. We certainly view it as an audacious move by the management, but one that is not without preparation... The reduced headcount should now drive a marked improvement in the gross profit/employee metric, which we expect will justify expanded valuation premium.”

Piper Sandler: “Dorsey characterized the move as a proactive step to make way for AI related productivity gains. The cost saves from lower headcount drive a $500M increase in Block’s Adjusted EBIT guidance for 2026 — now $3.2B vs. $2.7B at investor day just 3 months ago. Bottom line, while the right sizing from XYZ is being well received by investors and should boost short-term profitability, it seems like an extreme step, and we remain skeptical of XYZ’s longer term growth profile.”

Citi: “Several times during the Q&A, the sell side probed management’s comfort with carrying out the major headcount reduction in parallel with more extensive and more effective GenAI use over a roughly two quarter timespan. On the one hand, Block seemed confident in the organization’s ability to adapt and rise to the challenge, but on the other hand, we are aware that a 40% reduction in heads should generate many empty seats. While we believe it more likely for XYZ to succeed here, we think that more reassurance can surface should XYZ continue to do as they plan.”

RBC Capital: “The main question from investors thus far — is this just legacy bloat or real AI enhancements — only time will tell, but it feels like a combination of both... While AI efficiencies no doubt played a key role in a reduction in force of this magnitude, we also believe XYZ was moving in a direction to materially shrink the organization.”

Block soars after announcing 40% workforce cut amid AI push

Evercore ISI: “Mgmt is explicitly redesigning Block as an ‘AI-native’ organization — embedding automation and efficiency tools across product development, underwriting, operations, and customer interfaces. The financial implications are significant: FY26 Adjusted Operating Income guidance of $3.2B (26% margin) sits materially above mgmt’s prior expectations at the Investor Day just a few months ago, signaling confidence that AI-driven efficiencies can expand margins structurally while sustaining or potentially accelerating product velocity.”

Morgan Stanley: “Cutting 40% of employees (to ~6,000 from ~10,000) encapsulates XYZ’s undertaking that it is now prepared to replace human labor with compute power. We certainly view it as an audacious move by the management, but one that is not without preparation... The reduced headcount should now drive a marked improvement in the gross profit/employee metric, which we expect will justify expanded valuation premium.”

Piper Sandler: “Dorsey characterized the move as a proactive step to make way for AI related productivity gains. The cost saves from lower headcount drive a $500M increase in Block’s Adjusted EBIT guidance for 2026 — now $3.2B vs. $2.7B at investor day just 3 months ago. Bottom line, while the right sizing from XYZ is being well received by investors and should boost short-term profitability, it seems like an extreme step, and we remain skeptical of XYZ’s longer term growth profile.”

Citi: “Several times during the Q&A, the sell side probed management’s comfort with carrying out the major headcount reduction in parallel with more extensive and more effective GenAI use over a roughly two quarter timespan. On the one hand, Block seemed confident in the organization’s ability to adapt and rise to the challenge, but on the other hand, we are aware that a 40% reduction in heads should generate many empty seats. While we believe it more likely for XYZ to succeed here, we think that more reassurance can surface should XYZ continue to do as they plan.”

RBC Capital: “The main question from investors thus far — is this just legacy bloat or real AI enhancements — only time will tell, but it feels like a combination of both... While AI efficiencies no doubt played a key role in a reduction in force of this magnitude, we also believe XYZ was moving in a direction to materially shrink the organization.”

Luke Kawa2/27/26

The return of AI credit risk is crushing data center stocks, tipping over other speculative trades in the process

The upstarts participating in the disruptive industry of today as well as the speculative trades that mark the industries of the future are getting crushed on Friday.

It’s a sign of the creeping investor revolt against the capex binge.

The poster child for the move is CoreWeave, which is sinking after reporting Q4 capex figures that were larger than expected along with a 2026 investment budget that also surprised to the upside.

Neoclouds and data center companies like Nebius, IREN, Applied Digital, and Cipher Mining are also getting whacked. So too are the quantum computing companies: IonQ, D-Wave Quantum, Rigetti Computing, and Infleqtion.

What’s the common link between these two things?

Well, as we’ve discussed, speculative stocks tend to have common owners and trade in a relatively correlated fashion. And once again, this simultaneous swoon is coinciding with a perceived escalation in AI credit risk.

These smaller AI companies that have effectively bet their existence on this boom and the willingness of capital markets to fund their expansion plans would have the most to lose if either demand or access to credit shrinks. And, of course, the latter would impact other companies in nascent industries that need capital to grow.

The private credit industry, which has been broadly overweight software companies in their lending activities, is coming under severe pressure as those firms face competition from AI tools.

Block’s job cuts, regardless of any previous mismanagement CEO Jack Dorsey is willing to cop to, will do little to allay fears that software executives may take dramatic actions to grapple with the impacts of this emergent technology.

Meanwhile, the source of that disruption — AI — is also continuing to suck in a lot of capital without much in the way of returns. It feels like the credit market simultaneously doesn’t want to fund software because of the AI disruption threat and doesn’t want to fund upstart AI firms because of the lack of visibility into free cash flow generation. Not great, Bob!

Oracle, the large-cap stock most used as a barometer for AI credit risk, enjoyed a sharp improvement in its perceived creditworthiness after management said on February 1 that about half their funding needs this year would come from equity, rather than fully from debt. Now, its five-year credit default swap spreads are poised to close at their widest level since 2009.

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