A daily market update from FS Insight — what you need to know ahead of opening bell.

“Never stop fighting until you arrive at your destined place – that is, the unique you. Have an aim in life, continuously acquire knowledge, work hard, and have perseverance to realize the great life.” — A. P. J. Abdul Kalam

Overnight

Donald Trump says Gaza will be ‘turned over to the US by Israel’ FT 

How to trade the trade war FT

Trump’s power grabs will go on until someone stops him – and that’s not happening soon CNN

Friday’s Jobs Report Will Be Confusing. Here’s How to Make Sense of It. NYT 

Honeywell announces three-way split FT 

MicroStrategy unveils new name, reports accelerated bitcoin purchases in fourth quarter CNBC

Strong Taco Bell sales fuel Yum Brands earnings beat CNBC 

Amazon set to pass Walmart in revenue for first time CNBC

Bank of England Cuts Rates, Warns of Tariff Impact WSJ 

Lawmakers Push to Ban DeepSeek App From U.S. Government Devices WSJ 

Shen Yun Is Said to Be Under Federal Investigation Over Possible Visa Fraud NYT 

Anna Wintour takes off her iconic sunglasses for meeting with King Charles CNN

Chart of the Day

MORNING INSIGHT

Good morning!

The new year is tracking better than our base case. Despite the near-term turmoil from the tariffs being announced, we remain constructive and now see 2025 as less turbulent than we expected. 

Click HERE for more.

TECHNICAL

• TNX has officially broken its multi-month uptrend as of Wednesday’s close.
• SPY has broken down vs. TLT on multi-month uptrends & Treasuries likely outperform.
• Biotech is “on watch” for a breakout to join recent strength in Med. Tech & Services.

Click HERE for more. 

CRYPTO

We still anticipate that crypto will outperform this year. However, we believe it is prudent to manage downside risk in the near term (1-2 months) and consider raising cash/reducing altcoin exposure (plan for BTC dominance higher).

Click HERE for more. 

First News

The much-feared tariffs came this week, with some delays. Yet, the S&P 500 has added 0.3% this week. 

In Tuesday’s First to Market we tried to explain what’s behind the gains. Today, we will take a deeper dive on why the stock market has largely shrugged off the news. 

For all the right reasons, tariffs are on everyone’s minds. Out of the 247 companies that have reported since the start of the earnings season, the number of S&P 500 companies mentioning tariffs on earnings calls is at 108, according to our data team’s analysis. If that trend continues, it would be 15% more than the highest number of quarterly references of this type of tax made over 2018-2019 when President Donald Trump first started imposing tariffs.

This time around, there are reasons to believe that U.S. companies aren’t as exposed to headwinds that tariffs would create.

First, only 40% of the S&P 500’s revenue is generated abroad—with a majority derived from home, according to FactSet. 

Quarterly earnings offer some more insight. Corporate executives say they’ve already gone through a version of this during Trump’s first term, so they’re better equipped to navigate supply-chain issues and are more confident in their pricing power (thanks to the past few years of higher inflation). And let’s not forget that when the pandemic shut down the global movement in 2020, many companies realized the importance of shoring up their supply chains domestically and have already moved to do so. 

Below is pasted commentary from some household names, with minor grammar clean up. 

Chipotle Mexican Grill: “We sourced about 2% of our sales from Mexico, which includes avocados, tomatoes, limes and peppers. And less than 0.5% of our sales are from Canada and China. If the recently announced tariffs go into full effect, it would have an ongoing impact of about 60 basis points on our cost of sales. Also, we remain confident that we can offset the 60 basis point portion investment we made in 2024.”

“Today, we source from both Colombia, Peru, as well as the Dominican Republic. Only about 50% of our avocado supply today comes out of Mexico. And I think we said earlier in the prepared remarks, it’s about a 60 basis points impact if it is – it’s something that sustains for the year.”

Clorox: “We have not specifically baked in any impact from tariffs. What I might remind you, and I think we talked about this in the past, is based on the nature of our portfolio, for the most part, we manufacture products very close to where it’s consumed. So, we have fairly short supply chains. The other benefit for us is—you might recall several years ago during all the supply chain disruptions, we’ve done quite a bit of work over the last few years to onshore/nearshore production. Now, at the time, we did that work to reduce the risk of our supply chain, but there will be an added benefit here that it reduces our exposure to tariffs.” 

Colgate-Palmolive: “We aim to have local manufacturing as the cost of shipping some of our products across long distances can be material. We spent the last few years building much more flexibility into our global supply chain. It’s not necessarily about building more capacity, but rather making better use of the existing capacity and alternative sourcing, as well as standardizing formulas across the markets. So importantly, we’ve invested meaningfully in our U.S. supply chain, almost $2 billion over the last five years between investment in our oral, personal, home care business, along with the purchase of pet food capacity, the opening of our Tonganoxie wet pet food facility, we’ve increased the number of our U.S. based manufacturing facilities by more than 40% over that time. So material investments into U.S. capabilities.

Emerson Electric: “In 2018, the United States enacted Section 232 and Section 301 tariffs, primarily targeting exports from China. At that time, we acted immediately to use price and surcharges to protect profitability. And we also embarked on a program to derisk our supply chain for raw materials, subassemblies, and finished goods. The impact of those tariffs was de minimis due our swift actions and ability to capture price. The current tariff situation is fluid, but based on our supply chain regionalization strategy,[lessons learned] from prior tariff responses and planned price actions, we feel very good about our position. Starting with China, we do not expect a material impact based on actions taken since 2018. Next, we expect the impact from Canada to also be de minimis as we do not have any material exposure there. Last, the situation in Mexico is evolving, and we are prepared for a variety of scenarios. We are ready to implement price and surcharges to protect the P&L commitments of the company, and these assumptions are embedded in our guide.” 

Illinois Tool Works: “We’ve got a game plan in place that will cover tariff-related material cost inflation with price actions based on some pretty positive experience doing the same thing coming out of 2017, 2018. And by the way, a very inflationary period coming out of Covid, given the differentiated nature of our businesses, our ability to execute and take care of customers, we feel very good about our ability to offset, you know, those tariff-related cost increases.”

To be sure, some companies aren’t as impervious to tariffs. Intel suspects a portion of its fourth-quarter revenue upside was due to customers pulling forward revenue away from the first quarter as a hedge against potential tariffs. Meanwhile, Mattel said it is considering raising prices in response to tariffs.