OPENING CALL

Stocks looked poised to rebound, after Commerce Secretary Howard Lutnick hinted at a possible tariff deal with Canada and Mexico.

The news helped calm investors and nudged Treasury yields higher after they fell to their lowest levels in nearly three months on Tuesday as traders worried that the tariff strategy could further weaken the economy that was already showing signs of slowing growth.

Also helping push yields higher was a dramatic surge in German Bund yields after chancellor-to-be Friedrich Merz agreed with likely coalition partners to spend hundreds of billions on infrastructure and defense.

The plans represented one of the largest fiscal regime shifts in post-war history, according to Deutsche Bank.

"Everything you thought you knew about Germany's economic prospects 3 months ago, or even 3 weeks ago, should be ripped up and you should start your analysis from fresh. This is game changing if it goes through."

Stocks to Watch

Albertsons will be joining the S&P MidCap 400. Shares rose 3.5% afterhours.

AeroVironment fell after issuing weak guidance. Trump's wavering support for Ukraine has pressured shares of the company, which is a large supplier of guided munitions to Ukraine.

Box logged higher revenue but warned of a significant hit to profitability going forward due to a stronger dollar. Shares declined 6.1%.

CrowdStrike's outlook missed Wall Street's expectations. Shares fell 8%.

Palantir Technologies rose 3.9% after William Blair upgraded shares. The analysts said the higher rating on followed "the 33% DOGE-driven selloff from $125 to $84 over the past three weeks."

Nvidia was 2.1% higher, but the stock has fallen more than 13% since Nvidia reported quarterly earnings last week.

Super Micro Computer rose 4.1%.

Tesla rose 2.9% though it has declined 7.2% over the past two trading days. Issues for investors include tariffs, weak Chinese sales, and the impact of a "buyer's strike" on the company.

Watch For:

ADP National Employment Report; ISM Report on Business Manufacturing PMI; EIA Weekly Petroleum Status Report, earnings from Marvell Technology, Zscaler, Veeva Systems, MongoDB, Brown-Forman, Campbell's, Abercrombie & Fitch, Foot Locker, and Rigetti Computing.

Today's Headlines/Must Reads:

-7 Takeaways From Trump's Speech to Congress

-The Day Trump's Tariff Threats Became a Reality for America Inc.

-A Nuclear-Power Revival Brings Back an Old Problem: What to Do With the Waste

MARKET WRAPS

Forex:

The dollar fell to a 16-week low on mounting worries about the economic outlook.

The case for a stronger dollar rests on the economy continuing to outperform its peers, but economic data are softening and the Trump administration is shooting itself in the foot by slapping tariffs on its closest neighbors, Pepperstone said.

The dollar has gone from being the "best of the bunch to don't touch with a bargepole in the blink of an eye" given the toxic mix of huge government policy uncertainty, the Fed contending with stubborn inflation and weaker data.

The euro rose to a 16-week high against the dollar after news of the possible German fiscal boost.

The currency was also boosted by the EU's new plans to increase defense spending that could mobilize as much as 800 billion euros.

A weaker dollar and renewed hopes for a Ukraine cease-fire added further support.

"We believe risks are tilted toward a higher euro versus the dollar in the near term, particularly if U.S. data continues to surprise to the downside," Danske Bank said.

Commerzbank said the euro could extend its gains against the dollar if upcoming data feeds into the market's concerns that U.S. economic growth is slowing.

If Wednesday's data is soft, the euro could rise toward $1.07, especially if the ECB sounds cautious about cutting interest rates on Thursday, it said.

And nonfarm payrolls on Friday could send the euro above $1.07 if it comes in weaker than expected.

MUFG said the prospect of U.S. tariffs on the eurozone could limit any further euro gains.

With Trump sounding very aggressive on future tariff action on the EU, "we are unconvinced that this move higher in the euro will extend much further."

Short-seller bets against the euro no longer look extreme, it added.

Sterling's expected rebound against the dollar seems intact after surging as high as 1.2800 on Tuesday, UOB said, based on the charts.

"There is a distinct possibility of GBP/USD breaking above the top of the cloud, provided it holds above 1.2570."

Bonds:

T.Rowe Price said Bunds would now become less scarce, but Germany would continue to have the best fiscal fundamentals, even with a large debt expansion.

"Since many global bond yields trade relative to Bunds, the German government's action is equivalent to raising the global risk-free bond rate."

Even Treasurys, historically the center of all bond markets, might over time sell off significantly in response to higher Bund yields, it added.

Ten-year Treasury yields rose modestly, showing muted reaction to a significant selloff in eurozone government bonds, making them a relative outperformer versus Bunds.

Earlier the 10-year Bund yield rose to 2.728%, the highest since end-May.

Energy:

Oil prices remained under pressure amid growing uncertainty surrounding tariffs.

"Heightened uncertainty is sending investors to the sidelines," ING said.

"This is evidenced by a reduction in speculative positioning in both WTI and Brent in recent weeks."

Metals:

Gold futures rose as trade policy continued to drive investors toward safe haven assets.

The enforcement from Tuesday of import tariffs on Canadian and Mexican goods, as well as an increase of China levies, prompted a surge in gold buying, Pepperstone said.

Barrenjoey said precious metals prices were likely to stay higher than it originally thought.

The bank raised its forecasts for the gold price across 2025-29 by 7% to US$2,900, and lifted the outlook for the silver price by 7% to US$32.

Gold chart

The bullish momentum seen in Comex gold futures is likely re-accelerating, RHB Retail Research said, based on the daily chart.

As long as the futures contract remains above the $2,800 support level, the technical setup remains bullish, it added.

Base metal prices rose, and the metals complex has gained on a weaker dollar.

Support has also come from Chinese Premier Li Qiang's announcement that China has set an economic growth goal of around 5% for 2025.

While unchanged from last year, the target comes despite increased challenges from trade tensions and a moribund real estate sector.

In order to increase investment, local government can issue up to 4.4 trillion yuan in special purpose bonds, usually used to fund infrastructure and development projects--a boon for industrial-metals demand.

TODAY'S TOP HEADLINES

New Version of Merck's Blockbuster Cancer Drug Threatened by Patent Battle

A dispute over a microscopic enzyme is threatening Merck & Co. plans to sell a new version of Keytruda, the cancer drug that generates nearly half of the company's sales.

Merck has been tweaking Keytruda to make it easier to use-and to protect billions of dollars in revenue the company could lose after U.S. patent protection runs out in 2028 and rivals can begin selling copycats.

Target Wants to Bring Back the 'Tarzhay' Magic

Target is determined to bring back some of its lost "Tarzhay" mojo. It won't be easy.

The company on Tuesday reported that comparable sales rose 0.1% in its fiscal year ended Feb. 1, marking the third consecutive year of badly lagging behind Walmart's U.S. operations on that metric. Over the past two years, its shares have shed about 29% while those of big-box peers such as Walmart and Costco Wholesale more than doubled.

Adidas Aims to Increase Sales, Win Market Share Amid Nike's Struggles

Adidas is targeting continued sales growth and market-share gains this year, as arch-rival Nike seeks a turnaround to revive its struggling brand.

The German sporting-goods company embarked on its own revamp after Bjorn Gulden took the helm in 2023, taking steps to reposition its brand and clear out excess inventory. The company said its sales in North America and the region that includes China returned to double-digit growth in the fourth quarter.

Bayer Warns of Lower Earnings as Turnaround Continues

Bayer guided for lower earnings this year as it continues to work through a turnaround plan, but said performance is expected to improve from 2026.

The pharmaceutical and agricultural conglomerate said all three of its business units have attractive long-term prospects, but that it must first steer them through a challenging period ahead before it can take advantage of any opportunities.

The Two-Headed Monster Stalking the Economy Has a Name: Stagflation

Stagflation has entered the chat.

President Trump's decision to dramatically raise tariffs on imports threatens the U.S. with an uncomfortable combination of weaker or even stagnant growth and higher prices-sometimes called "stagflation."

China Sets 2025 Growth Target at About 5% Despite Looming Trade Tensions

China has set an economic growth target of around 5% for 2025, unchanged from last year, despite mounting challenges from trade tensions, weak domestic demand and a prolonged property downturn.

The target, announced by Chinese Premier Li Qiang on Wednesday, comes after China said that it met its 2024 growth goal, with gross domestic product expanding by 5%.

Trump Touts Rapid Action on Border, Budget and Economy

WASHINGTON-President Trump put his disruptive return to power on full display during a prime-time address to Congress, offering a no-apologies assessment of his decisions to crack down on illegal immigration, slash the federal workforce and impose stiff tariffs on imports.

(MORE TO FOLLOW) Dow Jones Newswires

March 05, 2025 06:12 ET (11:12 GMT)

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