Can U.S. stock markets keep rising even at the rest of the world's expense? President Donald Trump seems determined to test the limits of American exceptionalism but it's a risky approach.

New tariff threats and Trump's castigation of Ukraine's President Volodymyr Zelensky shook Europe. While the S&P 500 hit another record on Wednesday, the Stoxx Europe 600 Index dropped.

Trump's not wrong when he says the Russia-Ukraine conflict is far more important to Europe than the U.S. However, upending the global political order while also pushing for a restructuring of international trade is piling pressure on an already stretched market.

Among the risks mentioned in the Federal Reserve's minutes of its January policy meeting were changes to trade policy. Proposed tariffs on autos, semiconductors, and pharmaceutical products will likely raise prices for the U.S. consumer. Meantime, vague proposals on Wednesday for a meeting with China's President Xi Jinping do little to offset the risks to efficient supply chains as American companies look for alternatives to the People's Republic.

If the tariffs do succeed, the results won't necessarily be to the market's liking. Foreign governments and sovereign-wealth funds have plowed surplus funds into U.S. assets. Trump could find that reducing trade deficits also weakens impetus for U.S. stock gains.

There are signs of a shifting mood. A Vanguard survey of investors found their expectations of market gains over the next 12 months have dropped to an average of less than 5%, from a rate of 6%-7% throughout 2024. The America First trade can't go on forever.

-- Adam Clark

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Fed Minutes: Scant Interest in Rate Cuts Anytime Soon

Federal Reserve policymakers, citing a high degree of uncertainty during their January meeting, agreed that the central bank was well positioned to take its time assessing the evolving economic outlook, according to their latest meeting minutes. That means there is a low chance of another move on rates in the near term.

   -- Fed Chairman Jerome Powell said they would need to see "real progress on 
      inflation" or unexpected weakness in the labor market before considering 
      further rate cuts. Central bank officials aren't expected to cut rates at 
      their March 18-19 meeting. 
 
   -- Federal Open Market Committee members noted "elevated uncertainty" about 
      the scope, timing, and potential economic fallout from President Donald 
      Trump and the Republican-controlled Congress' changes to trade, 
      immigration, fiscal, and regulatory policies. They held rates steady in 
      January. 
 
   -- Officials said the risks to achieving the bank's dual mandate of price 
      stability and maximum employment were "roughly in balance," with some 
      members indicating that the target range may not be far above its neutral 
      level, where borrowing costs neither boost nor slow economic growth. 
 
   -- Some at the Fed appear unconvinced that inflation will return to its 
      desired level of 2% anytime soon. That suggests the Fed may not need to 
      move rates that much lower. The probability of a first-half rate cut 
      stayed at 46.6%, according to the CME FedWatch Tool. 

What's Next: The Commerce Department on Feb. 28 will release the January personal-consumption expenditures index, the Fed's preferred inflation gauge, which could show milder price pressures. Analysts expect core PCE excluding food and energy prices to have edged down to 2.6% from a year ago.

-- Paul R. La Monica and Janet H. Cho

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President Favors House Spending Bill. Senate Moves Ahead With Its Own.

Senate lawmakers were caught off guard Wednesday after President Donald Trump threw his support behind a House funding plan that tackles his agenda in one fell swoop versus the Senate's plan to address it in two parts. The Senate plans to vote this week on its own bill.

   -- Trump favors the House's bill, urging both chambers to pass "one big 
      beautiful bill" rather than split his agenda. Senate Majority Leader John 
      Thune (R, S.D.) told reporters on Wednesday he "didn't see that one 
      coming." Senate GOP leaders were meeting on a "skinny" bill focused on 
      border, energy, and defense spending. 
 
   -- The Senate hopes to vote on its roughly $340 billion bill this week. Sen. 
      Lindsey Graham (R, S.C.), who proposed it and led it out of the budget 
      committee, said lawmakers will have a vote-a-rama, a procedure that 
      allows for proposed amendments, today. Republicans are trying to pass the 
      bill without Democrats. 
 
   -- The House plan addresses border and defense funding, the debt ceiling, 
      and trillions of dollars in spending cuts. House Majority Leader Steve 
      Scalise (R, La.) told Punchbowl News, "We've got a bill that achieves all 
      of President Trump's priorities, and we're going to move it next week." 
 
   -- Many lawmakers have expressed concern about steep cuts to Medicaid, the 
      government insurance plan for low-income people. Trump told Fox News on 
      Tuesday that "Medicare, Medicaid, none of that stuff is going to be 
      touched." House Republicans contemplate cuts as part of their plan. 

What's Next: Senate Republicans are focused on what they call immediate priorities in this first bill, and will turn to tax policy in a later effort, which buys them time to work out extending Trump's 2017 tax cuts by the Dec. 31 date when they are set to expire.

-- Liz Moyer

***

Red-Hot Palantir Stock Suffers From Double Blow

Palantir Technologies tumbled 10% late Wednesday as investors had several reasons to suddenly worry about the red-hot artificial-intelligence stock, including the CEO's new plan to sell shares and potential U.S. defense budget cuts.

   -- CEO Alex Karp adopted a new trading plan to sell up to 9.975 million 
      shares, through Sept. 12 this year, worth close to $1.2 billion based on 
      Palantir's Wednesday closing price. Karp canceled an existing plan 
      adopted in Dec. 2023 for the sale of up to 48.9 million shares. He sold 
      40.7 million shares in 2024, according to Barron's calculations. 
 
   -- The Trump administration has warned the Department of Defense about 
      budget cuts ahead, The Washington Post reported Wednesday. Palantir has 
      several contracts with the government department for use of its AI 
      technology. 
 
   -- The data analytics company's stock is the second-best performer in the 
      S&P 500 this year, even after its 10% slump Wednesday -- up 48% in 2025 
      and 379% over the past year. The shares trade at an eye-watering 202 
      times future earnings. 

What's Next: Palantir's meteoric rally and lofty valuation mean any missteps in its financial results, which have been stellar recently, could set the stock up for a period of poorer performance.

-- Callum Keown, Ed Lin, and Jacob Sonenshine

***

Apple's Lower-Priced iPhone Could Speed Qualcomm Departure

Apple unveiled its latest, lower-priced iPhone 16e, an offering aimed at increasing iPhone sales, spurring upgrades, and boosting its market share around the world, including in China. But the phone contains something else: Apple's first in-house cellular chip, which has implications for Qualcomm.

   -- Apple's newest device starts at $599 and will be available for preorder 
      on Friday and in stores on Feb. 28. The more bare-bones 16e costs less 
      than the base iPhone 16, but is more expensive than previous SE models 
      that started at $429. It's also priced higher than some analysts 
      expected. 
 
   -- The cellular chip, which Apple named the C1, performs a critical function 
      by enabling cellular connections. Apple wants to test out the in-house 
      modem before including it in its primary iPhones. Eventually it will stop 
      paying billions of dollars a year to cellular-chip-maker Qualcomm. 
 
   -- The 16e includes Apple's artificial intelligence software powered by the 
      A18 chip, and contains a battery that can last up to six hours longer 
      than the iPhone 11. Instead of a home button fingerprint reader, users 
      unlock the 16e using FaceID facial recognition. 
 
   -- Apple's $69.1 billion in first-quarter iPhone sales missed analysts' 
      estimates. The 16e's lower price carries the risk that consumers who want 
      to acquire Apple's AI software decide to trade down from the base model 
      15 or 16 series to the less expensive option, said UBS's David Vogt. 

What's Next: Apple's next generation iPhone, which some analysts think will be the iPhone 17, could arrive this fall. If Apple's modem works well enough, Edward Snyder, a managing director of Charter Equity Research, said Apple could be completely free of Qualcomm chips in around two years.

-- Angela Palumbo and Janet H. Cho

***

Bill Ackman's Berkshire Hathaway Dreams Versus Warren Buffett's

Investment manager Bill Ackman outlined his plan to gain control of real estate company Howard Hughes Holdings and turn it into a modern-day Berkshire Hathaway that would invest in small companies. But Ackman's proposal has some substantial differences with Warren Buffett's conglomerate.

   -- Ackman's plan includes a lucrative fee structure that could pay his 
      flagship Pershing Square Holdco about $72 million annually, Barron's 
      estimates. The fee would be 1.5% of Howard Hughes' market value. As 
      Berkshire's CEO, Buffett has long earned a $100,000 annual salary. 
 
   -- Ackman's Pershing Square would buy 10 million newly issued Howard Hughes 
      shares for $90 a share, increasing its ownership to 48% from 37.6%. HHH's 
      management team would run the real estate business while Ackman's team 
      would look for investment opportunities using the $900 million raised. 
 
   -- Ackman previously proposed that Pershing Square gain control by 
      purchasing about $1 billion of publicly held stock at $85 a share. But 

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February 20, 2025 06:32 ET (11:32 GMT)

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