The market has made its mind up on President Donald Trump's tariffs.

Investors have been pondering which trade threats are real and which are not ever since Trump returned to the White House last month. After a dramatic four weeks of 11th-hour deals, postponements and late swerves, markets seem to think the reality of levies might all be a hoax.

Or, at the very least, they think the impact will be limited. The S&P 500 closed at a record high Wednesday, along with Europe's Stoxx 600 index and Germany's DAX.

There is evidence to support the argument of a muted fallout but there's an element of "the boy who cried wolf" about all this -- some of the tariffs may end up sticking, which could trigger an upset for markets given stocks' resilient march higher.

The levies appear to fall into two distinct categories: blanket global tariffs targeting specific products and sectors; and those aimed at specific countries, open to negotiations. The proposed tariffs on Canada, Mexico, and China fall into the latter, along with a plan for reciprocal tariffs that could end up with countries lowering their own levies on the U.S.

Trump's latest threat of 25% tariffs on foreign autos, semiconductors, and pharmaceutical products, made Tuesday, goes alongside his steel and aluminum levies in the first category. It's harder to see how these could be avoided through negotiations, though.

Perhaps investors are just happy to ignore the threat for now -- the deadlines for imposing the various trade taxes all come to a head in March and April, and that's without any further delays. That is plenty of time for negotiations or U-turns. Maybe investors are just ignoring the politics for now, happy to benefit from the market's rally.

Either way, the stock market is convinced Trump's trade policy is nothing to worry about. Perhaps it would be wise to price in more of the risk that tariffs are more than a negotiating tactic.

-- Callum Keown

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Musk Doesn't Run DOGE, White House Says. Why It Matters.

Megabillionaire Elon Musk's federal government role continues to be under scrutiny. The White House has said the Tesla CEO isn't the head of the Department of Government Efficiency, nor is he an employee of the initiative. Instead, he's a special government employee as advisor to the president.

   -- Musk's title and where he works matter for a couple of reasons. First, 
      the declaration by Joshua Fisher, director of the U.S. president's office 
      of administration, was made in response to a federal lawsuit brought by 
      14 states to a district court in Washington, D.C., against Musk, DOGE, 
      and President Donald Trump. 
 
   -- The lawsuit challenges Musk's constitutional authority as head of DOGE 
      without Senate confirmation. It also says Musk is in violation of the 
      Constitution's appointments clause. The White House says Musk doesn't 
      need Senate confirmation and as a senior advisor he has no actual or 
      formal authority to make government decisions himself. 
 
   -- Many experts say that doesn't really pass the smell test, given Musk's 
      very public efforts at DOGE, including his posts about it on X and his 
      Oval Office appearance. Musk says he has a goal of "maximum transparency" 
      when it comes to his cost-cutting moves, and he is starting to disclose 
      details of his effort. 
 
   -- DOGE has posted partial "receipts" for $17 billion of the $55 billion it 
      says it has saved taxpayers so far, in cuts to various agencies and 
      staff. Acting commissioner of the Social Security Administration, 
      Michelle King, became the latest agency official to step down amid DOGE's 
      move to access government records. 

What's Next: Now DOGE has eyes on the Internal Revenue Service. Musk has already polled his 218 million X followers about whether they want an audit of the IRS (more than half of respondents said yes.) Now he has created a new DOGE IRS X account and is seeking tips on finding and fixing waste at the agency.

-- Abby Schultz and Janet H. Cho

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Big Tech May Have to Wait Longer for FTC's Merger Green Light

The Federal Trade Commission's new Chair Andrew Ferguson isn't turning a page on one Biden administration policy that Wall Street had hoped would change. The FTC is keeping the same merger review rules that have been in place since 2023, signaling some continuity despite other changes by the Trump administration.

   -- Ferguson is taking a more incremental institutionalist approach to rule 
      making. The agency has gotten a flood of new merger applications, and the 
      new chair wanted to clarify how things will move forward. He said the 
      FTC's and Justice Department's merger guidelines will be the framework 
      for ongoing merger-review analysis. 
 
   -- The 2023 merger guidelines came from former FTC Chair Lina Khan, a Biden 
      nominee, and the Justice Department's former antitrust head Jonathan 
      Kanter. Ferguson has made some changes at the FTC, namely he won't pursue 
      reinstating a Khan-era ban on noncompete clauses in employment contracts. 
 
   -- The agency isn't likely to pursue antitrust claims with the same vigor as 
      before. Khan's FTC put a chill on Big Tech deals. Apple closed 39 
      acquisitions during the first Trump administration, but only nine under 
      President Joe Biden. Alphabet closed 122 mergers under President Donald 
      Trump but only 40 under Biden. 
 
   -- Trump issued an executive order that would give his political appointees 
      more control over agencies, including the FTC. Independent agencies will 
      be required to submit major regulations to the Office of Management and 
      Budget for review. That office is run by Trump ally Russell Vought. 

What's Next: Investors and CEOs can probably expect some changes to the mergers process under Ferguson, but he is indicating that it may take time. While there may be a sharp reduction in antitrust enforcement under Ferguson, merger approvals will proceed much as before, at least for now.

-- Adam Levine

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Occidental Sees Unexpectedly Strong Adjusted Profit Amid Lower Crude Prices

Occidental Petroleum, a stock favored by Warren Buffett's Berkshire Hathaway, posted a surprisingly strong fourth quarter adjusted profit but revenue dropped in the period, as declining crude oil prices and an environmental liability affected earnings.

   -- Berkshire owns 28% of Occidental's stock, having continued to buy it this 
      month. It now holds about 265 million shares, according to regulatory 
      filings, for a total market value of about $13 billion. 
 
   -- Occidental reported adjusted profit of 80 cents a share and revenue of 
      $6.8 billion, down more than 9% from a year ago and below expectations. 
      But analysts expected adjusted EPS of 68 cents. Average worldwide 
      realized crude prices dropped 7% from the previous quarter to $69.73 a 
      barrel. 
 
   -- Occidental's earnings are closely tied to the price of crude. Total 
      average global production of 1,463 thousand barrels of oil equivalent per 
      day (Mboed) for the quarter surpassed the midpoint of guidance, led by 
      its operations in the Permian Basin, in the Rockies, and in other 
      domestic areas. 
 
   -- The company also noted after-tax items of $1.1 billion mainly from 
      booking a long-term environmental liability increase based on a recent 
      federal court ruling. Occidental said it has appealed the ruling and is 
      seeking recovery from potentially responsible parties. 

What's Next: Occidental executives will discuss results at a conference call at 1 p.m. Eastern time today. The company raised its quarterly dividend by 9% to 24 cents a share, payable on April 15 to shareholders of record as of March 10.

-- Brian Swint and Janet H. Cho

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More Gloom in Housing as Toll Brothers Falls Short

Toll Brothers missed first-quarter earnings and sales expectations, but the luxury home builder blamed impairments and a delay in selling an apartment property. Demand is healthy, but CEO Douglas C. Yearley, Jr. said affordability constraints and growing inventories are pressuring sales, especially at the lower end.

   -- The company reported earnings of $1.75 a share and revenue of $1.86 
      billion. It also reported 1,991 homes delivered in the quarter and 
      another 2,307 homes under contract, both of which also fell short of 
      expectations. 
 
   -- It capped a gloomy day in real estate news. The National Association of 
      Home Builders' monthly confidence index fell in February to its lowest 
      level in five months, reflecting a sharp drop in builders' expectations 
      for new home-building over the next six months amid concerns about 
      tariffs and higher housing costs. 
 
   -- The shift comes after President Donald Trump first announced and then 
      scaled back tariffs. Builders had initially asked for exemptions from the 
      tariffs, but have readjusted their expectations for 2025 because of 
      "policy uncertainty and cost factors," said NAHB chair Carl Harris, a 
      custom home builder from Wichita, Kan. 
 
   -- Trump's tariffs on imports from Canada, China, and Mexico are raising the 
      cost of building materials, which is spooking home builders. Even though 
      he paused some of those tariffs, uncertainty over whether they will be 
      reinstated is affecting builders' outlook. 

What's Next: Rising construction costs and appliances will boost new home prices because companies typically pass along those costs to consumers. Higher building materials costs could add another $17,000 to $22,000 to the average $422,000 price of a newly constructed home, according to one CoreLogic estimate.

-- Janet H. Cho and Shaina Mishkin

***

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February 19, 2025 06:37 ET (11:37 GMT)

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