Andrew here. If you simply read the headlines, you’d think the world is more fragile than ever. But if you watched only stock tickers, you’d think that there is almost no risk in the market and that everything is looking up. So which is it? We take a look at the surprising divergence.
We also do a post-mortem on the Amazon Web Services outage, and we have a scoop on a deal in the cybersecurity industry.
A paradoxical market rally
A government shutdown. An expanding trade war. Turbulence in the credit and labor markets. And a data blackout that has forced Wall Street into a guessing game.
None of that is slowing down the S&P 500, which is near another high on Tuesday. The benchmark index has risen roughly 35 percent since President Trump announced reciprocal tariffs in April, according to Morgan Stanley.
But there are a growing number of reasons for market watchers to fear that the rally won’t last.
The latest test will come with the new quarterly earnings season. There are high expectations for bigger corporate profits.
One major question: Will tariff costs start showing up in the results this quarter? G.M. on Tuesday raised its full-year guidance as it lowered its forecast for how much the levies would cost the company.
There are other wild cards at play, including:
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Whether the government shutdown ends. Stocks rebounded on Monday after Kevin Hassett, a top White House economic adviser, predicted that the shutdown would most likely “end sometime this week.” But lawmakers remain far apart as they battle over health care subsidies.
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The fervor for Big Tech stock. Apple hit a record on Monday, closing in on a $4 trillion market value on reports of resurgent iPhone demand. But can the tech giant and its peers, which are continuing to spend big on artificial intelligence, keep meeting investors’ lofty expectations? Apple, Amazon, Alphabet, Microsoft and Meta report results next week.
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Lower oil prices. West Texas Intermediate, the U.S. crude oil benchmark, traded around $58 on Tuesday, after touching an almost five-year low last week. Further declines could reduce inflation, giving the Fed the cover to further cut interest rates more.
Ed Yardeni, the veteran market watcher, said that lower oil prices could help lower the yield on the 10-year Treasury note to 3.75 percent, a potentially big assist to homeowners and home buyers.
One market move is concerning some analysts. Despite its sharp rise, the S&P 500 has trailed “eye-popping gains” made by small listed companies, Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, wrote in a research note on Monday. Some of those businesses have shaky or untested finances.
She and Torsten Slok, the chief economist at Apollo Global Management, worry that investors are taking bigger and bigger bets on unprofitable companies.
What about the consumer? Affluent Americans are feeling flush from huge stock investment gains and are continuing to spend.
But lower-income Americans, strung by inflation and an uneven job market, are pulling back. Expect that split-screen view to feature on some upcoming earnings calls; it’s already showing up in opinion polls.
HERE’S WHAT’S HAPPENING
Sanae Takaichi is elected as Japan’s prime minister. Takaichi, the first woman to hold the position, campaigned on promises like a more expansive fiscal policy and more government investment in key sectors including defense and technology. (Japanese stocks ended up slightly on Tuesday on the news.) But Takaichi will face questions about how she will deal with newly rattled relations with the U.S. She is set to meet President Trump next week.
The U.S. makes a rare earths deal with Australia. Under the terms of the agreement, the two countries will invest together in mines and processing projects in Australia to help with production of critical minerals for manufacturing. The move underscores the Trump administration’s focus on shoring up American supply chains, as China restricts exports of some rare earths to gain leverage in trade talks with Washington.
U.S. banks question the likelihood of repayment for a $20 billion bailout for Argentina. Lenders including JPMorgan Chase and Bank of America are seeking assurances that they won’t lose money on the loan package, and are waiting to hear what kind of collateral Buenos Aires can provide, according to The Wall Street Journal. Despite Washington buying pesos directly, the currency is still falling, deepening uncertainty about the effectiveness of U.S. aid to Argentina.
The A.W.S. post-mortem
Web services around the world are mostly back up after an outage involving Amazon Web Services early on Monday knocked out an array of sites and apps.
But the damage inflicted by the failure of a crucial cloud computing platform underscored the fragility of modern internet infrastructure — and raised questions about whether anything could be done to fortify it.
Scenes from the meltdown:
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The websites of airlines like Delta and United were affected, leaving some customers unable to gain access to check-in services or see their reservations.
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Coinbase said customers would not be able to connect to their accounts at the crypto exchange.
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Zoom video calls struggled, Ring doorbells didn’t work and Fortnite was down.
The economic cost isn’t clear. Amazon said that the outage started shortly after 3 a.m. Eastern and largely ended by 5:27 a.m., though reports of glitches persisted for the rest of the day.
Previous internet outages led to big economic consequences: A disruption last year related to CrowdStrike, which was much wider and lasted longer, led to an estimated $5.4 billion in losses for the Fortune 500. Investors don’t appear to believe that Amazon will be on the hook for much: Shares in the tech giant rose 1.6 percent on Monday.
The big question? How to avoid a repeat. Some analysts said that companies would look at diversifying their cloud computing sources beyond Amazon Web Services, reducing the potential points of failure.
Alexandra Geese, a member of the European Parliament from Germany, argued that the disruption underscored the importance of European companies hosting critical European tech services in Europe.
And Senator Elizabeth Warren, Democrat of Massachusetts, said the outage showed that Amazon had become too powerful: “If a company can break the entire internet, they are too big. Period,” she wrote on X. That said, it’s unclear whether separating AWS from Amazon would make it more reliable.
Exclusive: Dataminr acquires ThreatConnect
Dataminr is acquiring the cybersecurity start-up ThreatConnect, which monitors internal data sources for threats, in a $290 million cash-and-equity deal, Niko Gallogly is first to report.
Founded in 2009, Dataminr scrapes public data sources to provide alerts about breaking news, enterprise threats and cybersecurity risks for customers including Google, Microsoft, OpenAI, the Defense Department and NATO.
At a time when artificial intelligence companies are securing eye-watering valuations, Dataminr hopes that the deal will enable it to combine private and public data for an edge in its generative A.I. products.
Doubling-down on A.I. In 2023, Dataminr laid off 150 employees to cut costs and invest in A.I. This fall, the company began offering so-called intel agents that provide A.I.-generated briefs explaining the context of events in real time. With its acquisition, Dataminr’s agents will use ThreatConnect’s internal data monitoring abilities to tailor the alerts to each company, Ted Bailey, Dataminr’s C.E.O., told DealBook.
In September, Dataminr closed a $300 million round of convertible-debt financing led by Fortress and NightDragon that did not set a valuation. Bailey declined to share internal valuation projections, but noted that in 2021, when the company raised a $475 million round of venture capital at a $4.1 billion valuation, it was making less than $100 million in annual revenue.
Dataminr expects to earn about $200 million in revenue this year. “Given the category that we’re in — A.I., defense, tech, data — there are some public market comps that have enormously favorable multiples,” he added.
Eyeing an I.P.O. As it prepares for a public market debut, Dataminr recently named Tiffany Buchanan its C.F.O. Buchanan joined from the cybersecurity firm CrowdStrike, which she helped to go public in 2019.
Dataminr is not yet profitable, Bailey said, but “showing the trend toward profitability is a critical aspect to being I.P.O.-ready.”
Louvre loot
The hunt for the Louvre Museum thieves who made off with jewelry of “incalculable” value continues, though hopes are fading that the items will be retrieved.
The speedy smash-and-grab — here’s a must-read on how it went down — netted the burglars a fortune including a royal sapphire necklace; another made of diamonds and emeralds with matching earrings, and a tiara worn by Empress Eugénie that featured more than 200 pearls and nearly 2,000 diamonds.
But the intent behind the heist might be more prosaic, if no less worrying, art experts told The Times’s Alex Marshall: a desire to make a major “commodity theft” score.
Marshall writes:
Whereas 20th-century museum security teams typically faced the threat of thieves stealing art masterpieces, Sunday’s Louvre heist is the highest-profile example yet of the trend in museum robberies purely for gems or precious metals.
James Ratcliffe, the director of recoveries at the Art Loss Register, a London-based company that maintains a database of stolen artifacts, said that thieves took on a bigger risk when targeting prominent institutions like the Louvre, “but there’s also a bigger reward” given the number of jewels on show. “That’s the gamble,” he added. …
Dick Ellis, a former leader of the London police force’s art crime unit, said that a desire to steal jewels that can easily be sold on could also explain why the Louvre thieves didn’t take the renowned and easily identifiable Regent and Sancy diamonds from the museum’s Apollo Gallery — although Pieter Bombeke, a diamond cutter in Antwerp, Belgium, said that the Louvre would have detailed visual records of all the stones that form part of the lost items, meaning that even the smallest stones would be recognizable and therefore need to be recut.
Museums and stately homes around Europe have been struck by commodity-focused crime over the past two decades.
But not everyone is convinced that’s what happened here. Joanna Hardy, a jewelry specialist who sold one of the items targeted on Sunday at a Sotheby’s auction before the Louvre acquired it, said there were easier ways of getting jewels. “Why would you do this unless you’re really, really stupid?” she said.
THE SPEED READ
Deals
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Unilever said that it would delay the spinoff of its ice cream business, citing complications with the S.E.C. The agency has had to reduce staffing because of the U.S. government shutdown. (FT)
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Ari Emanuel, the superagent turned entertainment mogul, is getting into live theater by buying TodayTix, a ticketing company. (NYT)
Technology and artificial intelligence
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Power cuts, water outages and more: Vulnerable communities worldwide face high costs for being too close to the construction of huge data centers that support A.I. companies. (NYT)
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“The F.T.C. Is Disappearing Blog Posts About A.I. Published During Lina Khan’s Tenure” (Wired)
Best of the rest
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A South Korean court dismissed charges of K-pop-related stock manipulation against Kim Beom-su, the billionaire founder of the tech conglomerate Kakao. (Bloomberg)
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NASA is looking into Plan B options for getting back to the moon, as SpaceX’s efforts experience delays. (NYT)
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Andrew Ross Sorkin is a columnist and the founder of DealBook, the flagship business and policy newsletter at The Times and an annual conference.
Bernhard Warner is a senior editor for DealBook, a newsletter from The Times, covering business trends, the economy and the markets.
Sarah Kessler is the weekend edition editor of the DealBook newsletter and writes features on business.
Michael J. de la Merced has covered global business and finance news for The Times since 2006.
Niko Gallogly is a Times reporter, covering business for the DealBook newsletter.
The post What Could Torpedo the Stock Rally appeared first on New York Times.
