AI Valuation Concerns Shift Markets to Risk-Off

Treasuries rally on AI jitters. Yields declined today on risk-off sentiment that was largely fueled by an 8% drop in Palantir as their Q3 earnings sparked fears of high AI valuations. Markets pulled back from equities and into Treasuries, and yields closed 2-3 bps lower across the curve. 2-year and 10-year yields are now at 3.58% and 4.09%, respectively, nearly flat on the week. Meanwhile, tech stocks plummeted today on valuation concerns with the S&P 500 and NASDAQ falling 1.17% and 2.04%, respectively. Bitcoin also fell ~7% today, dipping below $100,000 for the first time since June.

US–China trade truce faces another test. Speaking at a US-China Business Council event today, Chinese ambassador to the US, Xie Feng, named Taiwan, democracy and human rights, China’s political system, and development rights as four key issues that China views as nonstarters on the trade negotiation front with the US. Xie emphasized that “the most important thing is to respect each other’s core interests and major concerns,” and went on to warn that conflicts surrounding tariffs, industry, and technology will “lead to nothing but a dead end.” The statement comes just five days after the nations announced a one-year trade truce, following President Xi and President Trump’s landmark sit down. Another sticking point however, is that the recent meeting between the two leaders failed to resolve China’s desire to gain access to the most advanced US semiconductors, though President Trump said they discussed China’s access to Nvidia on the whole. Today’s comments by Xie are evidence of the many ways the two global economic powers’ one-year trade truce is likely to be tested.

Median first-time homebuyer age in the US hits 40. The National Association of Realtors’ annual profile of buyers and sellers was released today and painted a picture of increasing difficulty for Americans to purchase homes. The first-time home buyer age soared to 40, from 33 in 2021 and 29 in 1981. NAR’s deputy chief economist, Jessica Lautz says, “The implications for the housing market are staggering. Today’s first-time buyers are building less housing wealth and will likely have fewer moves over a lifetime as a result.” This past year, first-time homebuyers only made up 21% of the market, which is the lowest since the NAR started collecting data in 1981. This homebuyer data comes as the labor market is weakening and costs are elevated, although mortgage rates have begun to trickle down. The most recent MBA data showed that the average interest rate for 30-year fixed-rate mortgages was 6.30%, down from 7.09% earlier this year in January.