Welcome back to another edition of 7AM Research.

What a week. The Supreme Court just handed down one of the most consequential trade rulings in decades, oil is trading at its highest levels since last August, and the most important earnings report of the season drops this Wednesday night.

But here is the question nobody seems to be asking clearly: does the tariff ruling actually change anything? And if oil is spiking on Iran tensions, what happens to prices if a deal gets done? We dig into both.

We are also looking closely at a fascinating split developing inside the market. Two thirds of S&P 500 stocks are outperforming the index year to date. That sounds like great news. But the only comparable period in the past 50 years was 2001, right at the start of the dotcom bust. We explain why this matters, and why it does not necessarily mean the bull market is over.

Then there is Nvidia. All eyes are on Wednesday evening. With China H200 sales sidelined and demand from hyperscalers still accelerating, we believe the setup points to upside. Plus, we cover Snowflake, which the market has been punishing despite solid underlying fundamentals, and Monster Beverage, which appears to be accelerating just as the stock breaks to new highs.

Let's get into it.

Equity Market Performance

The S&P 500 posted a gain of 1.08% last week, closing at 6,910. The week was shortened and packed with significant events, most notably the Friday afternoon Supreme Court ruling on presidential tariff authority.

The court ruled that the International Emergency Economic Powers Act does not authorize the President to impose tariffs. Markets reacted with an immediate spike higher, but the initial euphoria faded quickly as the implications became clearer. President Trump announced a backup plan and indicated existing tools under Sections 301, 232, 201, and 122 remain fully operational. In other words, the ruling limits one specific pathway, not the overall tariff toolkit. A key remaining uncertainty is whether the ruling creates exposure for tariff refunds, which could reach into the $175 billion range, though that outcome remains highly uncertain.

Our view is that this ruling is moderately bullish. It removes some tail risk and adds legal complexity to future tariff imposition, but tariffs as a policy instrument are far from dead.

Economic Data: A Mixed Picture

Beyond the tariff news, last week delivered some challenging economic data. December PCE inflation came in meaningfully above expectations, rising to 2.9% on a headline basis and 3.0% on a core basis. That represents the highest core reading since late 2023 and reinforces the Federal Reserve's cautious stance on rate cuts.

At the same time, Q4 2025 GDP growth came in at just 1.4%, well below the 3.0% expectation. The ongoing government shutdown appears to have weighed on activity. The combination of hotter inflation and weaker growth is not a comfortable mix, though we believe the overall market trajectory still favors further upside as momentum and earnings remain constructive.

Sector Rotation and Breadth

One of the more interesting developments right now is the internal composition of the market's moves. Approximately 66% of S&P 500 stocks are outperforming the broader index year to date, an unusually high proportion. The money flow trend has been consistent: capital is rotating out of the Magnificent 7 mega-cap names and into smaller and mid-cap stocks.

This rotation is worth monitoring carefully. The last comparable period was 2001, when broader market participation actually masked building weakness in the Technology sector that ultimately weighed on the whole market. We are not saying history is repeating. But the widening gap between semiconductors and software stocks is a real divergence that deserves attention.

On the economic data front, last week also brought some genuine positives. December Durable Goods New Orders (excluding transportation) grew 0.9% sequentially, well above the 0.3% consensus. January Industrial Production also surprised to the upside at 0.7%, exceeding the 0.4% expectation and returning to pre-pandemic levels. These figures support the view that non-technology sectors of the economy remain on solid footing.

Additionally, the Federal Reserve began purchasing U.S. Treasuries in January, injecting liquidity into the financial system. While the pace is modest compared to pandemic-era quantitative easing, incremental liquidity is generally supportive for equity markets.

The technical picture for the S&P 500 improved last week. After testing the bottom of its consolidation range around 6,792 on February 17th, the index bounced and recovered into 6,910 following the tariff ruling. The upper end of the consolidation range sits at 7,000, and we expect that level to be tested in the coming sessions.

Private Credit: A Risk to Watch

Beneath the surface, a notable stress signal appeared last week when a major private credit fund halted investor redemptions. This is not directly linked to the equity market, but it is relevant because a meaningful portion of data center and AI compute buildout financing flows through private credit arrangements, not just from corporate balance sheets.

Private credit defaults have risen from 2.8% a year ago to 4% currently. Some estimates suggest that up to 35% of the $1.7 trillion private credit market has exposure to businesses at risk of AI-driven disruption. A CoreWeave data center project in Pennsylvania reportedly could not secure $4 billion in financing through this channel last week. If funding constraints begin to affect the infrastructure buildout narrative, that could have broader market implications. We are watching this closely.

Market Outlook and Technical Setup

We remain bullish on the S&P 500 with a target of 7,100 and a stop-loss at 6,600. The consolidation range between 6,800 and 7,000 has held since early February, and we expect it to resolve to the upside. The broader momentum is intact, corporate earnings remain solid, and the AI investment cycle is far from over.

The key technical markers to watch this week are the 7,000 resistance level and the behavior of the daily RSI, which bounced off approximately 40 support on February 17th. A clean break above 7,000 would be a constructive signal.

Federal Reserve and Rates

The Fed is expected to remain on pause through the end of Chair Powell's term in May 2026. The December PCE print reinforces that view. However, we believe the current hawkish posture is setting up a potential dovish pivot into the second half of 2026, particularly if GDP growth and employment continue to soften.

Treasury bonds are showing strength. TLT broke above $90 last week before pulling back to $89 support, which held. We remain bullish on TLT with a $93 target and an $85 stop-loss. A move toward that target would correspond with the ten-year yield falling back below 4%.

Key Events to Watch This Week

Sector Themes

Sectors showing relative strength heading into this week include Energy, Materials, Gold Miners, Regional Banks, and Telecommunications. Areas of relative weakness include CleanTech, Cybersecurity, broader AI software, FinTech, and Solar.

Retail stocks are also showing resilience, holding above late 2025 highs. Several major retailers report in the coming weeks, with Home Depot and Lowe's among the names due shortly.

The software sector remains the most challenged area of the market. Nearly 70% of software and services stocks are down since their last earnings reports, with FinTech stocks similarly weak at around 80% negative. The core issue is straightforward: investors are repricing the competitive risk that AI models pose to traditional software workflows. This is a structural headwind that may take time to resolve.

Price Action and Market Dynamics

WTI crude (April 2026 contract) surged 5.63% last week to close at $66.38 per barrel. The sharp move higher was driven almost entirely by geopolitical developments in the Middle East, as the United States continued assembling military forces in the region in an effort to pressure Iran toward a nuclear agreement. The current US military presence in the region is reportedly the largest since the 2003 Iraq invasion.

President Trump indicated a decision on potential military action could come within ten to fifteen days. He also left open the possibility of a diplomatic resolution. Oil markets are pricing in the scenario most feared by traders: a conflict that disrupts flows through the Strait of Hormuz, through which approximately 20% of global oil supply passes. That fear is driving a significant geopolitical risk premium into the current price.

Our View: Upside is Limited

Despite the headline-driven surge, we continue to hold a bearish view on crude oil and maintain a $60 target with a $70 stop-loss. Our reasoning is grounded in the nature of the current administration's priorities.

The Trump administration has consistently prioritized lower energy prices and has described itself as a peace-oriented presidency. A prolonged military conflict with Iran directly contradicts both of those goals. We believe any military action, if it occurs, is more likely to be a targeted and brief operation rather than a sustained campaign. Once the geopolitical risk premium is priced out, which we expect in the coming weeks, oil prices are likely to retrace.

Technical Setup

From a technical perspective, crude oil broke above the $64.00 downtrend resistance level on February 18th, reaching a high of $67.00 on February 20th before running into resistance. The daily RSI pushed above 55 on the breakout but then rejected at approximately 65 resistance. This pattern suggests the near-term rally has run into a ceiling.

The daily top Bollinger Band sits at $66.90, which crude essentially tagged and rejected. We believe the geopolitical premium will fade, and we expect WTI to move back toward and potentially below $60 over the coming weeks. We remain bearish on WTI crude with a $60.00 target and $70.00 stop-loss.

Natural Gas: Shifting to Neutral

Natural gas prices fell 5.28% last week to close at $3.05 per MMBtu as winter weather moderated and inventory data came in softer than expected. The US EIA reported a draw of 144 Bcf for the week ended February 13th, slightly below the 149 Bcf expectation and below the five-year seasonal average draw of 151 Bcf.

Dry gas production in the Lower 48 is running 12.4% above year-ago levels, while demand has pulled back meaningfully from the seasonal peak. After our bearish setup achieved its objective with prices falling below $3.00 midweek, we closed that position and we are now taking a neutral stance on natural gas. We will look for opportunities to re-establish a short position on rallies into resistance.

Gold: Risk Premium In, Pullback Expected

Gold prices (April 2026 delivery) closed the week 1.29% higher at $5,116 per ounce, a reversal from the early-week selloff that took prices as low as $4,854 on February 17th. The rebound was driven by rising US-Iran tensions, which provided a safe-haven bid that overrode the somewhat risk-positive impact of the Supreme Court's tariff ruling.

The Friday tariff ruling would typically be a headwind for gold, as it removed a significant source of market uncertainty and sent risky assets higher. Yet gold extended its gains into the weekend, reflecting how firmly the geopolitical risk narrative has taken hold of the precious metals market.

Why We Remain Cautious Near-Term

We continue to hold a bearish near-term view on gold with a $4,700 target and a $5,300 stop-loss. The long-term fundamental case for gold ownership remains strong: central bank demand is elevated globally, geopolitical risk is persistent, and real interest rates remain negative in many economies. However, several near-term factors suggest a pullback is coming.

First, the US Dollar Index strengthened last week, rising above 98.00 for the first time since late January. Dollar strength creates direct price pressure on gold. Second, the geopolitical risk premium that drove the rebound from $4,854 is, in our view, set to unwind once the Iran situation clarifies. Third, the technical picture shows that gold has yet to reclaim its prior high of $5,145, establishing what appears to be a lower high. Downtrend resistance now sits around $5,100.

Technical Outlook

Gold's daily RSI recovered to approximately 60 resistance before the weekend, while the Bollinger Bands have shifted to $5,320 on the upside and $4,700 on the downside. The lower band at $4,700 aligns closely with our price target and represents a zone of natural technical support.

We are not bearish on gold as a long-term holding. The structural backdrop of central bank demand, fiscal uncertainty, and global geopolitical friction all support gold over a multi-year horizon. But in the near term, we believe the current level reflects an excess of short-term risk premium that is likely to be walked back. We maintain our bearish stance with a $4,700 target and $5,300 stop-loss.

Treasury Bonds: Building Momentum

The iShares 20+ Year Treasury Bond ETF (TLT) had a constructive week, breaking above $90 before pulling back to hold $89 support. The daily RSI bounced off approximately 60 support following the brief pullback, and the daily top Bollinger Band has shifted up to $90.26.

The ten-year yield closed the week at 4.09%, up 4 basis points. We believe the yield is in a near-term downtrend and expect it to move back below 4.00% as the Fed maintains its pause and growth concerns persist. We remain bullish on TLT with a $93.00 target and $85.00 stop-loss.

Nvidia Corporation (NVDA): The Most Important Earnings Report of the Season

Company Overview

Nvidia reports its fiscal fourth-quarter 2026 earnings on Wednesday, February 25th after market close. The consensus earnings estimate sits at $1.52 per share on revenue of $65.56 billion, both within the upper half of the guidance range provided at the last earnings release of $1.44 to $1.56 per share on revenue of $63.7 billion to $66.3 billion. The positioning of those consensus numbers within the guidance range leaves meaningful room for an upside surprise.

The China Sales Wildcard

One of the more constructive aspects of the current setup involves China. Nvidia's H200 chip sales to China were not authorized by the US government until a few weeks after the company's last earnings report. As of just two weeks ago, Nvidia had still not finalized terms with the government. This means there were no China H200 sales in the fourth quarter, and essentially none in the very beginning of the current quarter either.

Why does this matter? H200 chips sold to China carry a 25% revenue fee add-on and lower margins than domestic sales. The absence of those sales is expected to support overall gross margins, which the company has guided toward the mid-70% range for fiscal year 2027. With supply costs rising modestly but pricing power remaining intact, we believe the margin situation is better than the market may be pricing in.

Demand Picture Remains Strong

The hyperscaler spending cycle has not slowed. Major cloud providers have increased their capital expenditure commitments for 2026, and Taiwan Semiconductor, the world's dominant chip manufacturer, has confirmed that it is the supply chain bottleneck rather than demand being the constraint. That matters enormously for Nvidia's pricing power and revenue trajectory.

For the first quarter forward, the consensus revenue estimate is approximately $71.6 billion, with earnings around $1.67 per share. However, $74 billion in revenue with gross margins maintained in the mid-70% range implies earnings in the range of $1.65 to $1.79 per share, suggesting upside potential relative to the current consensus.

Technical Setup

Nvidia has been trading in a range of approximately $171 to $193 in recent weeks. The stock tends to move directionally in line with its earnings trajectory, and without the margin headwind from China H200 sales, the technical setup points toward a potential breakout to the upside from this range if the quarter comes in ahead of expectations.

When Nvidia has guided first-quarter revenue above the consensus estimate in the past, the stock has opened higher on the day of the report approximately 71% of the time with an average opening gain of 4.4%. When guidance was merely in line with consensus, the stock still opened higher 59% of the time by an average of 1.7%. The direction of guidance will be the pivotal variable on Wednesday night.

Snowflake (SNOW): The Misunderstood Data Play

Why the Selloff May Be Overdone

Snowflake reports Wednesday, February 25th after market close. Sentiment heading into this report is unusually negative. The stock has been caught in the broad software selloff of 2026, dragged lower alongside companies that face genuine AI disruption risk. However, we think Snowflake's situation is meaningfully different.

The logic is straightforward: AI needs data. Every new AI model, every video generation tool, every inference application requires data infrastructure to function. As AI adoption accelerates and moves from training into production deployments, data consumption accelerates with it. Companies like Snowflake are, in this view, not victims of the AI wave but beneficiaries of it.

The consensus EPS estimate is $0.27 on revenue of $1.25 billion. However, market checks suggest upside potential: industry surveys of Snowflake customers show improved spend intentions, broader product adoption, and AI tailwinds driving workload growth. Multiple independent data checks point to demand that is incrementally positive relative to what consensus numbers reflect.

The Technical Challenge

We acknowledge the technical picture is difficult. After what appeared to be a breakout setup two quarters ago, the stock has since reversed sharply and now faces resistance around $200 with limited technical support until considerably lower levels near $100. Sentiment is at 6.6%, meaning very few market participants are leaning bullish into this report.

Given the deeply negative sentiment and evidence of improving fundamentals, we believe a positive earnings surprise could generate a disproportionately strong positive reaction. The risk, of course, is that if results disappoint, the stock remains a falling knife with limited nearby support. This is one to watch closely, particularly for those who want exposure to the data infrastructure side of the AI story.

Current Portfolio Positioning

We currently hold a modestly net long position in the overall equity market. Our positioning reflects confidence in the continuation of the bull market, supported by solid corporate earnings, improving macroeconomic data outside the technology sector, and constructive technical setups across multiple asset classes.

Our existing equity positions reflect conviction in the AI infrastructure theme. We hold long positions in Nvidia, Arista Networks, and Astera Labs. These names provide exposure across the compute, networking, and connectivity layers of the data center buildout. The hyperscaler CapEx cycle remains intact based on publicly available guidance from the major cloud providers, and we continue to view any near-term weakness in these names as an opportunity to evaluate adding rather than reducing exposure.

Strategic Rationale

The tariff ruling creates a more complex legal environment but does not fundamentally alter the economic landscape in our view. The administration retains significant tools to pursue trade policy objectives, and the refund liability question, while potentially significant, remains highly uncertain in terms of scope and timing.

We are watching the software sector carefully. The current decline may represent an overcorrection in some names like Snowflake, where AI is a demand driver rather than a threat. However, for software companies that genuinely face displacement risk from AI tools, we are cautious.

Summary of Positions

S&P 500: Bullish | Target 7,100 | Stop-loss 6,600

WTI Crude Oil: Bearish | Target $60.00 | Stop-loss $70.00

Natural Gas: Neutral | Closed bearish setup, monitoring for re-entry

Gold: Bearish (near-term) | Target $4,700 | Stop-loss $5,300

TLT (Treasury Bonds): Bullish | Target $93.00 | Stop-loss $85.00

No changes were made to our existing equity positions this week. We believe the technical consolidation across major indices represents a healthy setup ahead of a potential breakout to new highs. Nvidia's earnings Wednesday will be the key catalyst to watch.

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^{This report represents analysis and opinion rather than investment advice or recommendations. All views expressed reflect our current thinking and may change as new information becomes available. Past performance does not guarantee future results.}

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