Macro

General Electric is being removed from the Dow Jones Industrial Average after over a century, replaced by Walgreens Boots Alliance as S&P Dow Jones seeks a more representative index. The move reflects GE's prolonged stock decline and ongoing restructuring, while boosting healthcare sector exposure. Market implications include reduced index demand for GE shares and increased scrutiny on its turnaround efforts amid falling valuation and federal investigations.

Industrial sentiment is bearish this month, weighed down by GE’s removal from the Dow after 111 years, symbolizing a diminished role for legacy industrial conglomerates in the index’s evolving composition. The replacement by Walgreens underscores a broader shift away from heavy industry toward healthcare and consumer-facing sectors, reinforcing sector-level concerns about relevance and structural transition. This symbolic demotion amplifies existing pressures, contributing to a downbeat tone despite stable macro conditions.

The Fed's annual review found persistent weaknesses in the German bank's US risk-management and controls, even as it passed on capital levels. The failure underscored ongoing doubts about Deutsche Bank's US operations following years of scandal and restructuring.

The finance sector absorbed negative sentiment from the Danske Bank CEO’s abrupt departure amid a $230 billion money laundering scandal centered in Estonia, intensifying scrutiny on compliance failures and cross-border oversight. Despite this, the sector registered a modestly bullish read as markets anticipated regulatory tightening to reinforce institutional safeguards rather than signal systemic breakdowns. The broader financial system’s resilience, supported by stable credit markets and steady interbank flows, tempered spillover fears.

PG&E's stock plummeted over 60% amid growing concerns of massive liabilities if its equipment is found responsible for the deadly Camp Fire, which killed 56 and destroyed over 8,500 homes. The utility may face costs up to $15 billion, exceeding its insurance and cash reserves, potentially forcing it to seek a state bailout. Legal actions have already begun, with a lawsuit alleging negligence in infrastructure maintenance.

Utilities sector sentiment is neutral this month despite heightened concerns over wildfire-related liabilities, as evidenced by the sharp decline in PG&E shares following the Camp Fire. While investor focus has intensified on regulatory and financial risks for investor-owned utilities in fire-prone regions, broader sector performance remains stable, with no widespread deterioration in credit quality or operational outlook across the industry. The impact is thus contained to specific regional and company-level risks rather than signaling a systemic shift.

The administration proposed 25% tariffs on steel and 10% on aluminum, citing national security, in a move that rattled global trade partners and manufacturers reliant on imported metals. The announcement marked an early escalation toward that year's broader trade conflict.

Trump's steel and aluminum tariffs protected US metal producers early, but the escalating US-China trade war then sapped base-metals demand and copper fell while gold weakened under a strong dollar, a mixed and souring year.

The Fed's four hikes lifted mortgage rates toward 5%, the highest since 2011, sharply cooling housing in the second half as sales dropped and homebuilders sold off hard; a positive start turned negative.

On November 28, 2018 CVS Health closed its roughly $69 billion purchase of insurer Aetna, combining a retail pharmacy chain, a leading pharmacy-benefit manager and a major health insurer under one roof. Cleared after Department of Justice review, the deal accelerated vertical integration in U.S. healthcare and pressured rivals across pharmacy, insurance and PBM segments.

The healthcare sector holds neutral sentiment this month despite heightened pressure on cost structures, as the high-profile Amazon-Berkshire-JPMorgan cost-cutting venture signals intensified scrutiny on pricing and efficiency across providers, payers, and pharmaceuticals. While the initiative remains in early stages, its potential to reshape care delivery and procurement practices tempers near-term optimism, even as broader market conditions remain stable. No offsetting positive catalysts have emerged to shift the balance, leaving sector sentiment flat.

Elon Musk's tweet claiming he had funding lined up to take Tesla private at $420 a share sent the stock sharply higher before trading was halted. The claim proved unsubstantiated, leading to an SEC fraud investigation and settlement that forced Musk to step down as chairman.

Consumer sector sentiment remains neutral this month despite Sears' Chapter 11 filing, a symbolic endpoint to a long-standing retail decline. The broader consumer landscape shows resilience, with no widespread distress in major retail or consumer spending data to amplify Sears' isolated downfall.

Cambridge Analytica harvested up to 50 million Facebook profiles without authorization, using them for political targeting in the 2016 US election and Brexit, leading to regulatory investigations and public outrage. Despite Facebook knowing about the breach as early as 2015, it failed to notify users or enforce data deletion, damaging trust and triggering probes by US and UK authorities. The scandal has sparked calls for stricter regulation of online political advertising and data privacy practices.

The end of monetary dominance: February Volmageddon, the escalating trade war hitting chips, Cambridge Analytica and a brutal Q4 rout (worst December since 1931) overwhelmed Apple's $1T milestone.

A U.S. District Court judge approved AT&T's acquisition of Time Warner without conditions, rejecting DOJ claims that it would harm competition and consumers. The decision clears a major hurdle for the $85 billion deal, boosts M&A prospects across media and telecom, and may influence pending transactions like Disney-Fox and CVS-Aetna.

Choppy: Volmageddon and a Q4 selloff bracketed the year, Facebook's Cambridge Analytica scandal hit social/ad, but the AT&T-Time Warner merger cleared court. Mildly positive, volatile.

President Trump announced the U.S. withdrawal from the 2015 Iran nuclear deal, reinstating economic sanctions and escalating tensions with Iran. The move drew criticism from European allies and former President Obama, while Israel and Saudi Arabia welcomed it. Markets may face volatility due to potential disruptions in oil supply and heightened geopolitical risk in the Middle East.

Brent peaks near $86

President Trump signed the fiscal 2019 NDAA, named for Sen. John McCain, authorizing $716 billion in defense spending. It funded the largest servicemember pay raise in nine years at 2.6%, higher troop levels, and new equipment and weapons procurement. The bill extended the Trump-era defense buildup and expanded contractor order books.

The February Bipartisan Budget Act delivered a big defense increase toward $700B, the National Defense Strategy pivoted to great-power competition, and the Space Force push opened a new spending domain.