Key Takeaways
- Pentagon expands its blacklist, adding Alibaba (BABA), Baidu (BIDU), and BYD (BYDDY) to the list of Chinese firms allegedly aiding the military; Alibaba has vowed to take all available legal action in response.
- US Treasuries jumped as investors increased bets on the Federal Reserve lowering interest rates three times this year, with Goldman Sachs (GS) maintaining a June rate cut as its base case.
- Goldman Sachs CEO David Solomon expressed confidence in the US economy, stating the country is positioned to run at a higher base growth rate for the next few years without triggering overly high inflation.
- China’s Foreign Minister Wang Yi signaled a diplomatic shift, describing Ukraine as a "friend and partner" during a meeting with his Ukrainian counterpart to discuss a political resolution to the ongoing crisis.
- January inflation data showed a significant 0.59% month-over-month jump in core goods (excluding used cars), while tobacco products saw their largest rise since 2017 at 2.1%.
US-China Tech Decoupling Accelerates
The U.S. Department of Defense significantly expanded its scrutiny of Chinese technology giants on Friday, adding Alibaba (BABA), Baidu (BIDU), and electric vehicle maker BYD (BYDDY) to a list of companies allegedly supporting China’s military. The list also includes telecommunications giant Huawei and shipping firm COSCO, though the Pentagon notably removed CNOOC from the designations.
Alibaba (BABA) responded aggressively to the announcement, stating it will pursue legal action to challenge what it calls a misrepresentation of its operations. Simultaneously, the U.S. government proposed a new ban on federal agencies using certain Chinese-made semiconductors, further tightening the restrictions on Chinese hardware in American infrastructure.
Goldman Sachs CEO Projects Economic Resilience
In an interview with CNBC, Goldman Sachs (GS) CEO David Solomon offered a bullish outlook on the domestic economy, suggesting the U.S. can achieve strong growth without reigniting high inflation. Solomon noted that the firm is prepared for a "higher based growth rate" over the next two years, reflecting a shift in corporate sentiment toward a soft landing.
Solomon also addressed internal leadership changes, confirming he "reluctantly accepted" the resignation of General Counsel Kathy Ruemmler. While expressing disappointment over her departure, Solomon praised her six years of expertise and stated the firm is ready to move forward under new legal leadership.
Markets Pivot on Inflation and Rate Cut Hopes
US Treasuries rallied on Friday morning as market participants reacted to "cooler" elements of the January Consumer Price Index (CPI). Investors are now pricing in higher expectations for the Federal Reserve to implement at least three interest rate cuts in 2026, with analysts from Goldman Sachs Asset Management pointing to June for the first move.
Despite the overall cooling trend, specific sectors showed volatility; tobacco and smoking products surged 2.1%, marking the biggest increase in nine years. Conversely, at-home alcohol prices fell, even as core goods (excluding used vehicles) rose by 0.59% month-over-month, the largest such increase in recent months.
Geopolitical Shifts and Regulatory Updates
In a notable diplomatic development, Chinese Foreign Minister Wang Yi met with his Ukrainian counterpart, stating that China views Ukraine as a "friend and partner." Wang Yi emphasized that China is willing to maintain communication and play a "constructive role" in seeking a political resolution to the regional conflict.
On the regulatory front, the European Union announced it expects to conclude its Digital Markets Act (DMA) proceedings against Google (GOOGL) within the next six months. This timeline adds pressure on Alphabet (GOOGL) to align its search and platform services with strict new European competition standards.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.