🤜 Worst stock market day of the year

and some hits and misses

Good morning investors! Stocks fell again, making it the worst day of the year so far as the president hopes tariffs will make U.S. ‘very strong’.

Today we cover:

  • No recession

  • Big earnings (Costco, Broadcom, and more)

  • Create good habits

⚽️ Don’t forget to check the Calculators page for some amazing tools that can help you plan investment, retirement, and more.

📊 Economy and News 

U.S. Economy Faces First-Quarter Contraction but Avoids Recession, Says Capital Economics

Despite forecasting a 1.9% annualized contraction in first-quarter GDP, Capital Economics does not anticipate a full-blown recession, expecting a rebound in the second quarter.

The decline is largely attributed to a surge in real goods imports, which rose over 10% in January as businesses rushed to get ahead of new tariffs. However, inventories have not increased correspondingly, meaning net external demand could subtract around 3.5 percentage points from GDP growth, even if imports decline in February.

Consumer spending has also weakened, with a 0.5% drop in real consumption in January, partly due to severe winter weather. Early indicators, including Chicago Fed CARTS data, suggest spending did not recover in February, with non-auto core retail sales falling 0.8% after a 0.4% decline in January. Rather than front-loading purchases, consumers appear to be tightening their wallets and increasing precautionary savings in anticipation of further inflationary pressures.

On a positive note, business confidence remains steady, with small business optimism still above pre-election levels. While Capital Economics does not currently expect a recession, they caution that ongoing policy uncertainty leaves room for surprises.

What do you think of the economy?

Login or Subscribe to participate in polls.

Global hits:

Good to know: Trump delays tariffs on Mexico and Canada for a month. Also, Elon Musk’s Starlink could soon tap into a $42 billion federal program.

Sponsored by Zoe Financial

Market fluctuations can impact your long-term strategy. A fiduciary financial advisor can help you stay aligned with your investment and wealth management goals.

Zoe Financial connects you with vetted advisors who provide personalized guidance based on your needs.

📈 Stocks

S&P 500 5,738.52 (-1.78%)
DJIA 42,579.08 (-0.99%)
NASDAQ 18,069.26 (-2.61%)
BRENT CRUDE 169.54 (+0.23%)
* Prices as of Mar 7th, 12:20 AM UTC

HO, Broadcom, Gap and CostCo report earnings

Hewlett Packard Enterprise exceeded revenue expectations for the January quarter despite market-wide discounting. However, its guidance for the new quarter and full fiscal year fell short. The company plans to reduce its workforce by 2,500 employees, or 5%, including expected attrition.

Broadcom exceeded first-quarter earnings expectations and provided strong guidance, sending its stock up 16% in extended trading.

  • Earnings per share: $1.60 adjusted vs. $1.49 expected

  • Revenue: $14.92 billion vs. $14.61 billion expected

For the second quarter, Broadcom projects revenue of $14.9 billion, exceeding Wall Street’s $14.76 billion estimate. Last quarter’s revenue grew 25% year over year to $14.92 billion, with net income rising to $5.5 billion from $1.33 billion a year earlier.

Broadcom’s AI-driven growth fueled the surge, as its AI revenue soared 77% year over year to $4.1 billion in Q1, contributing to an 11% rise in its semiconductor business to $8.21 billion. CEO Hock Tan expects AI semiconductor revenue to reach $4.4 billion in Q2. Broadcom is also working on custom AI chips with major cloud providers.

The company’s infrastructure software division, bolstered by the VMware acquisition, saw a 47% annual increase in revenue to $6.7 billion.

Costco missed second-quarter earnings estimates but exceeded revenue expectations as comparable sales grew. Shares fell over 1% in extended trading.

  • Earnings per share: $4.02 vs. $4.11 expected

  • Revenue: $63.72 billion vs. $63.13 billion expected

Quarterly revenue rose 9% year over year, with net sales increasing 9.1% to $62.53 billion.

CEO Ron Vachris acknowledged uncertainty around tariffs but emphasized efforts to keep costs low for members. About a third of Costco’s U.S. sales come from imports, with less than half from China, Mexico, and Canada. Grocery margins remain tight, but the company aims to work with suppliers to minimize price hikes.

Membership fees grew to $1.19 billion from $1.11 billion a year ago, with paid memberships reaching 78.4 million and total cardholders at 140.6 million. The global membership renewal rate improved slightly to 90.5%.

Gap posted stronger-than-expected fourth-quarter results, signaling a successful turnaround under CEO Richard Dickson. Shares surged 17% in extended trading.

  • Earnings per share: 54 cents vs. 37 cents expected

  • Revenue: $4.15 billion vs. $4.07 billion expected

Comparable sales grew 3%, exceeding the 1% forecast.

Net income rose to $206 million from $185 million a year earlier, though total sales declined 3% due to an extra selling week in the prior year.

Gap expects 2025 sales to grow 1% to 2%, aligning with Wall Street’s 1.7% projection. However, first-quarter guidance was slightly weaker, with sales expected to be flat to slightly up, compared to the anticipated 1.5% growth.

Exciting: Chinese tech giant Alibaba said its latest AI reasoning model, QwQ-32B, “rivals cutting-edge reasoning model, e.g., DeepSeek-R1.” Moreover, China has announced a high-tech fund to grow AI, emerging industries. Lastly, Google has introduced an ad-free subscription tier for YouTube.

Surprising: Walgreens to go private in roughly $10 billion deal with Sycamore Partners. Elsewhere, SpaceX loses control of Starship in space in testing failure. Lastly, Netflix after MoffettNathanson analysts reiterated a ‘neutral’ rating with an $850 target, citing slowing growth..

💵 Personal Finance

Preach Your Way to Better Financial Habits

Setting financial resolutions is easy; sticking to them is the challenge. How often do we vow to save more or budget better, only to abandon those plans by February? Yet, building solid financial habits is key to a secure future. The World Health Organization links poor lifestyle choices—like overspending or neglecting savings—to stress-related illnesses, which contribute to 74% of global deaths. Behavioral factors, like reckless spending, are preventable risks.

Nir Eyal, author of Indistractable, suggests a brain hack: preach your financial philosophy. Telling others, “I’m a saver” or “I stick to my budget,” reinforces your identity, making consistency easier. “When you preach it, you’re more likely to live it,” Eyal says. This taps into consistency bias—we hate contradicting ourselves—and social pressure, as public declarations hold us accountable. Just don’t overdo it, he warns, or you’ll annoy your friends while trying to impress them with your frugality.

💰 Be a Better Investor

“It is thrifty to prepare today for the wants of tomorrow.”

Aesop

Resources:

What did you think of today's newsletter?

Login or Subscribe to participate in polls.

👩🏽‍⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.