The episode begins at 5 a.m. Pacific Time on Tuesday, February 17, 2026, with host Sonny Side welcoming listeners back after the President's Day holiday. Markets are described as waking up with a hangover, with futures showing declines: NASDAQ 100 down 0.8%, S&P 500 down 0.4%, and Dow Jones off by 0.2%. This follows a tough week where the NASDAQ shed over 2%, driven by investor nervousness about AI disruption in the software sector. The fear gauge, VIX, has climbed to 20.6, indicating heightened market volatility. Sonny introduces the concept of a 'period of rotation' in markets. On the macro side, he notes the entry into the 'Warsh era' with Kevin Walsh nominated to succeed Jerome Powell as Fed chair, which may shift focus to shrinking the balance sheet. Currently, the Fed is in a data-dependent pause with rates at 3.5% to 3.75%, and another cut is not expected until July. Inflation cooled to 2.4% in January, and the labor market remains steady. Sector analysis reveals winners in energy, industrials, and materials, with energy jumping over 14% in January due to global tensions. Conversely, traditional software faces pressure from AI tools like Anthropix Cloud Cowork, threatening legacy business models and causing outflows from the technology select sector SPDR, known as XLK. The episode concludes with a mention to watch Palo Alto Networks (PANW). The format is a solo market update, blending news summary with analysis, focusing on immediate market conditions and forward-looking insights.
