Bloomberg - Evening Briefing - The China missile gap

China leads the world in developing, testing and deploying hypersonic weapons, beating out Russia while the US, having already spent $12 billion, has yet to field even one. The weapons can travel five times the speed of sound, making interception by existing defensive systems difficult at best. China, senior US defense intelligence analyst Jeffery McCormick told Congress Tuesday, has the world’s “leading hypersonic arsenal” thanks to Beijing’s two-decade long effort “to dramatically advance its development of conventional and nuclear-armed technologies and capabilities through intense and focused investment, development, testing and deployments.” —David E. Rovella

The rollercoaster hasn’t stopped—not by any stretch. Just yesterday we wrote how investors were licking their lips at the prospect of lower interest rates by summer and all the good news that brings for Wall Street (but not savers, mind you). Well, it’s a new day and the data has thrown markets a new curve. Underlying US inflation topped forecasts in February, with prices jumping for used cars, air travel and clothes. The so-called core consumer price index, which excludes food and energy costs, increased 0.4% from January. Other than the upcoming release of the producer price index, this is the last major inflation report before the Federal Reserve meets next week. The central bank was already expected to stay the course this month—with today’s data, it may further extend the timeframe toward any cut. Nevertheless, many investors saw the “hot print” coming and had thought it could be worse. Here’s your markets wrap. 

Citadel founder Ken Griffin said he thinks the Fed should move slowly in lowering interest rates to avoid the possibility of having to reverse course later. “Pausing and then changing direction back toward higher rates quickly, that would, in my opinion, be the most devastating course of action to pursue,” Griffin said Tuesday. “So I think they’re going to be a bit slower than people were expecting.”

Mike Willson is still a skeptic. As a flurry of forecasters bump up their optimism about US stocks, the Morgan Stanley strategist won’t budge, saying he sees no justification to upgrade his outlook. Wilson stuck to his year-end S&P 500 Index forecast of 4,500 even as a growing list of peers at firms including Bank of America, Goldman Sachs and UBS have raised projections for the benchmark. “A lot of folks have raised their price targets because of higher multiples,” Wilson said. “We’re not willing to do that.” Here’s why.

Meanwhile, Ariel Investments’ founder John Rogers, one of the very few who forecast the US would not have a recession last year, says the stock market is ripe for a correction. Relative to history, large-cap growth stocks like Nvidia are overpriced, with earnings expectations ahead of themselves, Rogers said. He also views the market’s recent surge to all-time highs on artificial intelligence-driven investor enthusiasm as reminiscent of the bursting of the internet bubble in 2000.

John Rogers Photographer: Taylor Glascock/Bloomberg

Terrorist threats toward the US have reached a “whole other level” since the Oct. 7 attack by Hamas on Israel and the war that followed, FBI Director Christopher Wray told lawmakers. Israel said Hamas killed 1,200 Israelis when militants crossed into its territory from Gaza. The attack was followed by an Israeli bombing campaign and ground assault that Hamas’s health ministry said has killed more than 30,000 Palestinians. US President Joe Biden has maintained his support for Israel in its stated effort to destroy Hamas, though he has warned Prime Minister Benjamin Netanyahu that his response has been “over the top.” On Tuesday, Wray told the House Intelligence Committee that “you’ve seen a veritable rogue’s gallery of foreign terrorist organizations calling for terrorist attacks against us in a way that we haven’t seen in a long, long time.” The United Nations has said that a majority of Gaza’s 2.2 million residents have been displaced by the five-month conflict, while the World Health Organization is warning of malnutrition and starvation.

United Airlines has told embattled planemaker Boeing to stop building 737 Max 10 jets for the carrier, opting to switch to a smaller variant and the rival Airbus A321 until Boeing can pull the stretched single-aisle plane through its long-delayed certification. United Chief Executive Officer Scott Kirby has been one of Boeing’s most outspoken critics after a fuselage panel blew off of a 737 Max 9 operated by Alaska Airlines in early January. United, the biggest operator of the variant, temporarily took dozens of planes out of service while federal investigators probed the accident. The National Transportation Safety Board has found that workers at Boeing had failed to affix four bolts holding the door plug in place. The steady drumbeat of bad news for the company has not escaped the eyes of Wall Street. Boeing is falling even further behind its biggest competitor, Airbus. After a 29% drop in its share price so far this year, Boeing’s market valuation is now lagging its rival by the most ever.

San Francisco is making it easier to turn empty office buildings into homes, a move aimed at easing the city’s housing crunch and reviving its struggling downtown. Voters  approved Proposition C, which offers a tax break for developers to convert up to 5 million square feet of commercial space by 2030, according to a tally of results from last week’s election. Mayor London Breed, who championed the proposal, said it will help the city meet a state mandate to create tens of thousands of new homes and to diversify the downtown.

San Francisco Photographer: David Paul Morris/Bloomberg

• After SVB’s failure, its would-be rescuer charged $285 million in fees.
• Bloomberg Opinion: Nvidia vs. Cisco—a bubble by any other metric.
• Coinbase Global plans to offer $1 billion in convertible notes.
• How a physics whiz-kid is making a fortune betting on destruction.
• Sickle cell patients face a tough choice: be cured or have kids.
• Gold-medalist coders build an AI that can do their job for them.
• Canceled music festivals reveal rising costs of producing large events.

Giant robots made by Texas startup Icon began 3D-printing an entire neighborhood of suburban homes in late 2022; on Tuesday, the company introduced an AI architect to design them for you. It’s a technological leap that Icon says could one day spell the demise of cookie-cutter suburbia, ushering in an era of lower cost, lower carbon and climate-resilient homes in wildly novel forms. That’s the promise of a suite of new technologies previewed for Bloomberg Green as machines finish construction of the world’s largest 3D-printed neighborhood—a 100-house Austin subdivision.

A rendering of a California house designed by Icon’s new AI architect. Illustration: Courtesy of Icon

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