Stocks leap on Palantir earnings but Goldman warns the U.S. ‘is near stall speed’—where the economy ‘weakens in a self-reinforcing fashion’

• Palantir’s blowout earnings, with revenue up nearly 50% and net income up 144%, are sparking a tech rally as investors bet on AI-driven headcount reductions. Broader markets show gains, buoyed by expectations of early Fed rate cuts and a decent Q2 earnings season. However, Goldman Sachs warns the U.S. economy is “near stall speed” owing to sharply declining job growth. Lurking in the background: Trump’s war on the BRICS.

Tech company earnings appear to be driving the stock markets upward today after Palantir delivered a massive quarter after the markets closed in the U.S. last night. S&P 500 futures were up 0.27% this morning, premarket. Europe and Asia were broadly up this morning, too.

But lurking in the background, as always, are the big macro questions about whether President Trump’s tariff deals have hobbled the U.S. economy in the long run.

Palantir first: Revenues were up almost 50% to nearly $1 billion, beating expectations. Net income was $327 million, up 144%. CEO Alex Karp lifted guidance for Q3. The stock closed up 4% yesterday and rose another 5% in overnight trading. “We’re planning to grow our revenue … while decreasing our number of people,” CEO Alex Karp told CNBC. “This is a crazy, efficient revolution. The goal is to get 10x revenue and have 3,600 people. We have now 4,100.”

That prospect—the idea that tech companies can grow by replacing employees with AI—appears to have energized investors in tech stocks broadly. Palantir’s call was “eye-popping,” Wedbush’s Daniel Ives said this morning.

Look at the closing prices of this selection of tech darlings:

Goldman Sachs reported that its Risk Appetite Indicator was above zero for July, indicating a general risk-on attitude for equities.

Investors are also assuming that the U.S. Federal Reserve’s next interest rate cut will come in September and not December, as previously assumed. The CME’s Fed funds futures market is showing an 88% likelihood of a cut in September and a 60% likelihood of a cut in October. Cheaper money = higher stock prices, of course.

“The mood has been helped by a decent Q2 earnings season so far,” Jim Reid’s team at Deutsche Bank said this morning.

In the long term, there are obvious problems ahead. Goldman Sachs said today that new job creation—yes, the jobs number that was so controversial on Friday—is now so meager that the U.S. economy is in danger of stalling.

“Friday’s jobs numbers reinforced our view that U.S. growth is near stall speed—a pace below which the labor market weakens in a self-reinforcing fashion. So far, the unemployment rate has only risen modestly, from an average of 4.1% in Q1 to 4.248% in July. But our estimate of underlying monthly job growth—which is based on moving averages of real-time gains in the establishment survey and the household survey—has plummeted from 206K in Q1 to just 28K in July, well below our 90K estimate of the current break-even pace,” chief economist Jan Hatzius told clients.

DOGE cuts knocked 0.3 percentage points from GDP growth in Q2, according to Pantheon Macroeconomics’ Samuel Tombs and Oliver Allen. Their estimate for GDP growth was dragged down by “an enormous 11.2% drop in federal nondefense spending, dragging down headline GDP growth by 0.3 percentage points,” they told clients.

Coming down the pipe: more tariff deadlines. The average effective tariff rate for the U.S. is now around 19%, according to Piper Sandler, a rate that matches that of the 1930s:

Trump has specifically targeted the BRICS countries (Brazil, Russia, India, China, South Africa, and allied regimes) for high tariffs. The China tariff deal—not yet done—is the big kahuna in all of this. If China also gets a high percentage rate, investors will down-rate stocks, Chris Turner’s team at ING told clients.

“An early extension of the currently benign trading conditions would very much be welcomed by the market. If not, and the U.S. does ratchet up pressure on China again, then it would look like President Trump was opening up a new campaign on the BRICS nations after all,” they said.

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were up 0.27% this morning, premarket, after the index closed up 1.47% yesterday.

• STOXX Europe 600 was up 0.3% in early trading.

• The U.K.’s FTSE 100 was up 0.35% in early trading.

• Japan’s Nikkei 225 was up 0.65%.

• China’s CSI 300 was up 0.8%.

• The South Korea KOSPI was up 1.6%.

• India’s Nifty 50 was down 0.46%.

• Bitcoin remains above $114K.

This story was originally featured on Fortune.com