Happy Wednesday! Ballooning U.S. debt and unsustainable deficits could lead to severe economic consequences, with Ray Dalio warning of "shocking developments" if fiscal imbalances aren't addressed. Here’s why his 3% deficit target matters — and what it could mean for markets. Also, learn about small energy players that can boost your holdings.

—Josh Enomoto

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MARKET RECAP

Yesterday: Stocks closed little changed Tuesday, with the S&P 500 edging up 0.2% while the Dow and Nasdaq hovered near the flatline. Energy and materials stocks led gains, fueled by a spike in oil prices, while bond yields climbed as the 10-year Treasury yield hit 4.55%. Investors remain focused on corporate earnings strength and broader economic conditions as markets navigate ongoing uncertainties.

On Our Radar: After reviewing the much anticipated CPI report, analysts will next turn to initial jobless claims and the producer price index. Regarding corporate financials, software giant Adobe will disclose its fiscal Q1 results following Wednesday’s closing bell.

TOP STORY

Ray Dalio Warns US Debt Crisis Could Trigger 'Shocking Developments' Calls To Reduce Deficit At 3% Of GDP

Dalio’s warning underscores the growing strain on government finances, as soaring debt outpaces economic growth and pressures global markets.

Learn how his proposed fiscal solutions could reshape policy — and what investors should watch next.

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FIVE ZINGERS

Walk Back: President Trump canceled plans to boost tariffs on Canadian steel and aluminum imports to 50%. Read what caused the White House to reverse course.

Going Digital: Palantir Technologies has urged the Pentagon to embrace commercial software solutions. Understand the context that is driving this narrative.

Hot Takes: Tesla has been in freefall, in part due to the controversial stances that CEO Elon Musk has taken. Learn when the bleeding in TSLA might finally stop.

Cease Fire: Prediction platform Polymarket has shown a rising probability that the Trump administration can broker peace in Ukraine. Discover the one factor that's key to the negotiations.

Weak Outlook: Although Allbirds bettered expectations on the top and bottom lines for its Q4 report, BIRD stock was volatile. Here are the details on guidance that clouded the narrative.

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Under The Radar: The Real Impact Of Increased Drilling On Oil Market Dynamics

Editor’s Note: Every Tuesday, Benzinga Edge members receive the Under the Radar pick, detailing a very profitable stock or market trend that no one’s talking about. Here’s a sneak peek at yesterday’s:

Donald Trump made this a centerpiece of his campaign for a second term, suggesting that he could get oil and gas producers to turn on the spigots and drive the prices of gasoline below $2.

Judging by last week’s address to Congress, it is not an idea the President seems likely to drop.

A lot of oil and gas executives wish he would.

“Drill, Baby, Drill” and cheap gas is a cool campaign theme. It is a disaster for profit margins at small to midsize oil and gas producers.

Sustained high levels of production would destroy many of these companies.

The industry has been down this road before and has no desire to go there again.

…If we do begin to see large production increases coupled with a slowdown in economic activity because of policy decisions, smaller companies are going to struggle.

Just as we saw in the banking industry over the past 30 years, scale and size are going to be primary determinants of profits.

The bigger you are, the more likely you will be to stay profitable in the era of “Drill, Baby, Drill.”

The smart play is going to be for smaller companies to look for a larger partner.

Get all the details from yesterday’s Benzinga Edge-exclusive Under the Radar report. Click here to get a sneak peek.

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