Morning Note

Trading Observations

• The ebb and flow of US/China rhetoric took a slight turn for the worse, and the back and forth likely to continue to month end Trump/Xi (likely) meeting

• Just have to deal with the noise for now, headline risks remain high

• Fortunately, earnings starting so will have something else to focus on

• US job market leading indicator still deteriorating https://tinyurl.com/46n8vz85 [tinyurl.com]

• In tech, OpenAI/ARM partnership announced, and there is talk MRVL or QCOM could be next

• Samsung reported strong numbers but lower, let's hope not a trend

• ASML Wed, TSM Thurs on watch

• 6550 Fri low and 50-day key support, need to clear 6700 to get more comfortable

• Rates coming down means mortgages comes down, would think home builders would benefit, not sign of it yet but at key level https://tinyurl.com/4dd3wnnz [tinyurl.com]

• BofA's October Global FMS showed sentiment most bullish since February, with cash level down 0.1 pp to 3.8% and investors most underweight cash since December, investors most overweight stocks since February, and lowest bond allocation since Oct-22

• FMS Report also said global recession concerns lowest since Feb-22, with just 8% expecting weaker global economy

Futures

DOW -387

S&P -63

Nasdaq -298

Charts/Sentiment

Financials / Consumer / Healthcare

Cryptocurrency-linked stocks (MSTR -4.3%, CRCL -2.5%, BLSH -3.6%) slide in premarket trading amid a drop in Bitcoin prices following a flare-up in trade tensions between the US and China.

JPM swing between gains and losses in premarket trading after the bank boosted its net interest income forecast for the full year and CEO Jamie Dimon said he sees some signs of softness in the US economy.

WFC climbs 3.3% after raising a key profitability metric, giving its first major update about the bank’s next growth target after the removal of regulatory restraints it had operated under for more than seven years.

GS - Goldman Sachs Group Inc. presented a fairly benign outlook for its credit provisions compared to those of its rival JPMorgan Chase & Co., which was hit by an exposure to the collapsed Tricolor Holdings.

ACI rise 7% in premarket trading as the food and drug retailer boosted its adjusted earnings per share forecast for the full yea

JNJ fall 0.6% in premarket trading after it said it plans to separate its slower-growing orthopedics business from the rest of the company.

DPZ shares gain 4.1% after the restaurant chain reported total domestic stores comp sales growth for the third quarter that beat the average analyst estimate.

Technology

AAPL -0.7%, MSFT -0.7%, META -1.3%, AMZN -1.4%, GOOGL -1.7%, NVDA -1.7%, TSLA -2.3%

AMD: Wolfe upgrading following OpenAI win, Wolfe sees $10-plus in earnings per share power for AMD. Co "now simply needs to execute," and estimates have upside if AMD finds traction beyond OpenAI, the analyst tells investors in a research note. The firm also thinks estimates can go up in the near term due to traditional server strength.

AMD +2.2% early alpha leader - (1)Oracle Cloud to deploy 50,000 AMD AI chips. 50k * $25k ASP = $1.25B, so its a small number but another positive signal for MI450 which should continue to help re-rating ... (2)M-sci positive on Mi355x and CPU deployment momentum in Q3 ... (3)Wolfe upgrading post OAI deal

AAPL: said the iPhone Air will debut in China starting next week (SCMP)

ARM: +1.8% OpenAI is teaming up with ARM to design a CPU that will work alongside its upcoming AVGO Broadcom-built AI chip (The Information) ... The Arm CPU is intended to handle more general computing tasks in tandem with GPUs, while the OpenAI–Broadcom chip will focus on AI inference workloads, with production expected to begin in late 2026

AVGO: Hock on Mad Money/Cramer last night - says genAI will become a much larger part of global GDP; said the current GDP sits around $110 trillion, with 30% “valued from industries related to knowledge-based, technology-intensive,” and generative AI could grow that figure to 40% ... seemed to imply in a separate CNBC interview Mon night that it has four major AI customers (which is the same number it disclosed back on the Sept earnings call)

CRM: quiet into Dreamforce / has been viewed as funding short + attacking other cos hasnt been a great look. Bulls focused on commentary/details around Agentforce where Benioff will do his best to get investors excited about the long-term oppty

CRM - Salesforce and OpenAI expanded partnership to embed Salesforce’s Agentforce 360 directly into ChatGPT, allowing users to build AI agent and conduct commerce through OpenAI’s latest frontier models.

DASH: JPM upgraded DoorDash to Overweight from Neutral after reinstating coverage; Co continues to deliver "industry-leading" growth at scale with improving unit economics, the analyst tells investors in a research note. The firm says Deliveroo is expanding DoorDash's footprint in Western Europe and the Middle East

DATA CENTER BUILD: Data centers come under bipartisan criticism for driving up electricity prices (Semafor)

NFLX: #s 10/21 + 7% implied move .... hearing ppl looking for a slight beat vs Street on rev growth for 3Q at ~17%+ y/y (reported and ex-FX) and the implied 4Q is ~16% y/y reported rev growth .. sentiment / positioning pretty neutral/clean which is reflective in stock being dead $$$ since May (tariff premium subsiding; $$ into genAI complex)

NVTS: +25% said its next-gen GaN and SiC power chips will support NVIDIA’s new 800V DC architecture for AI data centers. The 800V system replaces legacy 54V designs, improving efficiency, cutting copper use, and boosting reliability across large-scale AI infrastructure

SMH: -2.3% ... Semis/AI proxies given back chunk of Mon performance: SNDK-6.5%, ALAB-5%, CRDO/MU-4.5%, VRT-3.6%, SMCI/LRCX/STM/MRVL-3%, AVGO/TSLA-2.8%, WDC/CLS/STX -2.5%

SNDK: shrs -6% in pre ... last four sessions: +15%, -10%, -2%, +9%

Industrials 

US-listed critical mineral companies (CRML +33%, MP +8.4%, USAR +12%) are extending gains in premarket trading Tuesday after China hit the US with more retaliatory measures on the shipping industry, a sign of persistent trade tensions between the two economies.

Albemarle (ALB) Cut to Neutral at BofA; PT $100

Carrier Global (CARR) Cut to Market Perform at Oppenheimer

Ford (F) temporarily cutting production of at least five models due to possible aluminum shortage following fire at supplier's plant - media report.

General Motors (GM) board approves Q3 charges of $1.6B based on planned realignment of EV capacity and manufacturing footprint - 8-K

Hub Group (HUBG) Raised to Outperform at Raymond James; PT $40

Huntsman (HUN) Cut to Underperform at BofA

MP Materials (MP) Rated New Buy at President Capital Management

SPX Technologies (SPXC) Rated New Overweight at Wells Fargo; PT $205

USA Rare Earth (USAR) Rated New Buy at President Capital Management

Latest Media

$JPM and many big banks trading at >2x P/B.

We keep saying valuation matters, especially in the medium to long run.

Another example, coupled with the history of returns when purchasing at current levels.