Morning Note

Trading Observations

• Extremely busy week

• US/China meet Thurs and rallying on deal being reached

• 45% of S&P due to report including 5 of the Mag 7

• Fed Wed, GDP Thurs, mutual fund year end Fri (position purging?)

• Headline risk 'seemingly' diminished the next 12 months, calendar a tailwind  https://tinyurl.com/msdrw7w8 [tinyurl.com]

• And central banks overall easiest since 2010 https://tinyurl.com/4jxp2bfk [tinyurl.com] 

• Inflation giving them cover... shelter https://tinyurl.com/245wv833 [tinyurl.com]

• NYSE A/D line breaking to new highs https://tinyurl.com/4rapu98j [tinyurl.com]

• IWM highest close ever (taking out 4 year base) https://tinyurl.com/7fd6yvmz [tinyurl.com]

• Feels like the rally outsized, but it's really not https://tinyurl.com/bddke4hm [tinyurl.com]

Futures

DOW +234

S&P +55

Nasdaq +321

Charts/Sentiment

Financials / Consumer / Healthcare

LULU (RVER Holding) + Up 5% on news they will launch a product line with the NFL and Fanatics. 14x P/E is dirty cheap.

BYND- Down 8% to $2 as the meme buzz died.

RNA – Up 43% - To be purchased buy Novartis. DYN up 36% as well.

NTLA – Down 46% - Today’s drug trial fail co.

CRI – Carters down 6% on EPS miss, blaming tariffs.

KDP – Up 11% - Keurig Doctor Pepper up on a FY outlook boost and a $7B financing package from APO and KKR to support purchase and split of JDE Peet’s.

HBAN – Down 7% on agreeing to pay $7.4B for Cadence Bank to expand in the Midwest and into Texas.

JHG – Up 15% - Trian is attempting to buy Janus Henderson with General Catalyst in tow.

GME – Up on White House tweet about Console wats. Must be a talking point at the Asia trip.

Novartis AG agreed to buy Avidity Biosciences in a $12 billion biotech deal.

Technology

AI Complex leaders (as of 630am ET): LITE +7%, OKLO +6%, CLS/CRDO/ALAB/NBIS +4%, SMCI/MU +3.5%, COHR/AAOI/MRVL/AMKR +3%, AVGO/STX +2.5%, NVDA/AMD +2.3%

AMZN: Amazon plans to invest $1.6B+ in the Netherlands over the next three years, its largest Eurozone investment since 2020 (Reuters)

ARM - UBS raised the target on ARM Holdings Plc ADRs to $200 from $175. Maintains buy rating.

BKNG: upgraded @ Truist - firm cites Asia's long-term travel outlook, steady" global GDP growth, and the stock's more attractive valuation for the upgrade

DASH: +2.6% reinstated Buy @ Goldman - incorporated Deliveroo into its ests and assumes DoorDash will invest to drive accelerating growth for the unit. Channel checks cont to point toward strong operational momentum in the delivery space. Sees DoorDash as having a positive 3:1 risk/reward skew

NVDA / October 28: Jensen keynote at GTC DC in Washington

OpenAI / flurry of The Information headlines: (1)SoftBank greenlights remaining $22.5 billion of OpenAI investment (The Information) ... (2)OpenAI views Sora as an entertainment product that can help people pass the time after AGI takes all their jobs (The Information) ... (3)OpenAI is thinking more seriously about running advertisements in its products as the company looks to grow revenue and justify its enormous valuation

PLTR - Polish Defense Minister Wladyslaw Kosiniak-Kamysz and Palantir CEO Alex Karp sign a letter of intent in Warsaw on cooperation in the areas of artificial intelligence, information technology, and cybersecurity.

Industrials 

US-listed rare earth stocks (USAR -8.5%, CRML -9.3%) fell in premarket trading Monday after US Treasury Secretary Scott Bessent said on Sunday that he believed China would delay its rare earth curbs for a year. Rare earth export restrictions were expected to impact supply.

General Dynamics (GD) upgraded to buy from hold at Vertical Research Partners; $400 PT

Honeywell International (HON) upgraded to outperform from sector perform at RBC; $253 PT

Keysight Technologies (KEYS) transferred hold from buy at Jefferies; $180 PT

MRC Global (MRC) downgraded to hold from buy at Loop Capital Markets; $16 PT

Roper Technologies (ROP) downgraded to sector perform from outperform at RBC; $539 PT

Terex (TEX) upgraded to outperform from market perform at Raymond James; $70 PT

Latest Media

$NBIS has experienced great revenue growth, but is likely to end up as a REIT...

Like $CRWV, Nebius's business model requires tremendous capex

With a large negative FCF, capex funds come from either debt or equity

We think equity holders will get diluted or own a highly levered security