Morning Note

Trading Observations

• After TACO Wednesday we closed back above the 50-day 6832 and look to regain 6920

• The market seems ready to look past this manufactured crisis and resume its uptrend

• Regional banks with the big move helping IWM to fresh new highs, microcaps also to new highs

• Semi’s along with NVDA ripped, Samsung Electronics Co. gained as much as 5% Thursday to an all-time high, helping drive South Korea’s benchmark Kospi above 5,000 for the first time

• SNDK is up an astonishing 112% YTD

• Software still under pressure

• MAG7 continues to be LAG7 with MSFT forming a death cross https://tinyurl.com/5cz9ez22 [tinyurl.com]

• Sentiment from small investors AAII shows more a few more bears which is good https://tinyurl.com/328ne6kp [tinyurl.com]

• But Institutional Investors Sentiment remains strong with 59.6% Bulls and 15.4% Bears

• It must be reiterated that a huge storm expected this week with stories of shelves at WMT and COST empty and implications for Transports and travel https://tinyurl.com/jnkjuahx [tinyurl.com]

• Developed markets ex-North America Breaking out https://tinyurl.com/ayvcfuwp [tinyurl.com]

• Contrarian trade to go long software and short semis… https://tinyurl.com/4nktyuhe [tinyurl.com]

• Buybacks on hold with earnings season https://tinyurl.com/mr48r737 [tinyurl.com]

Futures

DOW +228

S&P +44

Nasdaq +245

Charts/Sentiment

Financials / Consumer / Healthcare

CMG – Announced they have launched a PAC to engage in politics. Likely very pro-burrito.

SCHW – GS reiterates buy, says they are on track for 20% EPS growth.

LTH – Lifetime Up 3% on solid earnings, back to the gym January.

PYPL – Announced a small acquisition (Cymbio)to help it with agentic purchasing. Stock up slightly.

HBAN – Down 3% - Looks mainly in-line with not much beating expectations. Return on assets a bit low.

ORI – Old Republic Insurance down 5% on an EPS miss that isn’t well explained.

ABT – Abbott down 5% on a big Q EPS miss. They tried to kick save it with a strong FY guidance but the stock isn’t buying it. EXAS deal remains in process.

Baird on Banks – Don’t chase them here.

Baird on Processors – They like CRCL, and see no rush to buy FISV, FIS, or JKHY post survey work.

UnitedHealth to offer rebates to its Obamacare customers in 2026 – Reuters

Technology

AAPL: offering discounts of up to CNY1K on certain products in China as the firm looks to drive demand during the upcoming Lunar New Year holiday (SCMP)

AMZN: 3P firm (Yipit?) upticks on AWS to 23%+, highest y/y weekly # since 2022

AMD/INTC/RMBS: CPU bid contd (server shortage / pricing bid has fueled recent moves within group). Big winner from Claude Code/Agentic AI) .. RMBS +7%, AMD+2.3%, INTC+1% .....

DDOG: +3.3% upgraded @ Stifel - channel checks indicate the company will post "another larger than typical" quarterly beat in Q4, driven by accelerating core growth and continued strong gains

GOOGL: +2% leading megacaps in pre (again) ... RayJ upgrading to STRONG BUY (improving AI Stack momentum is expected to fuel upward revisions and position; high-quality top-line AI acceleration story, with fundamentals, rather than multiple reversion, driving mega-cap Internet performance in 2026). Remains cleanest story within the cohort (by a mile imho)

MEMORY PRICE MOMENTUM: BABA Cloud SVP says memory prices have already climbed 30% to 40% recently, and he sees a “high probability” they rise another 2 to 3x from here. "Given this trend, it is imperative to accelerate the AI transformation of databases" .... also saw this (no source): Samsung distributors are allegedly hiking the price of all memory products by as much as 80% Of All Memory Products By As Much As 80 Percent

META (RVER Name): Jefferies positive - 5 reasons to buy the pullback: (1)Attractive risk/reward at a 8-turn PE discount vs GOOGL; (2)moderate downside to ests with stronger upside potential; (3)AI hires set to deliver in ’26; (4)Continued momentum from META’s Core Flywheel powered by AI; (5)accelerating activation of major incremental rev engines, w/ WhatsApp poised to grow from a $9B run rate today to $36B by FY29, plus add'l upside from Threads & Llama/AI

META (RVER Name): Cleveland positive saying Q4 likely saw upside on accelerated Ecom Strength and ROI gains (Jeff reit top pick as well; positive Citi checks)

NOW Baird Preview. Key focus is AI adoption, top-line growth profile, and acquisition integration. We see an opportunity for shares to pick up in '26 as AI use cases ramp. Lower PT to $190 from $250

RDDT: -7% decent laggard Wed .. didn't see any negative checks .. few saying OAI ads could lead to $ loss

SHOP: cont to leak lower .. - "AI Agentic winner status fading - some pointing to Claude Code making it easier to build websites and create apps that handle inventory and orders (~25% of SHOP’s revs); Agentic Commerce Protocol (“ACP”) being cited as a risk as it bypasses SHOP Pay button

SNDK: trading 330% above its 200D moving avg .. healthy

TSLA: insurance provider Lemonade is offering discounts on Tesla auto policies for when people have FSD engaged (Lemonade says there is significantly reduced risk when FSD is engaged) (Bloomberg)

YELP: Yelp to acquire Hatch for roughly $270M

Industrials 

Dycom Industries (DY) initiated buy at Guggenheim Securities

Everus Construction Group (ECG) initiated neutral at Guggenheim Securities

Great Lakes Dredge & Dock (GLDD) initiated overweight at JPMorgan

Karman Holdings (KRMN) initiated neutral at Piper Sandler

Kratos Defense & Security Solutions (KTOS) initiated neutral at Piper Sandler

Orion Group Holdings (ORN) initiated overweight at JPMorgan

GE w/ a nice bid this am this following good #’s/guidance

SPX Broadening…The US stock market is rebalancing in one of the best ways possible. The mega caps seem to be taking a rest while the rest of the market breaks out. For now, the broadening is not a zero sum game.

Latest Media

River1’s CIO on Schwab Network

Levered ETFs, market perspectives, etc.