Morning Note

Trading Observations

• Futures turned negative ahead Trumps speech at Davos

• Yesterday we saw the biggest drop since October, big gap to fill now

• Support 6720 vs. resistance 6830 at the 50-day

• Sentiment still quite elevated but working off the overbought

• VIX over twenty for first time since Thanksgiving and higher this AM, Gold higher again

• A quick look at yesterday and ytd shows Financials the weak spot https://tinyurl.com/4fept24n [tinyurl.com]

• JPM’s Dimon called Trumps 10% cap on credit cards would be an economic disaster

• Bond markets calmed overnight in Asia and yields are quiet this AM, the 10-year 4.28% is reassuring

• Credit Markets also reassuring remain tight https://tinyurl.com/mr2t5knd [tinyurl.com]

• Article today in FT, Private equity giant Thoma Bravo eyes software deals as shares fall might help beleaguered software

• NFLX down 7% weighing on Nasdaq, UAL higher, JNJ down small

• Productivity gains continue https://tinyurl.com/5n6s7vn7 [tinyurl.com]

• VIX jumped but near the highs usually works out well https://tinyurl.com/ycx3spzn [tinyurl.com]

Futures

DOW -162

S&P -10

Nasdaq -75

Charts/Sentiment

Financials / Consumer / Healthcare

Housing: Trump signed an executive order on Tues preventing institutional investors from buying single-family homes – WSJ

AFRM - AFFIRM SHARES DROP TO PREMARKET LOW AS KERRISDALE SAYS SHORT

SCHW – Down 1% – New assets $158B vs $144B expected. Total client assets just under $12T. Somehow net revenue missed slightly. The CEO said customers are “buying dips and selling rips”, which is odd to say but he did.

ALLY – Down 3% - Credit provisions missed, which is a touch scary because there’s a lot of auto loans here.

JPM’s Dimon – “Trump card % rate cap would spell economic disaster”.

KHC – Kraft Heinz down 7% as Berkshire has filed to potentially sell its stake. Current P/E is 9x, so I’d just say I doubt they would sell.

JNJ – Down 3% - Top line beat was across business segments. Tremfya was strong. Guidance looks a hair better than expected. Call today but nothing bad in the numbers. Run into the numbers and multiple a little warm.

TFC – Down 2% - PPNR guide a touch soft, pointing to modest downside for 2026. 3-4% loan growth unimpressive. Expense guidance negative as well. Look for some melt lower here.

Baird on Banks – Core PPNR modestly ahead in general from solid revenues and controlled expenses. Banks trading lower on macro.

Who went to the International Roofing Expo? – Those that did say volumes flat to slightly higher for 2026. CSL estimates likely have risk.

FLUT (DraftKings) – Cut to hold at Craig-Hallum.

ANF – Up 3% - Upgraded to buy at Citi. The stock had gotten crushed on earnings.

AAP – Upgraded at Northcoast.

ULTA – Upgraded to Strong Buy at Ray Jay.

Technology

NFLX – Traded -5% after numbers (the 1 and 5-year charts are problematic)…. NETFLIX ,is now 20% below its 200 day moving average for the 15th time since 2005 (it’s 26% below) . • NFLX is now offering an all-cash consideration of $27.75/share for Warner Brothers o The NFLX claimed their opportunity is still massive with only ~10% TV share • (+) Seeing no material change of NFLX’s business outlook. • Buyback paused to conserve cash for Warner Brothers

Software Defense: Thoma Bravo/Orlando Bravo report in the FT about software (Bravo thinks the software stock slump is overgone and has created a “huge buying opportunity”) ... SW vs Semis pair toxic to say the least. Tough to find any safe spots in sw right now and very little appetite from investors to defend with conviction at this pt

MEMORY HIGHER (deja vu): SNDK +3.1%, MU+2.4% ... overnight: KIOXIA+8.5%, SAMSUNG+5%, HYNIX+1.8% vs Phison-5%, Nanya-7.7%

ADSK read: December US Architecture Billings Index 48.5 (prior 45.3); Project inquiries index 52.9 (prior 51.4), Design contracts index 47.5 (prior 42.7). “Despite the

AI hype vs. reality: while CEOs are speaking favorably about the productivity effects of AI, company workers are generally underwhelmed by the technology (WSJ)

AMZN/retail: planning to open a massive retail location (~230K sq. feet) in the Chicago area that would rival an average Walmart and Target in size and assortment (Amazon is preparing to open other locations in the US going forward) (WSJ)

AVGO/NVDA: lrg cap AI names cont to chop around / easy target for ppl to raise funds as $$ cont to pour into Memory / Opticals / Semicaps

GOOGL: AI boss says no plans for ads in Gemini

INTC: cont to o/p within alpha; +3.5% Tuesday on news of CPU pricing increases as traditional servers benefit from agentic demand. Also got a pair of upgrades from HSBC and Seaport .... failed $50 multiple times fwiw

META: new AI lab has delivered its first high-profile model internally and it’s “very good” according to the company’s CTO (Reuters)

META - Meta is pulling back on its metaverse ambitions after its Reality Labs division posted massive losses over the past few years. Since 2021, the unit has lost around $73 billion, raising serious questions about the future of Meta’s virtual and augmented reality strategy. Interest in the metaverse has faded sharply since its peak in late 2021. Google Trends shows a steady decline in searches, and surveys suggest most Americans still do not use metaverse platforms.

NVDA: Jensen is planning to visit China later this month in an attempt to bolster demand for the H200 (Bloomberg) ... meanwhile at Davos (assume) - Jensen speaking to BlackRock’s Larry Fink, says the infrastructure around AI will need trillions of dollars in additional investment over the coming years on a global basis

OKLO: +4.4% upgraded @ BofA - cites the signing of a firm, binding agreement with Meta to develop a phased 1.2 GW advanced nuclear campus. While the MW contribution is modest, the deal signals a meaningful step fwd and provides tangible proof of execution and counterparty commitment

Industrials 

OKLO, IMSR etc - Nuclear and uranium stocks gain in premarket trading after US President Donald Trump praises the industry in his Davos speech.

TRUMP: WON'T USE FORCE TO GET GREENLAND

ABM Industries (ABM) downgraded to hold from buy at Truist

Albemarle (ALB) upgraded to buy from hold at Truist

Ametek (AME) initiated buy at Deutsche Bank

Century Communities (CCS) initiated market outperform at Citizens

December US Architecture Billings Index (ABI) rises to 48.5 from 45.3 in November - Project inquiries index 52.9 vs month-ago 51.4

FedEx (FDX) downgraded to neutral from buy at Rothschild & Co Redburn

International Seaways (INSW) upgraded to buy from hold at Pareto

Mercer (MERC) International downgraded to sell from hold at TD Cowen

Southern Copper (SCCO) downgraded to sell from neutral at UBS

Teledyne Technologies (TDY) assumed equal-weight at Morgan Stanley

Waste Management (WM) downgraded to sector perform from sector outperform at Scotiabank GBM

Watts Water Technologies (WTS) upgraded to overweight from sector weight at KeyBanc

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