Morning Note

Trading Observations

• Jobless claims rose 22k to 231k in Jan. 31 week compared with median est. 212k

• 6860 support and 7000 resistance still holds

• GOOGL being lower on strong numbers, likely on massive capex number

• NVDA, AVGO, and MU rallying the big Cap-ex number

• On the flipside, QCOM and ARM lower on numbers

• Semis breaking an uptrend line 

• Despite the market weakness, there were some bright spots mainly in value (energy, staples etc)

• Transports new highs for 3rd day in a row

• Despite all the red, over 70% of the S&P was higher... this divergence has led to rallies in the past https://tinyurl.com/ycky8cs4 [tinyurl.com]

• Breadth overall has held up extremely well thus far https://tinyurl.com/mrx4pk42 [tinyurl.com]

• AAII Bulls DROP to 39%, the lowest in 6 weeks

• Because of the hidden strength under the surface, the NASI is still overbought unfortunately https://tinyurl.com/2e4k43bd [tinyurl.com

• IWM earnings coming in strong as 370 of the Russell 2000's companies have reported an epic EPS y/y growth acceleration of +24%

• Software with a massive spike in call buying... bounce coming? https://tinyurl.com/5n87cuwy [tinyurl.com] 

• JPMorgan on Software: “We are now in an environment where the sector isn’t just guilty until proven innocent but is now being sentenced before trial.”

• Money pouring into Staples https://tinyurl.com/4xcnjrjx [tinyurl.com]

• Quite the swings in metals https://tinyurl.com/p3nae5um [tinyurl.com] 

Futures

DOW -173

S&P -41

Nasdaq -197

Charts/Sentiment

Financials / Consumer / Healthcare

Homebuilders - This week’s selloff in software stocks amid concerns about AI disruption may indirectly set up homebuilder and building-product shares as “unlikely AI winners,” Citigroup analyst Anthony Pettinari writes in a note to clients.

Michael Burry warns Bitcoin selloff could trigger a “death spiral” – https://tinyurl.com/2dt8dhpy [tinyurl.com]

~50% of Bitcoin supply is now underwater.

Cryptocurrency-linked stocks (MSTR -7%, COIN -5.2%) are falling, extending losses, after Bitcoin slumped to the lowest price since November 2024.

LLY, NVO, HIMS - Hims & Hers Launches Wegovy Pill Copy Starting at $49: Reuters.  Following the lower first payment, patients at Hims ‌with a 5-month subscription will pay $99 per month versus the $199 Novo will charge

GOOS are down 19% after the apparel company’s results missed expectations on key metrics, including adjusted earnings and EBIT margins.

ELF rise 4% after the cosmetics company boosted its adjusted Ebitda guidance for the full year, beating the average analyst estimate.

EL are down 8% as the beauty company’s new annual forecasts come in below the average analyst estimates at the midpoint of the projected range.

PTON: -7% CFO departure

Technology

SOFTWARE CARNAGE: ETF tracking US software sector loses almost $1T in past seven days as AI disruption fears widen ... headlines typically want to see when a bottom is near/seen (wildy oversold near-term) ... headwinds on horizon: 12 major AI drops rumored/expected in the next 30+ days = DeepSeek V4; ByteDance Doubao 2.0; Alibaba Qwen 3.5; Kling 3.0; Seedance 2.0; GPT-5.3; Grok 4.20; Claude 4.6; Gemini 3 GA; Apple Gemini-powered Siri; Meta Avocado; new Codex

MEMORY SHORTAGE VICTIMS: see handset chain (QCOM smoked) - volumes being cut .... overnight: Nikkei reports HPQ, DELL, Acer and Asus are considering using Chinese-made memory chips for the first time as a global DRAM crunch pushes costs up. HP and Dell are qualifying CXMT’s DRAM, with HP potentially sourcing for non-U.S. markets if tight supply persist

AMZN: plans to utilize AI tools to help accelerate and streamline the process for producing movies and TV shows (Reuters)

APP: -42% YTD as negative Clev checks ystrdy sent stock into further freefall (followed Project Genie launch week prior)

ARM: -8% Q3 earnings miss / revs inline - recent sharp increase in memory prices is widely expected to impact the low-to-mid-end of the smartphone market, but high-end smartphone chips are the primary and increasing users of both v9 and CSS, which is contributing to Arm's rising royalty rate

CCI: -5% guided 2026 results a bit below the St, incl AFFO per share of 4.43 (vs st 4.59) and EBITDA of $2.69B (vs St $2.85B)

CIEN/S&P 500 add: Ciena +3.4% will replace DAY (Dayforce) in the SPX before the open on 2/9

COHR: -5% tough setup (+14% YTD; +134% y/y) ... solid beat + raise; not much to pick at other than positioning

FORM: +10% beat + raise - continued gross margin expansion as HBM and data center demand accelerate ... Call v bullish - "in Q1, we again expect to post an all-time DRAM record, this time on HBM strength with contributions from both sustained demand in HBM 3E and the early stages of the HBM4 RAM"

GOOGL: -3.3% positioning / valuation #1 concerns into print ... revs really strong Search +17% y/y vs expects +15-16% and Cloud monster +48% y/y vs expects ~40%; FY26 Capex number $175-185B vs expects $135-140B

GOOGL, UBER, LYFT - Waymo says it’s coming to Boston and Sacramento, the company announces in a post on X.

KLIC: +9% very strong FQ1 EPS upside (44c vs St 33c), w/the beat driven by slightly higher sales ($199M vs. the St $190M) and better GMs (GMs came in ~250bp above plan), and the FQ2 guide is strong (see EPS/sales of 67c/$230M vs St 35c/$190.6M) .. conf call @ 8am ET

MSFT: -1.2% downgraded @ Stifel - ""We downgrade Microsoft to Hold as we believe St FY/CY27 rev and EPS expectations are too optimistic. Given the well-documented Azure supply issues, coupled with Google’s strong Google Cloud Platform/Gemini results this evening and growing Anthropic momentum, we believe near-term Azure accel is unlikely.

NVDA - NVIDIA GAME CHIP DELAY DUE TO MEMORY CHIP SHORTAGE: INFORMATION

NVDA - Nvidia is warning Trump administration officials that recently released rules governing chip exports to China are too strict and would destroy demand, the latest twist in the company's saga to regain access to the lucrative Chinese market.

QCOM: -10% cheap + getting cheaper as memory issues weigh on handset outlook .... Remain on track to achieve our fiscal 2029 revenue goals (sure). Handset market is facing both cyclical and structural weakness

SNAP: +4% solid upside in Q4 on EBITDA ($358MM vs. the Street $298MM), w/the beat driven by slightly higher sales ($1.71B vs. the Street $1.7B, w/softer DAUs/MAUs offset by higher ARPU) and margin expansion (GMs rose 400bp Q/Q and 200bp Y/Y), while the Q1 guide mid-points are mixed

TSEM: +7% on Nvidia AI infra deal

TSMC: reportedly plans mass production of 3nm chips in Japan, investment totaling $17B (Reuters, Nikkei)

WDAY: -3% anncd restructuring; comes on heels of negative Cleveland checks

ZM are up 2.6% after Wolfe Research upgraded the software company to outperform from peerperform.

Industrials 

JCI - A data center boom, driven by increased AI usage, is emerging as a key growth driver for cooling, helping offset Carrier Global Corp.’s soft sales to residential customers and lifting Johnson Controls International Plc’s profit outlook to a decade high.

CMI - Cummins shares are down 4.6% in premarket trading, after the maker of truck engines and power-generation equipment reported fourth-quarter earnings per share below what analysts expected.

ROK fall 4.9% after the industrial automation company gave a forecast for full-year adjusted earnings per share with a midpoint below the average analyst estimate.

Celanese (CE) upgraded to buy from hold at Jefferies; $86 PT

Corteva (CTVA) downgraded to neutral from overweight at JPMorgan

Emerson Electric (EMR) downgraded to hold from buy at Deutsche Bank; $170 PT

Louisiana-Pacific (LPX) initiated outperform at Oppenheimer; $115 PT

Old Dominion Freight Line (ODFL) downgraded to underperform from neutral at Baird

TransDigm Group (TDG) downgraded to sector weight from overweight at KeyBanc

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