Morning Note

Calendar

This Week – A few scattered earnings and Fed Speakers, but the al events are Non-Farm Payrolls off cycle due to the shutdown (Tuesday) and CPI Thursday.

Thursday – NKE, FDX Earnings, Initial Claims, CPI

Friday – Existing Home Sales

Trading Observations

• Another frustrating day as S&P CLOSED below 6760 support, need a quick reclaim or 6550 in play over coming weeks

• CPI came in light, helping futures this morning building on MU momentum

• A couple of reasons to think we can rally including MU +10% after earnings and giving very strong guidance (let's hope gains hold and doesn't fade ala NVDA + AVGO)

• Also, the information reporting OpenAI in talks to raise $100B (at a valuation of $750B - up 50% from Oct raise)

• In addition, despite the selling, a positive divergence in that more S&P stocks were up than down, this is often seen near the end of a pullback

• NKE + FDX after the close with BOJ decision (guidance key) tonight

• Oscillators slightly oversold

• First time in over a year AAII Bulls >44% for 3 straight weeks, history suggests good things happen 12 months out https://tinyurl.com/3yrzrx8x [tinyurl.com]

• However, some context that could prove relevant should market start to rollover https://tinyurl.com/2t2yasnu [tinyurl.com]

• Hadn't seen this chart, but consumer confidence at 45 year low (what they say) https://tinyurl.com/mwpda2je [tinyurl.com]

• Bitcoin whales buying the dip https://tinyurl.com/3rh4uyr4 [tinyurl.com]

Futures

DOW +210

S&P +51

Nasdaq +321

Charts/Sentiment

Financials / Consumer / Healthcare

DJT – +25% - Said to merge with TAE technologies in an all stock, $6B transaction. So, we are at the part of the cycle where a fusion power clean energy company goes public by merging with a social media company associated with the Administration.

JPM Shuffles the deck in REITs – CPT, FRT upgraded, KW, PSA, O, REG, SMA, UDR, WELL all downgraded. There’s no underlying theme except “relative ratings”.

Baird Downgrades COLD and LINE in Reit-land calling 2026 and 2027 likely “muddle through” years.

LEN – Two downgrades to underperform, RBC and Evercore. Feels like we are letting the housing market slide so we can have lower rates.

ACN – Accenture had solid results and in-line guidance. Bookings growth looks strong despite tough comps.

SOFI – Up 3% - Joins the stablecoin race with an Etherum based stablecoin.

PYPL: -1.6% MS downgrading to UW - says the improvements to the co's branded checkout integrations will be "slow and complex." Believes PayPal will see sluggish dollar growth through 2028 on share loss, take rate degradation, and lack of Venmo monetization. In addition, the agentic narrative will be an overhang on the shares

LULU – Up 8% on an Elliot stake.

KMX – Down 10% on Q4 warnings. Used vehicle sales down 8% y/y, more signs of the K shaped economy.

BIRK – Down 10% - Revenue guidance a hair light, which doesn’t work for growth stocks. EBITDA margin missed a bit too. 10-12% revenue growth is still near the top of the category.

Coin Related – Much higher +4-7%.

MRK are up 1% after BMO Capital Markets upgraded the drugmaker to outperform from market perform, saying the company is assembling a portfolio to grow through the loss of exclusivity for its blockbuster cancer drug, Keytruda.

Technology

AI Power names: bid up after PJM auction .. TLN, VST, BE, etc (GSENEPOW, MSXXAIPW baskets smoked ystry)

AMZN/DC: Amazon was the prospective tenant that withdrew from FRMI (Fermi)’s Texas data center (Business Insider)

CART: -7% hit on report that FTC is probing company over AI pricing tool (NY Post article last week discussed dynamic pricing / consumers getting short end of stick) .... cont to see shorts press / competition only intensifying as well

DASH: launches grocery shopping ap within ChatGPT

ETSY: $750M buyback

GEV: Jefferies upgrading - positive on the outlook for Power (gas pricing & services visibility) and electrification yet shares are down since the investor day

GOOGL: is taking steps to make its TPU chips easier for software developers to write code for as the company aims to address one of the key selling points of Nvidia’s GPUs: its CUDA software framework (Reuters)

MU: +12% monster blowout; huge relief for AI trade at critical juncture (positioning had cleaned up significantly in recent weeks too) .... Q2 guide revs $18.3 - $19.1B vs bogeys of $16B; GM of 67-69% vs bogeys of 59%. Capex going to $20B from $18B ... Mgmt expects demand to cont outpacing bit supply, supporting pricing and margins, while maintaining disciplined capital allocation, strengthening the bal sheet, and returning capital to shareholders

ON - ON Semi signs a collaboration deal with GlobalFoundries to develop and manufacture advanced gallium nitride power products using GF’s 200mm eMode GaN-on-silicon process, starting with 650V.

xAI: Musk believes the company can emerge victorious in the AI/LLM wars if it can just survive the next 2-3 years (Musk feels xAI has an advantage over others in scaling compute infrastructure and sourcing funding, and thinks AGI can be achieved as soon as 2026) (Business Insider)

Industrials 

China has purchased more than 50% of the soybeans it promised Washington – Bloomey

Venezuela’s ~$8B in black market oil revenue at risk of collapsing as Washington targets shadow tanker fleet – WSJ

ABM Industries (ABM) downgraded to neutral from buy at UBS; $51 PT

GE Vernova (GEV) upgraded to buy from hold at Jefferies; $815 PT

Lennar (LEN) downgraded to underperform from sector perform at RBC Capital Markets; $95 PT

Lennar (LEN) downgraded to underperform from in line at Evercore ISI; $92 PT

Sherwin-Williams (SHW) upgraded to buy from neutral at Citi; $390 PT

RIVN gains 3.5% following an upgrade to outperform from neutral at Baird, which sees next year’s planned launch of the automaker’s R2 model as providing a clear boost

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