Morning Note

Calendar

This Week – Earnings Season isn’t over, but has had its crescendo. Lots of Fed speak this week as well as a possible Govt. shutdown and some increased saber rattling on Iran.

Wednesday- Unemployment (Late due to shutdown), 3 Fed Speakers

Thursday – Initial Claims

Friday – CPI

Trading Observations

• Payrolls rose by 130,000 in Jan, unemployment 4.3% vs 4.4% fueling futures.

• Still in 6860-7000 range, we will see how market digests job numbers

• Difficulty pushing out of 4 month range due to Mag7 unsurprisingly https://tinyurl.com/4fx34fet [tinyurl.com]

• Earnings roll on as NET + VRT higher, HOOD, ALAB, ZG, and MAT lower

• So far 291 S&P companies reporting, 79% are beating estimates by an average of 826 bps

• The Q4 dollar estimate has now bounced $4, which is in line with the result of the past few quarters... the earnings momentum which began in late 2023 has continued

• One of the benefits of the Big Beautiful Bill was supposed to be small business upping cap-ex due to tax law changes, not showing up in expectations yet https://tinyurl.com/y4zhxxm6 [tinyurl.com]

• Consumer getting more stretched? Serious credit card delinquencies (90 days+) highest  since GFC https://tinyurl.com/2enb7nm3 [tinyurl.com]

• Retail all in on IGV https://tinyurl.com/6t3x2y6x [tinyurl.com]

• While short interest at record high https://tinyurl.com/y9tz9hwv [tinyurl.com]

Futures

DOW +207

S&P +30

Nasdaq +137

Charts/Sentiment

Financials / Consumer / Healthcare

CRYPTO WINTER CONTD: XBT -2.3% .... HOOD-8%, MSTR-3%, COIN-4%, etc

Crypto Names - All down another 2-4% this morning. They don't seem to have a news flow answer to stem the tide. We think leverage within the system is likely larger than people think.

HOOD - Down 10%. Miss on crypto trading should have been expected. The miss on options trading was a bit more concerning. This stock feels like Draftkings, where they are running out of high margin day traders to bilk, and need to build something more useful besides a slot machine. Prediction markets proliferation is also an issue.

KHC - CEO says the company split up is back on pause as they try to fix weakening sales.

Homebuilders - Good outperformance day yesterday +2%. Watch 10 year yields as the tell, but the sector feels like a use of funds in a bad market.

HUM slide 6.4% after the health insurer’s forecast for full-year adjusted profit fell short of Wall Street’s expectations.

SN - Shark Ninja down 5% on earnings. Big expectations.

DKS upgraded to outperform at Baird on long term earnings growth story.

HOG- Baird analyst wonders if they didn’t just throw the kitchen sink in negativity wise to set up better tomorrows.

Z fall as much as 4% after the home-search site forecast adjusted Ebitda for the first quarter that missed the average analyst estimate as the firm contends with legal costs and expenses from its partnership with Redfin.

Technology

AKAM: +5% in pre on light volume/5k shrs .. not sure if any data pts missing ... positive NET read

ALAB: -13% revs fall short; CFO stepping down / elevated opex .. for the qtr, beat attributed the earnings beat to growth in its Scorpio fabric switch and its Taurus ethernet cables, which accounted for 30% of total revenue collectively ... "Increasingly, the bottleneck is shifting from compute to connectivity, and connectivity is where we play. So it gives us a lot of opportunity to continue to grow and beat the overall market growth rate in the AI space."

ALAB/AMZN: Astera Labs + Amazon.com entered into a transaction agreement and the company entered into a warrant agreement with Amazon.com NV Investment Holdings to acquire up to an aggregate of 3,262,299 shares of common stock of the company at an exercise price of $142.82 per share, Astera disclosed. Amazon is a customer of the company and holds a warrant issued in October 2022, as amended in October 2023, the filing noted

ANGI: -20% reported EBITDA essentially inline for Q4 ($39.7M vs St $39.2M) but the outlook is mixed, w/the EBITDA range falling short ($145-150M vs St $155M)

BL: upside in Q4 on EPS (63c vs St 59c while sales were about inline, and the 2026 guide is a bit ahead of expectations (they see EPS 2.37-2.48 vs St 2.34)

KVYO: +5% solid upside on sales (+30% to $350.2M vs St $334M) and EPS (29c vs St 16c), and the 2026 guide is bullish (they see sales +22% vs St +20% w/op. margins of 14.75% vs St 14.5%)

LYFT: -16% hit as Q1 guide missed across board (gross bookings, adj EBITDA, margins) ... Rides deceleration suggests Lyft U.S. Rides is growing by a high-single digit percentage, as Uber U.S. grows mid-to-high teens ... remain negative on Ride-Share names given contd disruption ahead from wider AV rollouts/adoption

LSCC: reported Q4 results that didn’t deviate far from the St, but the Q1 guide is bullish, w/ mgmt calling for sales of ~$165M at the mid-point (vs st $148M)

SHOP: +10% strong beat across board / exceeding buy side expectations ... Sentiment upticked into print as ppl increasingly see agentic commerce as a tailwind rather than a headwind ... direct coMerce continues to take share from Amazon, reinforcing Shopify’s strategic positioning .... structural operating leverage = upside to high-teens FCF margins, and early potential from agentic coMerce

ORCL: shrs up 16-17% last three sessions

PEGA: -8% upside in Q4 on the main KPIs (EPS, rev, and ACV), and the 2026 guide is bullish (they see sales/EPS of ~$2B/2.75 vs St ~$1.85B/2.22)

MU: +3% on $140M notional (as of 655am ET) .. Micron speaking @ Wolfe later this am (pre) / focus on whether address recent Nvidia/Samsung reports

Memory: Winbond said the DRAM shortage is set to persist, with memory prices this quarter expected to surge 90–95%, and price increases next quarter likely to remain in line with the current quarter ... As Economic Daily News notes, beyond the near-doubling of prices this quarter, memory pricing is expected to rise by almost another fold in the second quarter, implying that by end-June, prices could be nearly four times those at the end of last year.

NET: +14% impressive / ahead of buy side - 34% growth vs bogeys of 31-32%, another 300bps+ accel while guiding to 30% vs bogeys of 29%. Bullish call - company benefits from AI (“the shift toward AI and agents represents a fundamental re-platforming of the Internet that's driving demand across Cloudflare's services. If agents are the new users of the web, Cloudflare is the platform they run on and the network they pass through”) UPGRADED AT BAIRD

VRT: +14% blowout from a key supplier of data center cooling and power equipment ... strong Q4 with sales growth driven by the Americans (+50%) while other geographies witnessed softness, including APAC (-10%) and EMEA (-8%). Orders momentum accelerated significantly .... 2026 guidance mid-pts are ahead of Street. The AI infrastructure buildout is on fire, and “picks and shovels” companies are benefiting enormously

Industrials 

Installed Building Products (IBP) downgraded to Hold from Buy at Benchmark

James Hardie (JHX) upgraded to Overweight from Neutral at JPMorgan

QXO Inc. (QXO) trading up 6% - to acquire Kodiak Building Partners for $2.25B - The transaction is expected to be highly accretive to 2026 earnings

Saia Inc (SAIA) downgraded to neutral from positive

Trex Company (TREX) downgraded to Hold from Buy at Benchmark

NuScale Power (SMR) downgraded to hold from buy at TD Cowen

XPO, Inc. (XPO) downgraded to neutral from positive

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