Trading Observations

• Tariffs hurting markets everywhere, don’t like the uncertainty

• Trump reportedly is speaking to Canada’s Trudeau later in the morning so be on alert for his language

• 2-year yields are higher on inflation concerns

• Gold making new ATHs and the dollar is gapping higher

• Pain was felt in the crypto world where Ethereum got slammed over the weekend https://tinyurl.com/ykxd8kna [tinyurl.com]

• Of course all this comes on the back of frothy sentiment, high valuations and a strong January

• NVDA closed below the 200-day and Mag7 look lower this am, with only 4 of the Mag 7 performing well

• NXPI and PLTR after the close, ISM at 10am

• Feb is a month in first year of office that usually is weak https://tinyurl.com/58z5zfhr [tinyurl.com]

• Recall Trump's first year in first term was bumpy https://tinyurl.com/39f4pdax [tinyurl.com]

• Trump says he ordered air strikes on Islamic State group in Somalia https://www.bbc.com/news/articles/cdrye506z1go [bbc.com]

Baird

Mexico Tariff Losers Basket: AYI, ALGN, AXL, BHE, BOOT, CVGW, CAH, CMCO, STZ, CTOS, FLXS, GM, GBX, HELE, INFU, ISRG, ITT, AVO, RBC, REZI, R, SCS, TEX, MODG, TRN, VSTS

Canada Tariff Losers basket: AA, BYND, BF/B, CPB, GOOS, CECO, CTOS, HSIC, HSY, MLKN, PLL, SHC, TECK, TEXT, VLO

Futures

DOW -628

S&P -98

Nasdaq -380

Financials / Retail / Healthcare

COST - The union representing workers has reached a tentative agreement with the retailer, avoiding a potential strike by thousands of employees.

DG – Barron’s also ++ over the weekend

SBUX - Starbucks and Workers United have agreed to withdraw lawsuits against each other, taking another key step toward a contract deal for unionized locations.

IDXX rises over 6% after the animal healthcare company posted 4Q profit and revenue that topped estimates.

HLT – Baird positive, but expectations are high. Net unit growth and FCF conversion a key to keep high, but 8% EBITDA growth and 13% net income growth should be enough if they can hold it.

Bitcoin related – MSTR down 7%, which is about average. SOFI, MARA, RIOT, WULF, HOOD, COIN all down about the same.

Banks – US Banks very unlikely to be caught up in the carnage much today. Likely a use of funds. Short rates popping a bit on inflation but long rates are flat, likely helping housing related names.

Technology

Alphabet (GOOGL) -1.8%, Amazon (AMZN) -1.6%, Apple (AAPL) -2%, Microsoft (MSFT) -1%, Meta Platforms (META) -1.8%, Nvidia (NVDA) -3% and Tesla (TSLA) -3%

AAPL - reportedly scrapped work on a project to build advanced augmented (AR) reality glasses that would pair with its devices.

MSFT – OpenAI launches new AI agent “Deep Research” OpenAI unveils a new ChatGPT agent for ‘deep research’ [msn.com]

META - reportedly considering changing its incorporation state from Delaware to Texas.

NET, CRWD, FTNT – Downgraded to Neutral at Baird on Valuation.

NVDA - Trump told reporters he’d had a good meeting with CEO Jensen Huang on Friday at the White House, but insisted “eventually we’re going to put tariffs on chips.”

Industrials 

UAL - on Friday denied speculation it is in takeout talks with another carrier.

Aptiv Plc (APTV) downgraded to market perform from outperform at Raymond James

Booz Allen Hamilton Holding (BAH) upgraded to outperform from market perform at Raymond James

Caterpillar (CAT) upgraded to neutral from sell at UBS

Lennox International (LII) downgraded to underweight from equal weight at Wells Fargo Securities

Northrop Grumman (NOC) upgraded to peer perform from underperform at Wolfe Research

Steel – US Steelmakers higher following tariff order

Transports – Loop Capital downgrades select names - CSX to hold from buy, FDX to hold from buy, GXO to hold from buy, NSC to hold from buy, CNR to sell from hold, CP to sell from buy and UNP to sell from buy

Triumph Group (TGI) to be acquired by affiliates of Warburg Pincus, Berkshire Partners for $26/share in cash, or $3B total

United States Steel (X) downgraded to equal-weight from overweight at Morgan Stanley

Vulcan Materials (VMC) removed from US Conviction List at Goldman Sachs