Morning Note

Trading Observations

• And we begin. . . .  

• Futures higher though one more day of holiday trading (still in the Santa window though down for the period this year) before we get back to our regularly scheduled market next week

• Samsung, TSM and BIDU higher on AI chip related news helping tech

• Despite markets being thin, reached some extremes to suggest a bounce

• Fewer than 20 S&P stocks up Wed https://tinyurl.com/fn35babh [tinyurl.com]

• After double digit positive year with weak final week, tend to rally first week of new year https://tinyurl.com/4tjrjt5a [tinyurl.com]

• More surprisingly is tech at same p/e multiples as last year despite rallying 28% https://tinyurl.com/udyu4dpa [tinyurl.com]

• The DJIA now up 8 months in a row, historically a good sign https://tinyurl.com/238esd3s [tinyurl.com]

• Time for Equal weight to take the baton? Widest 3 year performance gap in history

  (yes wider than tech bubble) https://tinyurl.com/ys5y2hxz [tinyurl.com]

• What a run - S&P has AVERAGED 12% year since 1980! 45 years, despite average intra-year drawdown of 14% https://tinyurl.com/yhwabbwz [tinyurl.com]

Futures

DOW +162

S&P +37

Nasdaq +243

Charts/Sentiment

Financials / Consumer / Healthcare

W/RH/Furniture: W+2.5%, RH +5%, WSM +1.5% after Trump delayed tariff increases on upholstered furniture, kitchen cabinets and vanities - update gives some breathing room for the sector

TSLA – Closes out “brutal year” with sales declines in Europe, per Bloomberg. Stock up 2% because everyone thinks it’s a self-driving/robot company now. BYD is now the electric leader.

UAA – Up 3% in positive UBS survey work.

Financials – Bitcoin related all up 2-4%.

Technology

Megacap Dispersion in Q4 (ongoing theme): GOOGL +28.8%, AAPL +6.8%, AMZN +5.1% ... versus .... NVDA (0.04%), META (10.1%) and MSFT (6.6%)

ASML gain 5.9% as Aletheia Capital double upgrades the chip equipment maker’s European shares to buy from sell due to investment expansions and capacity upgrades.

AAPL: dials back on manufacturing and marketing for its Vision Pro amid tepid demand (FT)

BE: hit earlier in week if missed .... Taiwan AI server giant Quanta said its US subsidiary will spend US$502 million on Bloom Energy fuel cell microgrids for its AI server plants in California, media reports

BIDU: +11% filed for its AI chip unit Kunlunxin to come public in Hong Kong as the company looks to capitalize on investor interest in the industry (WSJ)

DeepSeek: released a paper outlining a more efficient way to train models (Bloomberg); KHC (Kraft Heinz) is the subject of a cautious profile article in the WSJ detailing how the firm underinvested in its core brands for years, resulting in lost market share (WSJ)

Memory Px Action: strong in Asia - SAMSUNG+7.4%, NANYA+7.3%, HYNIX+4%, KIOXIA-2.2% .... Samsung CEO touted its HBM4 chips are winning customers compliment that “Samsung is back” - says Samsung’s HBM4 demonstrated differentiated competitiveness. By leveraging cutting-edge AI technologies, it is necessary to develop AI solutions specialized for semiconductors and apply them across the entire semiconductor value chain

MEMORY/MU: Memory shortages to persist through 2026 as AI server demand surges (DigiTimes)

META (: Reels business is now generating >$50MM in ARR, becoming a blockbuster that far exceeds TikTok and is even larger than YouTube (WSJ)

Tesla/xAI: The Information: 2026 Predictions: Tesla Will Acquire xAI ... "xAI needs cash. Tesla has billions. It makes sense for Elon Musk to combine the two. As almost everyone in Silicon Valley has found out lately, creating AI is a money drain, and many of the biggest startups eager to do so aren’t profitable. That’s true even for the AI business run by the world’s richest man, and that’s why I expect Elon Musk will take a drastic step next year to keep the money flowing to xAI: by selling to the profitable part of his empire

Industrials 

China EVs: BYD shipped 4.6M vehicles in 2025, up 7.7% Y/Y and inline with the firm’s (reduced) guidance (BYD likely surpassed Tesla to become the world’s largest EV manufacturer last year) (Bloomberg)

VRT gains 4.5% as Barclays upgrades the power equipment company to overweight from equal-weight, saying its shares currently offer a good entry point following recent volatility.

TSLA - Tesla reports 418,227 deliveries for the fourth quarter, down 16%. Street really only focused on Robotaxi, autonomous and robotics.

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