Morning Note

Trading Observations

• Quite morning, futures higher

• Yesterday, US Military conducted 22^nd strike on Alleged drug boat in Eastern Pacific – wonder how they pick the crew to drive these boats (serious game of rock paper scissors)

• Thwarted by initial 6850 resistance with 6870 more significant above vs. 6780 support

• Oscillators pushing into overbought territory (likely to reach VERY overbought by end of week)

• S&P 200-day ma participation never breached key levels and turning up suggesting correction has run its course https://tinyurl.com/4x5rpvnk [tinyurl.com]

• Still need heavier volume to the upside for more conviction

• Use of repo market increasing and something to watch https://tinyurl.com/bdfszvyy [tinyurl.com]

• If small caps finally get the earnings growth expected, finally show some vigor? https://tinyurl.com/59v6c6wn [tinyurl.com]

Futures

DOW +0

S&P +6

Nasdaq +10

Financials / Consumer / Healthcare

LULU - Baird takeaways from our November Assortment Tracker, analyze Black Friday/Cyber Monday (BFCM) discounting trends, review recent demand indicators, and outline thoughts ahead of FQ3 earnings. Overall, US demand trends remain sluggish, and discounting was more intense (~2x breadth, deeper markdowns) over the holiday period.

NFLX “wins” WBD for $83B. Seems like an overpay. WBD net income has been negative for years, saddled with debt costs, low margins, and cord cutting.

SOFI – Down 7% on announcement of a $1.5B secondary. We sold this name at the astronomical 6x P/B it hit, and those who didn’t are paying the piper today.

IRBT – Up 22% along with some other robotics names as the Trump Administration says they are eyeing stakes in the sector.

VSCO – Perennial loser Victoria Secret up 16% on earnings. High short interest a part here.

SPWH – Down 22% on earnings. $2 stock because debt is high. Equity very well could be a donut.  

ULTA – Up 7% on solid cosmetics demand and positive comps. This name had been thrown out a year ago and now the market has fully realized what a good business it is.

CODI – Down 5% on “needs to cut debt”

Technology

Software vs Semis: +0.4%, snapping five-day losing streak. SNOW was source of frustratain/pain Thur vs CRM, ORCL leading lrg caps

AI POWER IMPACT: AI reasoning models use 100x more power on average, adding to concerns around energy consumption (Bloomberg)

AMZN: rallied off lows / held 100D; Yipit data was source of weakness in alpha but they came out midday and issued some sort of correction (either way, they underestimated AWS growth by ~170bps last Q)

APP: up 6 in a row (+39% off Nov 21 lows) ... flurry of bullish checks and mgmt has sounded good on the road - Ecommerce ad buyers reported contd momentum on AppLovin, with all treating APP as an incremental, high-ROAS channel that is outperforming SNAP, PINS, and RDDT and often matching Meta

CRWV: +2% Roth bullish initiation - "CoreWeave is positioned to be a top-four market share winner in an AI Cloud mkt that will likely exceed the size of the traditional Internet Cloud - citing the co's proven scale, speed to market, and superior product-price performance versus AI Cloud peers and hyperscalers"

GOOGL/Waymo: NHTSA asks Waymo about robotaxis passing Texas school buses .... asking Waymo to answer addtl questions after Texas officials said the co's self-driving cars illegally passed school buses 19 times in recorded incidents since the start of the school year

HPE: -9% says customers' AI delays weiging on sales / blaming timing. Talking up AI server demand. Concerns in relation to the ability to navigate the memory cost headwinds, are likely leading investors to overlook the progress HPE made in F4Q

IOT: boost guide after swinging to profit

LSCC: $250M buyback

MRVL: few ?s on px action here; Semianalysis article was that MRVL was the big loser of Trn 3 as they lost the socket “due to poor execution for Trainium2”

RBRK: +18% massive beat + raise; ongoing shr gains. Demand in the market remains robust, driven by new workloads, cloud adoption, and steady data growth ... Boosting FY26 metrics; qrtr/guide ahead of bogeys; customers with $100K or more in subscription ARR 2,638, +27% y/y. Bulls = one of the strongest grow rates in software at this scale and a long runway of platform-driven expansion

NVDA US senators seek to bar NVDA China AI chop sales – Bloomey

ROKU: -2.8% in pre; choppy week with stock down 4 out of last 5 weeks. Combo of internet leaking lower in general / WDB sale weighing on streaming narrative overall

S/Sentinel One: -8% smoked on Q4 outlook miss; CFO search another distraction

WBD/NFLX: deal to close in 12-18 months; $5B breakup fee ... NFLX sees at least $2-3B cost savings/year by 3rd year

Industrials 

Albemarle (ALB) upgraded to buy from neutral at UBS

BE: +15% huge move; some chatter about potential big deal (300MW of power gen in a NBIS/MSFT data center) - unconfirmed

Trump official says it is planning more stakes in minerals companies – Bloomey

Hub Group (HUBG) initiated overweight at Wells Fargo Securities

ITT, Inc. (ITT) enters into a definitive agreement with Lone Star Funds to acquire SPX FLOW for $4.775B in cash and equity (see Baird note below)

Landstar System (LSTR) initiated equal weight at Wells Fargo Securities

MP Materials (MP) upgraded to overweight from equal-weight at Morgan Stanley

Parsons (PSN) downgraded to market perform from strong buy at Raymond James

Rollins (ROL) upgraded to overweight from equal weight at Barclays

Ryder System (R) initiated overweight at Wells Fargo Securities

Southwest Airlines (LUV) - guides FY25 EBIT ~$500M vs prior guidance $600-800M and cons $584.7M - Government shut down related

Trimble (TRMB) board authorizes repurchase of up to $1.0B in shares of common stock

Latest Media

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Levered ETFs, market perspectives, etc.