Morning Reads








Tesla (TSLA) carved out a new 52-week low of $140.60 with some reports indicating the search for a new CEO at Twitter could be drawn out and keep the Elon Musk distraction angle a factor for weeks or months in how the stock is viewed.

Musk, who's currently CEO of both Tesla and privately held Twitter (along with other private companies like SpaceX), confirmed late Tuesday that he will step down as Twitter's chief executive.

The billionaire made the move after polling his Twitter followers over the weekend on whether he should give up the helm at the social media giant, which Musk recently bought and took private.

However, the entrepreneur said he would only relinquish his Twitter CEO title "as soon as I find someone foolish enough to take the job," potentially meaning he'll remain tied up with the social firm's business for some time.

Shares of Tesla closed down 8.05% earlier Tuesday and ended up trading at a 25-month low. The stock has given back more than half of the pandemic gain and is down more than 65% during 2022.

Is Tesla a value pick yet? On a quant basis, the electric vehicle stock is still rated D- although bulls maintain the growth and margin upside warrants a premium valuation similar to a tech megacap superstar. Over the last week, Tesla has fallen more than EV peers like Fisker (FSR), Rivian Automotive (RIVN), Lucid Group (LCID), and Nio (NIO).

What to watch: Perhaps lost in all the drama over Tesla's share price slide and the Twitter headlines, the electric vehicle giant is only two weeks away from reporting on Q4 deliveries. Tesla is seen having a chance to hit 450K to 465K deliveries for the quarter with Giga Berlin and Giga Austin contributing. If Tesla could hit 475K deliveries, the company could re-charge the bull argument by achieving its broad target of 50% production growth. (338 comments)

Zelenskyy goes to Washington

Ukraine President Volodymyr Zelenskyy travels to Washington Wednesday in his first trip outside his country since the Russian invasion.

Zelenskyy will have an extended meeting with President Joe Biden, who is planning to announce a $2B defense aid package for Ukraine that will include the Patriot missile system, according to published reports. Ukraine has faced an escalation of Russian missile and drone attacks. Zelenskyy will also hold other meetings and address a joint session of Congress and push for continued aid from the U.S. The House of Representatives is expected to be much more reluctant to aid Ukraine when Republicans take control in January.

"On my way to the US to strengthen resilience and defense capabilities of (Ukraine)," Zelenskyy tweeted. "In particular, @POTUS and I will discuss cooperation between (Ukraine and the USA) I will also have a speech at the Congress and a number of bilateral meetings."

“The visit will underscore the United States’ steadfast commitment to supporting Ukraine for as long as it takes, including through the provision of economic, humanitarian, and military assistance,” White House Press Secretary Karine Jean-Pierre said. Zelenskyy is expected to arrive at the White House at 2 p.m. ET. (2 comments)

Nike rally

Nike (NKE) rallied after sliding past consensus marks with its FQ2 earnings report. A drop in revenue in Greater China (-3%) was more than offset by gains in Asia Pacific & Latin America (+19%), North America (+30%) and Europe, Middle East, & Africa (+11%).

Footwear sales were up 25% to $8.50B, while apparel sales rose 4% to $3.8B. Nike Direct sales were up 16% to $5.4B on a reported basis and were up 25% on a currency-neutral basis. Converse sales growth lagged during the quarter with only a 5% increase. Gross margin fell 300 basis points to 42.9% of sales vs. 42.1% consensus. The margin drop was primarily due to higher markdowns to liquidate inventory, particularly in North America, as well as continued unfavorable swings in foreign currency exchange rates and elevated freight/logistics costs. Strategic pricing actions during the quarter helped to offset some costs.

Net income for the apparel giant was flat compared to a year ago at $1.3B. Nike ended the quarter with inventory up 43% year-over-year to $9.3B. The comparable to last year when supply chain disruptions hit accounted in part for the big runup.

Nike's cash position at the end of the quarter was $10.6B vs. $15.1B a year ago as strong free cash flow was offset by share repurchases and cash dividends. Nike management said the company is on track to deliver on operational and financial goals. The athletic apparel giant is expected to issue guidance on its upcoming conference call. (14 comments)

Storm stocks

According to weather reports, a white Christmas is due this year across much of the country. However, as opposed to a light dusting, a potential bomb cyclone over the Midwest and a blizzard in the Northwest are expected. Meanwhile, heavy rain across New England and high winds across the East coast are set to hit in tandem ahead of the Christmas holiday weekend.

Per AccuWeather reports, stormy weather across the Pacific Northwest began to set in on Monday evening, dropping snow across Washington. That winter weather is expected to gain steam on Wednesday and into the end of the week, hitting cities like Minneapolis and Denver hardest and progressing toward Chicago, St. Louis, and upstate New York. While avoiding snow, inclement weather is expected to hit across the East coast as well. Adding to expectations of difficult weather conditions across the country, The Weather Channel reported that a storm it has termed Winter Storm Elliott could become a bomb cyclone and ravage the region around the Great Lakes. Meanwhile, temperatures across the country are set to hit the lowest levels for the Christmas holiday in 39 years.

The most obvious sector to bear the brunt of the impact into the busy travel weekend is the airline industry. In accordance with the expectation of unsafe weather for flight, major carriers including United Airlines (UAL), American Airlines (AAL), and Southwest Airlines (LUV) have already begun to issue weather-related waivers. Regional carrier Sun Country (SNCY) as well as Spirit Airlines (SAVE) and JetBlue Airways (JBLU) have offered fare changes.

By contrast, a cold snap across regions not seeing quite the same snowfall may aid holiday shopping, according to Wells Fargo. A team of analysts led by Ike Boruchow noted that near-record low temperatures across the nation is likely to result in a boost for women’s outerwear and boots, men’s outerwear, and jeans sales. As such, Canada Goose (GOOS), Burlington Stores (BURL), and G-III Apparel (GIII) are expected to benefit as the bank’s “top names to play” as last-minute shoppers hunt deals.

“While retailers have already been heavily discounting this season, consumers and retailers are likely holding out for some special offers to land on the biggest promotional day of the year,” Steve Sadove, senior advisor for Mastercard (MA), forecast ahead of the holiday shopping season. (35 comments)

Today's Markets

In Asia, Japan -0.68%. Hong Kong +0.34%. China -0.34%. India -0.99%.
In Europe, at midday, London +0.52%. Paris +0.73%. Frankfurt +0.97%.
Futures at 6:30, Dow +0.73%. S&P +0.62%. Nasdaq +0.58%. Crude +1.23% to $77.17. Gold -0.07% to $1824.10. Bitcoin +0.56% to $16,873.1.
Ten-year Treasury Yield flat at 3.68%.

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Current Account
10:00 Consumer Confidence
10:00 Existing Home Sales
10:30 EIA Petroleum Inventories
1:00 PM Results of $12B, 20-Year Bond Auction

Companies reporting earnings today »

What else is happening...

Elon Musk confirms he will resign as Twitter (TWTR) CEO once he finds replacement.

FedEx (FDXbeats bottom line estimates, offers weak guide into 2023.

Google's (GOOGGOOGL) YouTube said in talks for rights to NFL Sunday Ticket.

U.S. Senate seen voting on $1.7T spending bill to avert shutdown.

Bill Gross buys Annaly Capital (NLY), AGNC (AGNC) stocks even as recession looms.

Walmart (WMT) says $3.1B payout to settle opioid lawsuits cleared by all 50 states.

Six Flags (SIX) gains after report activist takes stake, pushes for sale of real estate.

BlackBerry (BBNon-GAAP EPS of -$0.05 beats by $0.02.

Workday (WDAY) paves way for tech veteran Eschenbach to become CEO in 2024.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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