Morning Reads


Todays Open Interest Change




Lawsuits are piling up against freight rail operator Norfolk Southern (NYSE:NSC), which has faced a public backlash and investor scrutiny over a series of train derailments. One led to a chemical disaster in East Palestine, Ohio, on Feb. 3, while another said to be carrying hazardous materials overturned yesterday outside of Detroit, Michigan. NSC shares have gone off the tracks over the past two weeks, falling 10% to $230, though some like Cowen analyst Jason Seidl are looking at historical precedent, believing the unfortunate events may not have much of a long-term impact.

SA commentary: "While I expect more weakness than the average analyst, I'm eagerly looking to buy NSC as soon as it drops to $210 again," contributor Leo Nelissen wrote in an eerily entitled article, just a week before trouble struck for Norfolk Southern (NSC). He explores a steep cost surge and high operating ratios in the company's latest earnings, but counters that pricing and improved operations have helped bolster record revenues. For investors looking for other players in the freight railroad sector, check out recent SA analysis on CSX Corp. (NASDAQ:CSX), Union Pacific (NYSE:UNP) and Canadian Pacific Railway (NYSE:CP) (which is expected to close its acquisition of Kansas City Southern by the end of Q1).

Facing a public backlash over the chemical spill in East Palestine, Norfolk Southern (NSC) CEO Alan Shaw just penned a letter to address concerns about the contamination of air, water and soil. "Crews are cleaning the site thoroughly... together with local health officials, we have implemented a comprehensive testing program and established a $1M community support fund as a down payment on our commitment to help rebuild." Worries remain in the community of about 4,800, especially following the release of carcinogen vinyl chloride, and reports of headaches, rashes and nausea, as well as dead fish in local waterways.

Is there anything to do about it? Around 1,000 derailments occur in the U.S. each year caused by collisions, conductor errors, mechanical failures, broken rails and defective wheels. While it may be hard to prevent the incidents (the latest was said to be triggered by a mechanical axle issue), there have been pushes to regulate and de-regulate new costly safety standards in recent U.S. administrations. Others have blamed the mishaps on precision-focused railroading, heavier train capacities, staff cuts and the rushing of essential safety checks. (7 comments)

Changing of the guard

One of the most prominent women in tech, YouTube (GOOGGOOGL) CEO Susan Wojcicki, is stepping down from her position to focus on "family, health, and personal projects." Wojcicki was one of Google's earliest employees, having rented out her garage to co-founders Larry Page and Sergey Brin in 1998, and later shepherding YouTube to a premier position in online video. Her departure comes at a time when YouTube is under pressure from falling advertising revenue, as well as intense competition from TikTok (BDNCE), Facebook Reels (META) and streamers like Netflix (NFLX). Wojcicki will be replaced by her longtime lieutenant Neal Mohan, a senior ad and product executive who joined Google in 2008. (32 comments)

Worries return

Market volatility is making a comeback as traders eye any mention of the word "inflation" like a deer in the headlights. Stocks fell on Thursday following the release of January’s producer price index, with wholesale costs coming in hotter than expected. It wasn't the only thing causing jitters. "My overall judgment is it will be a long battle against inflation," St. Louis Fed President James Bullard told reporters, while the Cleveland Fed's Loretta Mester even saw a "compelling case" for a 50-basis-point increase at the central bank's meeting two weeks ago. Elsewhere, initial jobless claims continued to point to a tight labor market, further evidence that higher interest rates have yet to significantly dent the economy. Taking all of the developments together, stocks aren't pointing to a better open this morning, with further losses expected on Wall Street. (49 comments)

Consumer debt

The sum of money owed by U.S. households climbed considerably during the fourth quarter, rising by $394B to $16.9T. That's the largest Q/Q increase in household debt in two decades, taking balances $2.75T higher than before the pandemic at the end of 2019, according to the New York Fed's Household Debt and Credit Report. Not helping the situation was the U.S. central bank's rate hiking cycle, which has raised the borrowing costs on everything from credit cards to mortgages and auto loans. Serious delinquency rates of 90 days or more are creeping up too, and while the metric is not near dangerous levels yet, it will be an item to watch as the year progresses. (42 comments)

Today's Markets

In Asia, Japan -0.7%. Hong Kong -1.3%. China -0.8%. India -0.5%.
In Europe, at midday, London -0.2%. Paris -0.6%. Frankfurt -0.7%.
Futures at 6:00, Dow -0.5%. S&P -0.7%. Nasdaq -0.9%. Crude -2.3% to $76.90. Gold -1% to $1833.30. Bitcoin -3.7% to $23,754.
Ten-year Treasury Yield +6 bps to 3.90%

Today's Economic Calendar

8:30 Fed's Barkin Speech
8:30 Import/Export Prices
8:45 Fed's Bowman Speech
10:00 E-Commerce Retail Sales
10:00 Leading Indicators
10:00 Quarterly Services Report
1:00 PM Baker-Hughes Rig Count

Companies reporting earnings today »

What else is happening...

Another tech cut: DocuSign (DOCU) to lay off 10% of its workforce.

Europe said to run into delays over how to regulate AI.

Will China shoot down Ford's (F) CATL EV battery deal? Not likely.

General Motors (GM) is now Lithium Americas' (LAClargest investor.

Tesla (TSLA) recalls +360K vehicles to fix self-driving problems.

DoorDash (DASH) tops revenue expectations, posts upbeat guidance.

Strong growth sees DraftKings (DKNG) guide for profitability in 2024.

Goldman Sachs (GS) pauses efforts to acquire new credit card programs.

Multibillion crypto scheme? SEC sues Terraform Labs and Do Kwon.

Manchester United (MANU) on the move as Qataris ready bid of £5B

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.

More Posts by UPB: View All | Private Twitter Feed: Access Now! (For Diamond Members)