Morning Reads

Morning Reads

  • China is preventing Arm (SFTBY) from selling Chinese joint venture. FT
  • Microsoft (MSFT) trying to solve UK antitrust issues with Actvisiion (ATVI) deal. Bloomberg
  • Microsoft (MSFT) aiming to use TSMC (TSM) AI chip. Digitimes

Todays Open Interest Change




The jury is out on Tesla's (NASDAQ:TSLA) Investor Day event at its Gigafactory in Austin, Texas. Elon Musk started off by talking about the clear path to a fully sustainable Earth, highlighting the dirty and wasteful energy economy that is currently in place. His "Master Plan Part 3" would eliminate fossil fuels including repowering the existing grid with renewables and a switch to all-electric vehicles by consumers and businesses (electric planes and boats were also mentioned). In terms of resources, the company is convinced there are enough nickel, lithium, and cobalt sources to power a sustainable economy.

Reaction: Investors were underwhelmed by the presentation, sending the stock down nearly 6% in AH trading on Wednesday. The future of Full Self-Driving, a robotaxi network, and charging infrastructure was discussed in broad strokes, and while a "next generation" electric-vehicle platform was announced, it didn't include too many details. Note that Tesla shares have been on rip since investors welcomed in 2023 - sending the stock up 90% YTD - and those betting against the volatile stock have, at times, found themselves in the opposite lane facing traffic.

It was another "buy the rumor, sell the news" event, noted Seeking Alpha contributor Bill Maurer. "The presentation was just too long and wordy for the average investor," which may have "fueled some of the selling in the after-hours session." SA contributor Long Term Tips has already broken down what Tesla's new master plan means for competitors.

Other highlights: Tesla disclosed that it broke ground on a lithium refinery plant in Corpus Christi, Texas with output expected within 10 months. The company also confirmed that a new Gigafactory will be built near the northern Mexican city of Monterrey. As for numbers, potential Tesla CEO successor Tom Zhu said Tesla has now produced 4M cars just seven months after passing the 3M vehicle mark for production. (180 comments)

Higher yields

Headlines from the fixed income world are rattling equity investors as the yield on the 10-year Treasury (US10Y) topped 4.00% for the first time since November. The 2-year yield (US2Y) also rose 2 basis points to 4.91% on Wednesday, hitting a new post-2007 high. Looking at the latest comments from policymakers, Atlanta Fed President Raphael Bostic advocated for rates to rise above 5%, while Minneapolis Fed President Neel Kashkari expressed concerns about incoming economic data. "Stocks are in trouble if Treasury yields keep rising," writes SA contributor Tyson Halsey, CFA, who says to "buy high yields to hedge your portfolio." See the full article, Is The Federal Reserve Wrong Again In Believing Inflation Is Transitory?

War on 'woke' funds

Over in Washington, the Senate just passed an anti-ESG measure that would overturn a Labor Department rule allowing fund managers and retirement plans to consider ESG (environmental, social, and governance) factors when making investment decisions. President Biden has said that he will nix the new bill if it comes to his desk - marking the first veto of his presidency - but the developments could signal further shifts in asset allocation strategies. With trillions of dollars pouring into the ESG space, a fight is brewing over the market narrative, as well as the PR and positioning that managers seek to take advantage of when marketing their funds. Contrarian investors wanting to bet against ESG can buy the God Bless America ETF (NYSEARCA:YALL), which is up 16% since its launch in October 2022. (6 comments)

A force to be reckoned with?

Salesforce (CRM) flexed its muscles in after-hours trading Wednesday, rocketing up 15%, as the cloud-based business-software giant gave a strong sales forecast to go along with upbeat fourth-quarter results. In an accompanying statement, CEO Marc Benioff avoided any comments about Salesforce laying off 10% of its employees, and stuck to the typical earnings-report script, but said, "we hit the hyperspace button since we last spoke a quarter ago. Changes that used to take months are taking weeks." CFO Amy Weaver added to the sentiment by saying the results and outlook "set us up for a transformational fiscal year." Will the advances help Salesforce pacify activist investors, like Elliott Management, which has reportedly nominated a slate of directors in preparation for a potential proxy fight? (19 comments)

Today's Markets

In Asia, Japan -0.1%. Hong Kong -0.9%. China -0.1%. India -0.8%.
In Europe, at midday, London -0.2%. Paris -0.1%. Frankfurt -0.5%.
Futures at 6:30, Dow +0.3%. S&P -0.3%. Nasdaq -0.5%. Crude +0.5% to $78.06. Gold -0.2% to $1841.90. Bitcoin -1.7% to $23,365.
Ten-year Treasury Yield +3 bps to 4.03%

Today's Economic Calendar

Auto Sales
8:30 Initial Jobless Claims
8:30 Productivity and Costs
10:30 EIA Natural Gas Inventory
4:00 PM Fed's Waller: Economic Outlook
4:30 PM Fed Balance Sheet

Companies reporting earnings today »

What else is happening...

ECB eyes release of the latest eurozone inflation numbers.

Microsoft (MSFT)-Activision (ATVI) review gets extended in Europe.

TikTok (BDNCE) sets one-hour screen time limit for teens.

Lowe's (LOW) stock slips as Q4 sales lag expectations.

Department store markdowns: Sharp margin contraction at Kohl's (KSS).

Despite payout concerns, Petrobras (PBR) to pay $6.9B in dividends.

Cryptoverse: Silvergate (SI) tumbles as annual report filing is delayed.

SpaceX (SPACE) launches latest space station crew into orbit.

Out-of-pocket cap: Lilly (LLY) slashes insulin prices by 70%.

Walgreens (WBA), DoorDash (DASH), Uber (UBER) partner on new delivery effort.

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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