Morning Reads

Morning Reads

Open Interest Changes



Many are watching as conflict and war expand across the globe, and what those consequences might mean for various sectors of the economy. Everything from energy and finance to supply chains hangs in the balance, with spillover effects mostly acutely impacting defense production. Countries and companies alike are preparing by restocking their arsenals and inventories, as well as fast-tracking new technologies to give them the upper hand or banning their adversaries from acquiring them.

Bigger picture: The U.S. has already outlawed or effectively lobbied allies against selling cutting-edge semiconductor chips to China out of fear that the silicon could be used for precision-guided kits or other advanced military systems. Traditional arms are also back in fashion, with BAE Systems (OTCPK:BAESY) announcing today that it would restart production of M777 howitzer parts for the U.S. Army. Putting it in perspective, the last order that took place was five years ago, but with output back online, BAE expects to ink new contracts for the artillery cannons given inquiries from more than eight countries.

It's not the only company going into overdrive. Thales is bringing back the Starstreak portable air-defense missile, while other firms like Raytheon (NYSE:RTX) struggle to ramp up production of the popular NASAMS, which helps protect crucial areas like the airspace over the White House. Demand may not be the only factor when deciding how to invest, with SA's screening tool helping identify strong buys within the defense sector. Check out the Top Defensive Stocks For Turbulent Times by Steve Cress, Head of Quantitative Strategies at Seeking Alpha.

Conflict zones: It's not only Russia-Ukraine, China-Taiwan, and an escalating war across the Middle East. Cartel chaos in Mexico has prompted mainstream discussion in the U.S. over whether military personnel should be sent south of the border, while a Venezuela-Guyana conflict could shake things up in Latin America. The U.S. is also preparing military options to secure international shipping in the Red Sea, as well as bases for drones in Africa to counter Russia and stop an Islamist insurgency across the region. Preparing for what might come ahead, President Biden and Congress signed off on a U.S. defense policy bill in December that approved a record $886B in annual military spending. (2 comments)

More in store?

U.S. commercial bankruptcy filings jumped 72% to 6,569 in 2023, primarily due to increased interest rates, tougher lending standards and pushback from the pandemic. "These facts teach investors a timeless lesson," SA Investing Group Leader Value Digger declared. "Investors need to avoid the leveraged (indebted) companies (i.e. REITs, utilities etc.) and buy companies with fortress balance sheets including ZERO leverage, if they want to sleep well at night." Among the notable firms that filed for bankruptcy last year were Yellow Corporation (OTC:YELLQ), Rite Aid (OTC:RADCQ) and Bed Bath & Beyond (OTCPK:BBBYQ) as well as SPACs like WeWork (OTC:WEWKQ), Lordstown Motors (OTC:RIDEQ) and Bird Global (OTC:BRDSQ). (2 comments)

Rate uncertainty

The latest FOMC minutes have provided little insight on the timing of potential rate cuts, with Fed officials acknowledging "an unusually elevated degree of uncertainty" about the economic outlook. "The minutes confirm whatever you wanted to think about the direction of U.S. interest rates before the release," UBS' Paul Donovan said. "I would suggest they are consistent with three rate cuts, starting later than March - but that was my bias before the minutes." Some Fed members also noted that keeping the benchmark rate at an elevated level might be necessary should inflation stay above target, meaning the central bank will continue to base its policy decisions on incoming economic data. (18 comments)

Making money

2023 was a bumper year for Meta Platforms (NASDAQ:META), becoming the best-performing Magnificent 7 stock after AI darling Nvidia (NVDA). Shares soared 178% during the "year of efficiency," in which CEO Mark Zuckerberg refocused the business on digital advertising and social media market share and away from moonshot projects like the Metaverse. As growth returned and the stock neared all-time highs, the captain of the ship also decided to cash in. New filings show that Zuckerberg offloaded nearly half a billion dollars of Meta shares in the final two months of the year, selling stock on every trading day between Nov. 1 and the end of 2023 (his last sales occurred in November 2021). (2 comments)

Today's Markets

In Asia, Japan -0.6%. Hong Kong -0.1%. China -0.4%. India +0.7%.
In Europe, at midday, London +0.2%. Paris +0.3%. Frankfurt +0.1%.
Futures at 6:30, Dow +0.2%. S&P +0.1%. Nasdaq -0.1%. Crude +1.1% to $73.52. Gold +0.5% to $2052.30. Bitcoin +2% to $43,387.
Ten-year Treasury Yield +5 bps to 3.95%

Today's Economic Calendar

7:30 Challenger Job-Cut Report
8:15 ADP Jobs Report
8:30 Initial Jobless Claims
9:45 PMI Composite Final
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
4:30 PM Fed Balance Sheet

Companies reporting earnings today »

What else is happening...

Red Sea ship attacks send ocean freight rates soaring.

Crude oil bounces after shutdown at major Libyan oilfield.

General Motors (GM) remained top-selling U.S. automaker in 2023.

Meet the latest Chinese electric vehicle model - Xiaomi's SU7.

Goldman Sachs (GS) in talks with Grayscale about bitcoin ETF role.

Cigna (CI) reportedly nearing $3B-$4B deal to sell Medicare business.

Covering biosimilars, CVS (CVS) to drop Humira from certain formularies.

Cannabis stocks in focus report DEA reviewing legal status.

PepsiCo (PEP) looks to leverage both Rockstar and Celsius (CELH).

Disney (DIS) wins Blackwells backing in boardroom fight vs. Trian.

TikTok sets sights on Amazon (AMZN) with goal of growing e-commerce tenfold.

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)