Dow Jones: 35,091.13 (+1.06%)
S&P 500: 4,483.87 (+0.84%)
Nasdaq: 14,015.67 (+1.28%)
Russell 2000: 2,012.60 (+1.63%)
Bitcoin: $44,211 (+0.64%)
Ethereum: $3,114 (-0.70%)
Happy Green Day! The market rallied after a slow start to the week, even though the 10-year Treasury yield hit 1.96% today… a level not seen since 2019. Investors are still waiting patiently for Thursday’s inflation data.
Tech, financials, and small-caps helped pull the market higher today, with JPMorgan Chase (JPM), American Express (AXP), and Chegg (CHGG) rising 1.9%, 3.3%, and 7.8% on the day.
Earnings: Pfizer (PFE) fell 2.8% as Q4 revenue and forward guidance came in less than expected. Chipotle (CMG) spiked nearly 7% after they beat Q4 earnings (yep, your favorite chipotle bowl got more expensive).
Crypto: BTC and ETH traded relatively flat as the global crypto market inches slowly up to the $2 trillion mark… and unfortunately, Shiba Inu cooled down its wild 45%, 7-day rally today. But hey, it was nice while it lasted.
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Now, for the top stories of the day…
Source: Heat Map & Sector Performance — Finviz.com
The Largest Chip Deal Ever Just Fell Apart
The Nvidia X Arm deal is officially dead.
After almost two years of battling with regulators and other tech companies, SoftBank finally decided to call off the potentially record-breaking sale of the British design firm Arm (the company that licenses its chip “architecture” to hundreds of businesses around the world).
Nvidia’s near-$80 billion acquisition of Arm would’ve been the largest semiconductor deal on record — but regulators just couldn’t look past the power it would give Nvidia over companies like Apple, Amazon, Qualcomm, Google, and Samsung… all of which are Arm’s customers.
So now that Nvidia is out of the picture, what’s next?
Well, SoftBank still wants to cash out some of its gains while the chip market is hotter-than-ever. SoftBank CEO Masayoshi Son announced that the new plan is to offload Arm through an IPO in the US, likely before March 2023.
While disappointed that the initial deal isn’t going through, Son is still as bullish as ever on Arm, claiming that it will revolutionize cloud computing and the metaverse. He also added that it could become the most significant IPO the chip industry has ever seen…
Check out these stats and let us know if you agree with him:
- Arm chip architectures are used in 95% of the world’s smartphones and 95% of chips designed in China
- Arm licensees ship an average of 22 billion chips annually (200 billion to date)
- Forecasts: Arm expects $2.5 billion in revenue and $900 million in adjusted EBITDA for the year ending March 31, 2022.
New leadership: Following the resignation of CEO Simon Segars, Arm appointed Rene Haas to helm the ship in the next chapter of the company’s life. Coincidentally, Haas worked at Nvidia for 7 years before joining Arm in 2013, and SoftBank is bullish on his ability to prep the company for the public markets.
“Arm is back. Rather just being back, it’s really going to grow explosively,” Son told reporters.
Consumer Debt Hits an All-Time High…
New data released by the Federal Reserve’s New York district shows that consumers ended 2021 with record-high levels of debt…
Total U.S. consumer debt at the end of 2021 came in at a whopping $15.6 trillion, increasing $1 trillion during the full year and $333 billion in the fourth quarter alone.
- The annual jump of $1 trillion was the largest on record (since 2003) and the Q4 spike was the biggest quarterly increase since 2007.
Interestingly, student loan debt only increased about $20 billion for the year, and actually declined marginally in Q4.
But other consumer debt categories certainly picked up the slack… Mortgage balances rose $890 billion in 2021, to nearly $11 trillion (~70% of total consumer debt). Mortgage originations also hit a new record, totaling more than $4.5 trillion for the year.
Things Could Get Interesting…
Right now, the NY Fed says that household balance sheets are still pretty strong thanks to low-interest rates and forbearance programs that have kept delinquencies in check.
But things could get tricky when the Fed finally decides it’s time to raise rates, which are directly tied to the prime rate consumers pay for credit cards and adjustable-rate mortgages.
- Total credit card balances ended 2021 at $860 billion
Tom Lee’s ‘Hidden Gem’ Tech Stock for 2022
Fundstrat’s Tom Lee, the closely watched strategist known for making some great calls during the Covid crisis, is bullish on a number of tech names that have been beaten down badly in the market.
Today, Lee went on CNBC to say, “If an investor does their homework I do think you’re going to find some real gems.”
In particular, he is looking at growth stocks that have struggled while investors rotate from the growth sector to value. With tech stock charts all messed up to start 2022, Lee says “This is probably the time you’d start to pick winners from losers.”
Shopify (SHOP): Lee thinks Shopify has been unfairly treated in the market during the tech rout. But despite selling off nearly 55% from its 52-week high, SHOP is one of the growth stocks that Lee believes can compound its earnings expansion.
Shopify “changed the economy” and is “part of the everyday lexicon,” said Lee.
- SHOP is down over 35% year-to-date and is trading just 12% above its 52-week low of $780
- Shopify is set to report Q4 earnings on February 16
FAANG (or MAANG?): Lee is also bullish on Meta (FB), Apple, Amazon, Netflix, and Alphabet (GOOGL), claiming that the valuations are starting to look very reasonable at their current levels.
An equally weighted portfolio of FAANG stocks would be down 16.11% YTD.
The DOJ Just Seized $3.6 Billion From This Crypto Couple
The US Department of Justice just seized $3.6 billion and arrested two individuals in New York today on charges that they conspired to launder funds from the mysterious Bitfinex hack in 2016.
The 120,000 BTC stolen in 2016 was worth approximately $60 million. But now, that tainted fortune has grown to a value of $4.5 billion at bitcoin’s current price.
DOJ officials revealed that they were able to seize 94,000 BTC of the original 120,000 that were stolen, in what Deputy Attorney General Lisa Monaco called “the department’s largest financial seizure ever.”
The (alleged) Culprits: Married couple Ilya “Dutch” Lichtenstein and Heather Morgan are set to appear in court at 3:00pm ET in New York as the DOJ puts together its case. According to the DOJ release, the two are likely the original hackers — but it does not claim that to be a fact.
- “U.S. authorities traced the stolen funds on the BTC blockchain,” watching the proceeds from the hack move from the original recipient’s wallet to wallets that were controlled by Morgan and Lichtenstein.
Over the past 5 years, over 25,000 BTC was transferred from Lichtenstein’s wallet to nearly 2,000 other connected wallets, which law enforcement officials were able to gain access to. “Blockchain analysis confirmed that almost all of those wallets were directly linked to the hack,” the statement said.
Making things right… Bitfinex said that if it is able to recover the seized BTC from authorities, the exchange will repay affected investors in its UNUS SED LEO token within 18 months. The LEO token pumped from $4.97 to over $7 in just one hour following the news.
The DOJ Just Seized $3.6 Billion From This Crypto Couple
Twitter (TWTR) earnings are right around the corner, but it looks like Cathie isn’t betting on a Snapchat-style pump.
Ahead of the social media company’s report, ARK Investment Management is ramping up its selling of shares… On Monday alone, ARK dumped nearly 4 million shares of TWTR valued at approximately $142 million — the most it’s sold in a single day since last May.
Breaking up with @jack… Cathie has been a fan of founder Jack Dorsey for a while now (after all, being Bitcoin bulls together creates a strong bond). But with Dorsey out of the picture, Wood has been trimming down her Twitter position since December.
Since the start of February, ARK has shed over 6.7 million shares of TWTR, which now commands less than 0.4% of the ARK Innovation fund’s (ARKK) weighting.
Twitter’s Rough Performance
The stock is down nearly 60% from its 52-week high of $80.75… and even though the company is doing its best to cater to the strong crypto crowd on the platform (with things like NFT profile-pic verification), Cathie likely sees better opportunities in the market elsewhere. Fact: TWTR is down over 13% all-time since its IPO in 2013.
And of course, the earnings drama we’ve been seeing so far could be pushing ARK to speed up its selling. Meta (FB), PayPal (PYPL), and Netflix (NFLX) all got crushed by over 20% following their Q4 reports.
Earnings Preview: Here’s what analysts are expecting Twitter to report on February 10th (according to Zacks Consensus)
- EPS: $0.33 (13.16% YOY decline)
Revenue: $1.57 billion (21.84% YOY growth)
Peloton (PTON) +20.93% – Peloton shares surged ahead of its earnings after the company announced its CEO was stepping down and they were laying off 2,800 employees.
Chegg (CHGG) +17.17% – Chegg is coming off hot earnings yesterday as earnings weren’t as bad as feared and forward guidance exceeding expectations.
GameStop (GME) +8.44% – GameStop is seeing a nice recovery today and rallying with the market as it tries to recover its 26% decline YTD.
Teladoc (TDOC) -7.08% – Bank of America lowered its price target on Teladoc from $118 to $108 due to Chronic Care enrollments forecasts for Q1.
Moderna (MRNA) -6.08% – Moderna continues to fall as a new study by the U.S. government shows its omicron-specific booster might not be needed.
Robinhood (HOOD) -5.56% – Robinhood stock is giving up some of its post-earnings gains after rallying over 40% from its post-earnings low.
General Motors (GM) – Morgan Stanley downgraded shares of General Motors from overweight to equal weight saying the stock has a “less clear path to realization,” “We downgrade GM to EW from OW and lower our price target to $55 from $75 previously following a FY22 guide below our estimate. While SOTP potential still exists, we see a less clear path to realization.”
Nio (NIO) – Barclays initiated coverage of Nio as overweight saying it sees positive catalysts for the company in the year’s head. “Dubbed ‘China’s Tesla,’ NIO targets the premium EV market with models priced between RMB 300-500k ($48-80k). NIO has successfully built its brand as a legitimate luxury car maker, not only by enhancing the high-end look and feel of its cars, but also through its service oﬀerings, such as BaaS (Battery as a Service).”
Airbnb (ABNB) – BTIG downgraded shares of Airbnb from buy to neutral saying expectations are too high. “We downgrade ABNB from Buy to Neutral with concern over consensus expectations and the sustainability of multiple if estimates are coming down and growth is slowing.”
Quote of the Day: “I don’t look to jump over seven-foot bars; I look around for one-foot bars that I can step over.” — Warren Buffett
Fun Fact: Dunkin’ Donuts in South Korea started spraying coffee aroma into public buses every time their jingle played. Coffee sales increased 29%.
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