A daily market update from FS Insight — what you need to know ahead of opening bell

“True love is felonious… You take someone’s breath away… You rob them of the ability to utter a single word… You steal a heart.” ― Jodi Picoult, My Sister’s Keeper

Overnight

Tom Suozzi wins New York special election, replacing George Santos. link

Israel hit by missile barrage in escalation of Lebanon attacks. link

Ukraine says it destroyed Russian warship in Black Sea attack. link

Russia buys Musk’s Starlink systems in Arab countries, flaunts acquisition; it may be possible to stop their use on the battlefield, says Ukraine. link

EU proposes sanctioning North Korea for sending Russia missiles. link

UK inflation weaker than forecast in relief for BOE policymakers. link

OpenAI founder Andrej Karpathy departs (link) as company is on track to hit $2 billion in revenue. link

Canva CFO Damien Singh leaves ahead of potential IPO. link

CVC co-founder Donald Mackenzie, who led the F1 buyout, bows out before planned IPO. link

Lyft shares initially surge on first-ever profit, strong outlook, then retreat after source of earnings turns out to have been a typo. link

Nvidia’s Chat with RTX brings a personal AI chatbot to your PC. link

ChatGPT will create a digital memory to help personalize its responses. link

Databricks CEO predicts major drop in AI chip prices. link

North Korea fires fifth barrage of cruise missiles in past month. link

First news

• Marriott is not in a suite spot
• Coke revenue rises, but anger at ‘price gouging’ is bubbling up
• Europe, afraid of Russia, takes steps to protect itself
• Microsoft’s Copilot gets so-so marks in test flight
• Cost of chocolate, true romance is at record highs.

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

Yesterday’s selloff in equites was the largest decline of 2024 so far, after Jan. CPI came in “hot” vs consensus, with Core CPI +0.39% (vs consensus +0.30%). While yesterday’s decline was indeed large, this simply takes us to prices of four trading days ago – in other words, this is a mild retracement of recent gains.

Bottom line: Stocks are seeing profit-taking, which is healthy but not a sign of a top in our view. We think it is too early to call a top for 1Q24. As the adage goes, we will peak when we “sell-off on good news”. We are watching for a top, but this sell-off seems too consensus.

Click HERE for more.

TECHNICAL

Is the MPWR rally going to continue much further?

This is a stock investors need to pay attention to following the recent breakout, given its past price history. Most are clamoring to attempt to “find the next SMCI”, which is no easy task, but one tool we often employ is to recognize when a stock has enjoyed a huge runup prior to basing.

MPWR -0.84%  rose from $165 back in early 2020 to nearly $600 within a two-year period, (+263%) then went sideways in a giant Reverse Head and Shoulders base from late 2021 into late 2023, before the breakout in December 2023, with its move above $580. This resulted in a sharp spike to over $750 quickly. However, no evidence of any counter-trend exhaustion is present on daily or weekly charts after this week’s breakout, and if one merely measures the current rally from early January this year and compares it to October 2023 bounce, it would be equal near $815.

Furthermore, if one expects a similar move percentage-wise to the 2020-2021 rally, in percentage terms, that would allow for a move over $1400. Those are rudimentary projection techniques, but ones we often employ to come up with technical price projection targets. (We’re not saying that MPWR should get over 1000 this year, but we do expect a move to $816, then consolidation, then further gains, overall, so we still find this attractive and the reason has more to do with its larger structure and breakout and volume, not the last few days of gains.)  Bottom line: MPWR looks attractive to us technically, in both a short-term and intermediate-term timeframe. However, any pullback in the weeks to come would create an even better risk/reward proposition. 

Click HERE for more.

CRYPTO

In today’s Crypto Comments video, we discuss Bitcoin’s resilience despite risk-assets turning lower following a hotter-than-expected CPI report. We also explore Stacks’ relative strength and our view on Coinbase’s upcoming earnings.

Click HERE for more.

FIRST NEWS

Do Not Disturb. Marriott said it sees growth ‘normalizing’ this year. The hospitality major’s earnings, out yesterday morning, showed that so-called post-Covid ‘revenge travel’ has run its course, leaving hotels and Airbnb (which reported better-than-expected revenue on the back of international travel yesterday) duking it out for market share in 2024. For now, it’s a gentleman’s boxing match, but one that could turn into a cage fight at the drop of a hat. Competitors are throwing their hats into the ring. Hyatt announced a new vacation-rentals site coming in the fall, while Hilton has just taken the wraps off of its newest extended-stay hotel brand. Semafor

The Fizzle that Pops. Several large companies say price increases continue to buttress their sales figures. Coca-Cola’s Q4 organic revenue rose by 12%, three-quarters of which was driven by price/mix and increased concentrate sales. “U.S. consumer spending power has held up pretty strongly,” Coca-Cola CEO James Quincey said yesterday on a conference call, pointing to “a section of the population that has come under pressure from … the real spending power squeeze from the inflationary effect.” Applying its own sort of pressure, watchdog group Accountable.us says the food industry is engaging in ‘gross profiteering’ at the expense of consumers. CNBC

Never Fight a Land War in (Eur)Asia. European countries, especially those particularly close to Russia geographically, are increasingly seeing Russia as a security threat to all of the continent. Moscow is set to double its military presence along NATO’s border. Estonian intelligence called it a path of ‘long-term confrontation’ Tuesday, echoing concerns expressed recently by Denmark. Baltic states – which, as former Soviet colonies, have insider knowledge of the Russian way of doing things – have been ramping up their defense efforts, with plans to build a line of bunkers.

In the meantime, former U.S. President Donald Trump’s recent suggestion that he could ignore NATO obligations if Russia attacked an allied state has forced European leaders to pledge greater military cooperation. The warnings come as the U.S. Senate has just approved a $95 billion aid package for Ukraine, Israel, and Taiwan, whose passage in the House is seen by some as an uphill battle. Semafor

Clippy to Copilot’s Rescue. Testers of Copilot for Microsoft 365 say the product sometimes hallucinates, fabricating responses. Users said Copilot, at times, would make mistakes on meeting summaries. The hallucinations are especially problematic in programs that handle numbers. Consequently, current users say Excel is one of the programs on which they’d be less likely to use the AI assistant, which can crunch numbers into a bowl of mistake-ridden gruel. 

Microsoft’s VP of workplace applications admitted that Excel was still in preview and was lagging behind other programs in usefulness. Copilot’s ability to generate PowerPoint slides has also disappointed users, leading excitement about the AI tools among early adopters to wear off quickly. Lenovo reported that, aside from the AI used to transcribe meetings on Teams (which had its own issues: manufacturing phantom participants, for instance), there was about a 20% drop in the use of Copilot for most software after a month.

Operation Paperclip

Microsoft said it plans to address the drop-off by incorporating more alerts and tips to nudge users. Power users are shuddering at remembrances of the company’s polarizing paperclip assistant. WSJ

Cupid Bitter as Cost of Romance Cons, Chocolate Remains High. In olden days (of yore) the common folk had a habit of biting into coins to make sure they really were made of gold. (Gold is relatively soft, whereas the baser metals used to imitate it tend to be harder.) This year, the price of those Valentine’s Day chocolates – some of which might come in the shape of coins, although it’s true that most are shaped like hearts – might bite, what with romance scams on the rise.

Over 64,000 cases of this particular type of con were reported to the FTC last year; losses totaled $1.14 billion. They seem to be more rare than before, but the median loss of $2,000 per victim makes them the costliest of any form of imposter scam. A typical romance scammer contacts their target through social media – feigning love, telling a sad love story, or both – then deceiving the victim into sending money, often as cryptocurrency or gift cards.

Also bitter, for some, is the price of chocolate. Cocoa futures have doubled over the last 12 months, as bad weather in West Africa, home to more than 60% of global cocoa production, has damaged crop yields and constrained cocoa supply, naturally pushing prices higher. Our own Global Head of Technical Strategy, Mark Newton, gave ample warning of the marked run-up in the price of cocoa 12 days ago – and prices have risen 12% since then!

Still, if you didn’t have time to stock up, don’t fret. Bite the bullet chocolate coin and buy the best bonbons you can afford. Everyone knows chocolate and the other pleasures of Valentine’s Day should be about getting on the right side of Cupid, not engaging in cupidity. CNN

On this special day, whomever it is you love – or whatever it is you love: like investing in the stock market or consuming quality bonbons – take a moment to listen to this classic tune. Happy Valentine’s Day!