TMTB EOD Wrap

QQQs +3.4% on a huge risk on day as stocks got a huge boost from Trump’s Art of the Deal: the ol’ turn your back and walk away…

We think John’s point from early this morning was largely right and think investors took Trump’s tweet to mean he is seriously considering walking away with no deal (at the very least, increased the probability of it). We had this as our most likely scenario in our weekly, but the signal came a lot sooner than expected. We also didn’t fully internalize what a walk away means: it really only takes 1 to TACO. Here’s what we wrote would happen in that scenario:

We likely see a bounce on #2 given stocks are so oversold and vol would reset, but that scenario likely comes with oil staying bid, yields high, and fed expectations not shifting much. More likely a fade the 5-7 bounce and expect market to remain choppy.

Oil did stay bid, but fed expects moved in a slightly dovish direction, especially for ‘27 expectations of cuts and yields dipped 5bps across the curve. A 5-7% rally in equities would take us right to the underside of the 20d, which we think sounds like a fair bounce given we are so oversold. On top of that we got a joint letter from Pakistan and China calling for an end to hostilities. Given this backdrop, we added risk (gross and net) this morning. Our base case rt now is a hit of the 20d on the QQQs and then at least some chop at the very least — and time to reassess — assuming oil staying bid, but we remain open minded and are taking it day by day (It’s a very fluid situation w a ton of uncertainty and lack of clarity). We just picked our spots on the names we like with the right chart set ups and r/r’s. We even finally added some NVDA today as the chart was showing our preferred scenario we have been writing about: a dip below the range and break back above, providing a “false break” and good r/r entry (we can cut if it breaks back below that range)

Source: Bloomberg

Mag7 continued to act strong for a 2nd straight day. Desks pointed to real LO interest in Mag7 names — Jefferies had them 7x to buy, which is a big shift vs. previous months. These names like to rally into earnings given they’re all likely to post good numbers (with lack of capex raises for now the base case), so something to keep in mind: META +6%; AMZN +4%; GOOGL +4% with MSFT +3.5% bringing up the rear.

Let’s get to it…

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AI/SEMIS

• MRVL +11% as they announced a partnership with NVDA to connect MRVL to the NVDA AI Factor and AI-RAN ecosystem through NVIDIA NVLink Fusion as well as a $2Bn investment from NVDA. Harlan At JPM (one of main bulls on the stock) was out saying they view today's expanded NVDA-MRVL partnership is a broadening collaboration into silicon photonics and AI-RAN for 5G/6G, and confirming MRVL as the primary NVLink Fusion integration partner for AWS's Trainium4. Harlan basically arguing this signals Nvidia is "effectively acknowledging custom ASIC XPUs are here to stay" and that the optimal strategic response is embedding its interconnect, networking, and CPU stack into XPU racks rather than defending GPU-only deployments. Just a couple ppts off 52wk highs — who would have thought MRVL could be first AI semi to break out to new highs. Not involved here, but chart looks nice: