After-Hours % Gainers

After-Hours % Decliners

Closing Volume

- NYSE volume 41% above its one-month average;

- NASDAQ volume 20% above its one-month average;

- VIX index: up 9.73% to 17.33

Breadth

S&P 500 Sectors

% Movers

Nasdaq 100 Heat Map

Closing S&P 500 Heat Map

Earnings After the Close Tuesday Feb. 3

Earnings Before the Open Wednesday, Feb. 4

At $79.97, I moved from very small to small sized in Netflix  (NFLX) .

I am a scale buyer and plan to move to medium sized on any further weakness.

* On Tom Lee...

(39) Tom Lee’s $250K Bitcoin Target And Other Bedtime Stories

My sources indicate that rescheduling will finally be driven home and finalized shortly by the Trump administration.

There is probably a very short-term trade in  (MSOS)  with limited risk.

I am now long MSOS common (cost $4) and I am buying in the money calls for February and March.

Importantly, this is a rental and not a long-term lease (given my secular industry concerns).

I have covered my  (IWM)  short rental at $259.55 for a nice profit. 

I have argued about the inevitability that high depreciation expenses (associated with the massive AI build-out) will result in earnings shortfalls for the hyperscalers.

This is exactly Michael Burry's warning this morning:

It has been reported that the U.S. Navy has shot down an Iranian drone that neared a U.S. aircraft carrier in the Arabian Sea.

Okay, I get it — Tesla's  (TSLA)  shares are "not ready" to drop.

I covered to break even.

But I'll be baccccckkkk!

- NYSE volume 24% above its one-month average;

- Nasdaq volume 4% above its one-month average;

- VIX index: up 4.65% to 17.10

Surprise, Surprise!

* Another surprise seemingly being realized...

Private equity stocks are getting schmeissed today (down by between -4% to -9%), led by Ares  (ARES) , KKR  (KKR)  and the others mentioned below.

From my 2026 Surprise List.

Surprise #6: The bill finally comes due from the 2020-2022 LBOs that relied on low-cost debt that now can’t be effectively rolled over

Valuation opacity, a compression in exit multiples and unrealistic net asset value marks (mark to model delays volatility but doesn't remove it) in private equity come into focus in 2026. The greatest problems are companies tied to commercial real estate and Saas companies. There are a number of high-profile bankruptcies in notable private equity portfolios.

A market for stranded LP interests trading at deep discounts becomes widely followed. Further, the IPO market continues to not be a viable exit for most holdings. Gated redemptions become common place. Apollo (APO) , TPG (TPG) , KKR (KKR) and Ares (ARES) each fall by 30%. 

Charts from 9:49 a.m. ET.

I just covered  (NVDA)  at $180.45.

We shorted it yesterday at $190:

Things I Did Today

Here are today's things:

* I re-shorted (NVDA) at $190.01.

By Doug KassFeb 2, 2026 3:30 PM EST

Though PepsiCo  (PEP)  is my stock of the year, I just sold most of the balance of my PEP at $162.80 (+$7.60)

Now very, very small in size!

With S&P cash -28 handles I have moved to very small in my index shorts (common and calls).

Here are my common short cover prices:

*  (SPY)  $692.72

*  (QQQ)  $620.17

With S&P cash -30 handles I have covered all of my Index shorts (common and calls) for a profit.

With S&P cash -28 handles I have moved to very small in my Index shorts (common and calls).

Here are my common short cover prices:

*  (SPY)  $692.72

*  (QQQ)  $620.17

Short SPY common VS calls VS QQQ common VS calls VS

* We reshorted Nvidia (at $190.01) yesterday....

The Space X / xAI “merger” speaks volumes.

This is simply another deal in the AI industry that, I believe, has become a circular financing scheme that would make Charles Ponzi proud:

The proposed merger is putting CDO2 to shame.

As mentioned yesterday, the proposal reminds me of Tesla  (TSLA)  acquiring Solar City.

Seems to me this is how you garner funding for a business that cannot get enough funding of its own volition, by folding it into the business that is able to raise capital.

Despite what I believe will be a BS rationalization offered up, xAI really has nothing to do with Space X, and vice-a-versa. A far fetched story about data centers in space will only fly with the willfully ignorant, whose investment case is not much beyond hoping the industry's scheme continues. Even if data centers in space are feasible in anybody’s lifetime, they are still two entirely different businesses.

I cannot imagine  (MSFT)  is going to buy a cement company, a steel company, and a construction company and claim “tilt up slab buildings are necessary for DCs.”

The only thing space has to do with AI is they both have giant black holes!

Open AI is in not much different of a position. Nor is seemingly anyone else, given how capital consumptive and dis-economic this industry is. There are now stories that Oracle may have to fire 20,000-30,000 people, sell Cerner and still raise capital to fund its AI DC commitments. Amazon  (AMZN)  and Meta  (META)  are now seemingly having to resort to firing people and shuttering different businesses to fund their AI exploits and on and on it goes.

The investment case for the whole industry now seems to be cheering for the continuation of what I view as a Ponzi scheme.

This also speaks volumes about what the investment landscape has become.

The backdrop is an end product, that despite all the hype, seems to deliver very little in the way of promised productivity gains. What people continue to miss in this analysis is all the money that is being lost (and power price burden being shoved to the consumer), to deliver little or no benefit.

If the entire value chain (infrastructure and app providers) were pricing at an economic level, my guess is the end customers might have to pay two-times per unit as what they are paying now. If it has marginal or no utility at the current price and it obviously would have negative value to the end user at an economic price.

In the process, many companies are destroying their balance sheets and cash flows. But I guess (and for now), the good news is “investors” no longer seem to be able to read a balance sheet or a cash flow statement and the AI is probably trained not to know how to do that either!

Oh and there is this, the pissing match between these guys continues. Although I still expect Open AI to be able to extract more money from Nvidia  (NVDA)  in their latest round. The investment case in Open AI seems to be not much more complicated than Sam Altman saying something like, “give me money at whatever valuation I want or ... I am going to go down and I will take you down with me.”

This is what the entire industry has become. Good money thrown after bad money by existing investors and suppliers because they have all stuck themselves in the tangled web they have woven.

We reshorted NVDA at $190.01 yesterday.

I covered my 4 a.m. Index shorts for a profit on the whoosh lower:

*  (SPY)  $695.23

*  (QQQ)  $624.10

From earlier:

Premarket Trading

* Of a 4:05 AM kind

Adding to index shorts:

(SPY) $697.46

(QQQ) $629.85

Position: Short SPY common (S) and calls (S), QQQ common (S) and calls (S)

By Doug KassFeb 3, 2026 5:55 AM EST

I have initiated a very small short in  (TSLA)  at $425.01.

Please don't follow me into this one!

* I have no positions in cannabis at the current time...

From The Dales Report on Florida Cannabis legislation:

Florida’s long-running adult-use cannabis saga has encountered another plot twist. State officials confirmed that proposed citizen initiatives—including the adult-use marijuana measure backed by Smart & Safe Florida—did not meet the signature threshold required to appear on the November 2026 ballot. Under Florida law, campaigns needed 880,062 valid signatures by Feb. 1. The state’s running tally for the cannabis measure? 783,592. Close, but in ballot politics, “close” doesn’t print yard signs.

Still, if you think that’s the end of the story, you haven’t been following Florida election law. 

For the rest, see the thedalesreport.com/

Upside:

-FATN +63% (earnings)

-TER +23% (earnings, guidance)

-WWD +15% (earnings, guidance)

-DVA +12% (earnings, guidance)

-PLTR +11% (earnings, guidance)

-THRM +11% (submits 510(k) for ThermAffyx Patient Safety System)

-FLXS +7.7% (earnings)

-QTRX +4.6% (announces FDA 510(k) Submission for a Multi-Analyte Algorithmic Blood Test for Alzheimer’s Disease Detection)

-MPC +4.3% (earnings, guidance)

-WDC +4.2% (authorizes additional $4.0B share repurchase program (4.4% of market cap))

-BALL +3.0% (earnings, guidance)

-ATI +2.6% (earnings, guidance)

-WTW +2.4% (earnings, guidance)

-TWO +2.3% (earnings)

Downside:

-PYPL -17% (earnings, guidance; appoints new CEO)

-FUBO -16% (earnings)

-IT -15% (earnings, guidance)

-FN -8.2% (earnings, guidance)

-RMBS -8.2% (earnings, guidance)

-ADM -7.6% (earnings, guidance)

-MTG -5.0% (earnings)

-ASH -4.7% (earnings, guidance)

-NXPI -4.6% (earnings, guidance)

-ETN -4.0% (earnings, guidance)

-HUBB -3.2% (earnings, guidance)

-KFRC -3.2% (earnings, guidance)

-AME -2.8% (earnings, guidance)

-DOC -2.5% (earnings, guidance) 

* Its still going on....

Management at PepsiCo  (PEP)  notes that while some media reports suggest price cuts as high as 15%, the strategy is highly surgical—targeting specific brands, formats, and channels where price is a barrier to frequency—rather than a broad portfolio price reduction.

Forecasts growth across volume, net revenue, and operating margins for Frito-Lay North America (PFMA) in 2026, with growth expected to manifest early in the first half of the year.

Expects to achieve double-digit space gains for Frito-Lay products during retail resets scheduled for the March–April 2026 timeframe, leveraging pricing investments to secure better placement in both main aisles and perimeters.

Accelerating "surgical" affordability initiatives during the first half of 2026, focusing price investments on specific brands, formats, and channels where low-to-middle-income consumer friction is highest.

Anticipates that strong productivity gains realized in Q4 2025 will carry over into the new year, providing the necessary funding for commercial reinvestments without compromising margin targets.

Identified affordability as the primary barrier to faster penetration and frequency; internal testing since Q2 2025 has confirmed that targeted pricing interventions yield a high ROI and drive volume.

Executing a multi-vector strategy to revitalize categories, combining price adjustments with brand restaging for Gatorade and new innovations focused on functionality and simpler ingredients.

Management notes that while some pricing headlines suggest cuts as high as 15%, the actual net revenue impact is manageable and fully integrated into the existing 2026 financial guidance.

Confirmed that the "right-sizing" and productivity measures taken at the global level in late 2025 have created the "financial freedom" required to play offense and recapture market share in 2026

Treasury Auctions

11:00 a.m.: Treasury Announces a 4 and 8 and 17 Week Bill Auction;

11:00 a.m.: Treasury buyback announcement (liq sup-port);

11:30 a.m.: Treasury hosts a $90B 6-Week Bill Auction

Fed Speakers:

8:00 a.m.: Fed Bank of Richmond President Barkin (Non-Voter) will speak to SC First Steps, Columbia, SC (the speech will be posted on richmondfed.org. The event also includes audience Q&A);

9:40 a.m.: FOMC Member Michelle Bowman (Voter, Dove) participates in a moderated discus-sion titled at a Wall Street Journal Invest Live event, Palm Beach, FL (Audience questions expected)

Economic Calendar for the Week

From JPMorgan:

US: Futs are as metals rebound and RoW more than retrace Fri / Mon losses; risk sentiment from our Int’l colleagues is risk-on with pockets of weakness being defended. Gold is +5.5%, silver +9.4% with WTI flat and Ags bid. Bond yields are flat to +1bp with USD flat. In Eqys, pre-mkt Mag7 names are all higher ex-AAPL with PLTR the standout which should aid the Software reboot. Energy, HC, and Staples are weaker pre-mkt as all other sectors are bid higher. Today’s macro focus is on the vote to reopen the gov’t where Trump told GOP not to block the deal, plus vehicle sales. NFP / JOLTS have been delayed with release dates to be updated after the gov’t reopens.

and...

Yesterday, we had a relief rally but closed off the intraday highs. As mentioned yesterday, we like to buy the dip as the price action last week was not reflecting a change in fundamentals but stretched positioning in precious metals that triggered a cross-asset vol spike.

· EARNINGS – FactSet sees a blended (combination of actual plus forecasted) net profit margins of 13.2% for 25Q4, which would be the highest level since FactSet began tracking this metric in 2009. Tech and Industrials are leading this margin expansion; Tech YoY is forecasted to print 29.0% margins vs. 26.8% in 24Q4 and Industrials of 12.5% vs. 10.7% in 24Q4. The sectors expected to see margin contraction include (from smallest absolute margin to highest): Staples, HC, Discretionary, Comm Srvcs, and Real Estate. Financials and Energy are expected to have flat YoY margin growth.

· INDUSTRIALS & ISM (Paige Hanson) – From a broad setup perspective, the risk-off tape that we were feeling at the end of last week has sharply reversed today following the very strong Jan ISM print this morning, giving cyclical rotation bulls a very clear proof point after earnings season thus far has been more mixed/negative on the micro reads for cyclicals. This could mean we have more bad=good reactions post the ISM, although any Jan/QTD reads on calls not lining up with the surprise ISM strength will likely lend itself to the more nuanced cyclicals “haves”/”have nots” discussion that is already underway as folks look to differences on the demand side across industrial end markets, but more so on the supply side with excess capacity/supply viewed to negatively impact shape of recovery.

o Paige’s Previews … full note is here. As a reminder, “Paige’s Previews” reflect sales thoughts & investor feedback on what Paige believes to be the buyside setup of each print and are not the view of JPM research.

o US MKT INTEL ON ISM – This is a bullish print, giving support to the hypothesis that the economy is “good and getting better”. This is the best ISM-Mfg print since Aug 2022 and the second expansion in 38 months. The highlight is that the 3 demand indictors (new orders, backlog of orders, and new export orders) all increased. Further, the Customers’ Inventories Index is low which tends to be a positive signal for future production. Quotes from surveyed businesses point to shifting tariff policies and / or increased tariffs as being headwinds. Overall, a good print that should be supportive of stocks.

* Interest rates continue to rise

* And the equity risk premium morphs into and deepens the equity risk discount...

Interest rates are important — they are an integral part of all valuation models.

Investors continue to be undaunted — ignoring an increasingly clear rise in interest rates:

As noted recently in my Diary, the rise in rates has been a key factor in the equity risk premium (S&P earnings yield (the inverse of the P/E) less the risk-free rate of return (e.g., the 10-year Treasury note)) becoming an even larger equity risk discount.

* Kiss of death? Technicians are only now recognizing the strength in consumer staples

* Staples now moving into resistance (I have recently cut back long positions in  (PG)  and  (PEP) ):

Bonus — Here are some great links:

Return of Stock Pickers?

Why February Will Be Crucial for Bitcoin

Crypto’s Groundhog Day

The U.S. Dollar's Rebound

When You Have Higher Earnings and Margins

The S&P Short Range Oscillator moved back into an overbought — standing at 0.38% vs. 0.31%.

marvinleftwich

Do we hold PEP overnight tonight?

Dougie Kass

after this run - almost regardless of results - i expect profit taking.

* Of a 4:05 AM kind

Adding to index shorts:

(SPY)  $697.46

(QQQ)  $629.85

Michael Burry: