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- New York Stock Exchange volume hits 425 million shares, flat to its one-month average.

- Nasdaq volume hits 4.78 billion shares, 24% above its one-month average

NYSE Highs : 25 Lows : 13

Nasdaq: Highs : 52 Lows : 75

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* Put them together, what a fine lookin' Jew!!!

* So, put on your yarmulke, here comes Hanukkah

A very Happy Hanukah to all my Jewish friends! 

Come on, sing along with me: 

Okay
This is a song that uh
There's a lot of Christmas songs out there and uh
not too many Hanukkah songs
So uh
I wrote a song for all those nice little Jewish kids
who don't get to hear any Hanukkah songs
Here we go

Put on your yarmulke
Here comes Hanukkah
So much funukah
To celebrate Hanukkah
Hanukkah is the festival of lights
Instead of one day of presents, we have eight crazy nights

When you feel like the only kid in town without a Christmas tree
Here's a list of people who are Jewish just like you and me
David Lee Roth lights the menorah
So do James Caan, Kirk Douglas, and the late Dinah Shore-ah

Guess who eats together at the Carnegie Deli
Bowser from Sha Na Na and Arthur Fonzerelli
Paul Newman's half Jewish, Goldie Hawn's half too
Put them together, what a fine lookin' Jew

You don't need "Deck The Halls" or "Jingle Bell Rock"
'Cause you can spin a dreidel with Captain Kirk and Mr. Spock- both Jewish

Put on your yarmulke
It's time for Hanukkah
The owner of the Seattle Supersonicahs
Celebrates Hanukkah

O.J. Simpson, not a Jew
But guess who is? Hall of famer Rod Carew- he converted
We got Ann Landers and her sister Dear Abby
Harrison Ford's a quarter Jewish- not too shabby

Some people think that Ebenezer Scrooge is
Well he's not, but guess who is
All three Stooges
So many Jews are in showbiz
Tom Cruise isn't, but I heard his agent is

Tell your friend Veronica
It's time to celebrate Hanukkah
I hope I get a harmonicah
Oh this lovely, lovely Hanukkah
So drink your gin and tonicah
And smoke your marijuanikah
If you really, really wannakah
Have a happy, happy, happy, happy Hanukkah
Happy Hanukkah

Wishin' and hopin' and thinkin' and prayin'
Plannin' and dreamin' each night of his charms
That won't get you into his arms
So if you're lookin' to find love you can share
All you gotta do is hold him, and kiss him and love him
And show him that you care

- Dusty Springfield, Wishin' and Hopin'

A large buyer just came into (OXY) ... just wishing and hoping for The Oracle of Omaha. 

His last buy was at around $62/share a few weeks back.

Despite lower mortgage rates, it is my expectation that housing is about to hit a wall:

From Peter:

Initial claims were as expected at 220k vs 219k last week and brings the 4 week average to 221k from 220k and smooths out the Thanksgiving holiday. With respect to continuing claims, after rising to the highest level since November 2021 for the week ended 11/17, the 84k jump for that week gave back 64k of it for the week ended 11/24.

Bottom line, the slowdown in hiring is reflected in the 2nd highest print in continuing claims going back 2 years, notwithstanding today's drop, while the muted pace of firing's is evidenced by the low level of initial jobless claims.

Ahead of tomorrow's BLS payroll report, here are the signs of that slowdown, 1)ADP yesterday seeing a 99k 3 month average in net private sector hiring's, 2)Last month's BLS job gain of 99k for the private sector, 3)Those that said jobs were Hard to Get in the Conference Board's consumer confidence index is at the most since March 2021, and 4)the ISM employment component barely above 50 at 50.7 and we heard this comment from S&P Global on their US PMI, "Firms providing both goods and services have become increasingly concerned about excessive staffing levels in the face of weakened demand, resulting in the smallest overall jobs gain recorded by the survey since the early pandemic lockdowns of 2020."

4 week average in Initial Claims
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Continuing Claims

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More bearish microeconomic fodder from Liz Ann:

Down to tagends in Goldman Sachs (GS) $344.14 and Morgan Stanley (MS) $80.43.

- WOC

Dougie, I love your 1st level and 2nd level thinking approach. My humble suggestion is to expand it to 3 levels:

0 level thinking - Group stink, death star, Munger's sheep, those who don't even try, political enthusiasts

1st level thinking - headline only readers, analysists with tight deadlines, Helene's mom

2nd level thinking - all your famous friends and the experts who help us here

I'm driving again today. I'll be home tomorrow.

From JP Morgan:

Market and Volatility Commentary

Thoughts about the 2024 Outlook

By Marko Kolanovic, PhD AC, Bram Kaplan, CFA

2023 started with low and declining expectations for global growth and elevated fears of an onset of a recession. However, China's reopening, large fiscal stimulus in the US and Europe, and residual strength of US consumers stabilized growth. Additional market optimism was related to ChatGPT, luxury goods, weight-loss drugs, expectation of Fed rate cuts, bitcoin rally, etc., resulting in broadly positive performance of risk markets. That was despite the largest increase of interest rates in decades, major wars, energy crisis, regional banking crisis, recession in parts of the Eurozone, and emerging signs of credit and consumer deterioration in the US (here, here, here).

Investors trade stock and bond markets, not GDP. In the past year there was a fair amount of disconnect between markets and the economy. A significant impulse to the global economy in early 2023 came from China's reopening. This is illustrated in Figure 1 with JPM GDP nowcasters, which show China contributing ~2/3 of global GDP early in the year and producing the impulse that lifted risk sentiment. This, however, did not prevent China stocks (e.g., A50) to decline nearly 20%; similarly, Germany's effective recession (-0.4% GDP) did not prevent a nearly 20% rally of German and Eurozone stocks, propelling them to all-time highs (Figure 2). Not only did China's reopening ensure positive growth, but it also provided stimulus to global financial markets in a somewhat roundabout way. Investors, likely due to geopolitical considerations, pulled money from Chinese markets and allocated them to various proxy markets such as Japan, India, Europe and US sectors seen to benefit from China (including market-leading stocks such as European luxury goods, or some prominent US AI chip companies).

Figure 1: J.P. Morgan GDP nowcasters: global, China and rest of world

Source: J.P. Morgan

US growth held up well through the year and surprised to the upside in the most recent quarter. High fiscal deficits provided support for the economy and risk sentiment, and investors declined to worry about the sustainability of this fiscal path, or events like the US debt downgrade earlier this summer. Contemporaneous positive economic data were enough to lift risk markets, which we see as complacency in the backdrop of declining consumer strength and increased credit stress. Figure 3 shows excess household liquidity trends, indicating that for 80% of consumers (who account for nearly 2/3 of consumption) excess savings from the COVID era are already gone, and by mid-2024 it is likely that only the top 1% of consumers by income will be better off than before the pandemic. Figure 4 shows the emerging signs of stress in increased credit card and auto loan delinquencies, and Chapter 11 filings. There are no significant delinquencies in residential mortgages yet, as consumers locked in low interest rates.

However, existing home sales have dropped near record lows, and ~$6.5 trillion of commercial real estate debt remains an overhang. One should note that virtually all of the stock market's gains this year came from a small number of tech stocks ('magnificent 7') that rallied around themes of Artificial Intelligence and quality balance sheets, and that disregarded the significant increase in interest rates (the interest rate increase should have reduced multiples of these stocks). The rest of the stock market was largely in a 'holding pattern,' unsure of prospects for the economy. This led to a high concentration of index weight in a handful of the largest stocks, something not seen in over 50 years. Inflation has played a significant role in propping up corporate earnings, which were in many cases delivered by selling fewer units at higher prices or by cost cutting.

Figure 3: All but the top 1% of consumers will likely be worse off than pre-pandemic by mid-2024

Source : J.P. Morgan Equity Macro Research, Haver Analytics

We expect both inflation data and economic demand to soften in 2024. Should investors and risky assets welcome an inflation decline and bid up bonds and stocks, or will the fall in inflation indicate that the economy is sliding towards a recession? We think that the decline in inflation and economic activity that we forecast for 2024 will at some point make investors worry or perhaps even panic. Our economic forecasts (averaged across different scenarios) would allow the Fed to start easing in 2H24, likely at a 25bp per meeting pace, and a decline in bond yields could be led by the belly and eventually the front end. The US 10-year note yield is expected to drop to 3.75% over the next year if there is a gradual economic slowdown, and more if the economy slides into a recession.

Other developed market rates are likely to follow a similar path. Whether it is a risk-off move due to a recession, or the ability of the US economy to navigate the slowdown better than other countries, we look for US dollar strength. Currency carry trades, that attracted significant inflows and performed very well this year, would likely give back some of this performance, or potentially unwind in a sharp risk-off scenario. In commodities, precious metals have structural tailwinds and would benefit from a risk-off sentiment and subsequent easing of monetary policy. There is significant value in energy, but economic weakness may interfere with geopolitical and structural tailwinds.

Overall, we are not positive on the performance of risky assets and the broader macro outlook over the next 12 months. The primary reason is the interest rate shock (over the past 18 months) that will negatively impact economic activity. Geopolitical developments are an additional challenge as they impact commodity prices, inflation, global trade in goods and services and financial flows. At the same time, valuations of risky assets are expensive on average. Currently we have high equity multiples (by various estimates at least 3 turns of P/E expensive), low levels of volatility (investor complacency and excess supply), and tight credit spreads.

Bond yields of 5%+ present a high performance hurdle rate for other assets and strategies. For instance, in a very optimistic economic scenario, we can see equities outperforming bonds (or cash) by ~5%, while in a likely environment of declining growth or a recession, they could underperform cash by ~20%. Regardless of whether a recession happens or not, ex-ante, the risk-reward in equities and other risky assets is worse than in cash or bonds. It is hard to see acceleration of the economy or a lasting risk rally without a significant reduction of interest rates and reversal of quantitative tightening. This is a catch-22 situation, in which risk assets can't have a sustainable rally at this level of monetary restriction, and there will likely be no decisive easing unless risky assets correct (or inflation declines due to, for example, weaker demand, thus hurting corporate profits). This would imply that we would need to first see some market declines and volatility during 2024 before easing of monetary conditions and a more sustainable rally.

Finally, we want to point out that it is becoming consensus thinking that a recession will be avoided. We see the arguments such as no landing, goldilocks, election year seasonality, labor market resiliency, up-rating of valuations, Fed put, etc., as various versions of "this time is different." Going back to basics and the relatively small number of recessions we can study - signaling from yield curve inversion indicates that recession risk is highest between 14 and 24 months following the onset of inversion (Figure 5). That period will cover most of 2024, and should make it another challenging year for market participants.

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Figure 5: Timing of the start of recession relative to the onset of yield curve inversion

Source : J.P. Morgan

I have covered my (PARA) at $15.12 for a small gain.

I reduced Nike  (NKE) just now at $115.33 - after its nice run.

My only trading in the regular session was a purchase, as I suggested, of Chewy (CHWY)  at under $17.

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Something here:

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From Danielle DiMartino Booth, in her commentary today: 

And what of that cooling in Bloomberg's large bankruptcy count last month to a total of 6 from October's 17? According to the American Bankruptcy Institute, "the case filed by WeWork, Inc. on November 6 included 517 related filings, according to an ABI analysis, representing the third-most related filings in a case since the Bankruptcy Code became effective in 1979." We're confident continuing claims will keep rising up and to the right. The WeWork effect pushed commercial Chapter 11 filings to 842, an increase of 141% over the 349 filings registered in November 2022, according to Epiq Bankruptcy, the leading provider of U.S. bankruptcy filing data. November's triple-digit YoY gain has but one rival, 2009's second quarter, the final chapter of the Great Recession.

The insouciance communicated by initial jobless claims is rivaled by that of credit spreads in this year's second half (green line). Low jobless claims illustrate how the fundamental richness in investment grade (IG) spreads. At the current print in the low 100s (in basis points, orange line), the IG spread is closing in on the narrowest points of the economic expansions in the 2000s and 2010s.

To be sure, other credit fundamentals contradict initial jobless claims' bullishness. We're delighted to announce the birth of a QI proprietary metric. Mining data from the National Association of Credit Management's Credit Managers' Index yielded our Credit Manager Account Performance indicator. The composite is derived by averaging the combined manufacturing/service components for credit application rejections, accounts placed for collection, and bankruptcies. Flipping it on its head (inverted lilac line) produces a high yield (HY) spread tracker (light blue line). The Simon-esque tightening in HY spreads "makes you think all the world's a sunny day, oh yeah." The disconnect between credit manager guidance and HY spreads has only one way to close.

At 11:08 am:

- NYSE volume 129M shares, 10% below its one-month average 

- Nasdaq volume 1.66B shares, 24% above its one-month average

NYSE - Highs: 17, Lows: 11

Nasdaq - Highs: 37, Lows: 47

Breadth

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Biggest Movers

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Heat Map

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Gave and Kuppy do macro!

Lets go to the tapes, here.

From Peter:

I guess where there is smoke, there is fire. As my lead story yesterday on the BoJ that highlighted in the piece titled "The end of NIRP seems near", it seems that it might be very near. Following the comments yesterday from Deputy Governor Himino that said there are positives getting out of negative rate policy, Governor Ueda met with PM Kishida today and told this to parliament in answering a question on monetary policy, "It will become even more challenging from the year end and heading into next year. We will work to properly communicate and conduct appropriate policy."

He wasn't firm that something was going to happen with NIRP by yr end but the groundwork is clearly being made. He also said "We may not be at a stage to talk about an exit now, but to ensure it will go smoothly when it happens we will make efforts to convey information shortly beforehand."

Look at the intraday moves in JGB yields and the yen in response:

10 yr JGB Yield intraday

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Yen intraday

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Other Asian yields rose in sympathy and US Treasuries are selling off too as is the gilt market but other European bonds are little changed after some more soft economic data there. I'll say for the umpteenth time, what the BoJ does is a big deal for global bonds.

In the Bank of Canada statement yesterday where they held rates unchanged as fully expected, they highlighted the slowing growth, not just in Canada but globally and how this is "reducing inflationary pressures in a broadening range of goods and services prices." Though, "shelter price inflation has picked up, reflecting faster growth in rent and other housing costs along with the continued contribution from elevated mortgage interest costs."

While most likely done hiking, they are in no mood to cut, "Governing Council is still concerned about risks to the outlook for inflation and remains prepared to raise the policy rate further if needed. Governing Council wants to see further and sustained easing in core inflation." There is that word again, this time from Canada, "sustained."

Speaking of hopes of rate cuts next year, ECB Governing Council member Peter Kazimir yesterday said that at least in Q1, market expectations of a cut is "science fiction" he tweeted.

Whether Carson Block is going to be right or not in his new short on Blackstone Mortgage Trust, it does highlight that 2024 will see a lot more pain in commercial real estate.

Sara Eisen on CNBC showed an interview yesterday she had with the CEO of Walmart this week...

Here were some of his notable quotes:

To a question on how Black Friday and Cyber Monday went, "we released our third quarter results early in November, and we talked about the fact that we saw some softness at the end of October, but that November started off well. What we said at that time is that we expect that Black Friday will go well and that things may be a little soft until you get closer to Christmas. Because customers, generally speaking, are really price sensitive right now. They're prioritizing their orders. And they know that there's a chance that prices might be lower right before Christmas or right after Christmas with clearance. And so that's what we expect to happen."

To a question on the bifurcated consumer landscape, "Everybody's price sensitive. You know, we went through this period of inflation which has now changed. We're starting to see some deflation, which we're happy to see. But as that price sensitivity went up everybody was looking for value and we did really well and continue to with higher income cohorts."

With respect to general merchandise and its under performance as people have spent less on discretionary goods, is it reversing?

"Not in dollars, but in units we're seeing GM start to come back. And we've done well in GM through the year. Back to school was pretty good. Things were better in the 2nd quarter than the first quarter. It's gonna be interesting to watch what happens in the general merchandise categories in the year ahead because prices are so much lower. We're down in pricing in the general merchandise categories, meaning non-food categories, by about 5% now. And we're seeing the food categories basically about where they were a year ago. So today, if you're a customer shopping our app or walking through the store, you see a lot of rollbacks, prices that were lower than before."

Now to the point that while lower inflation is good for the consumer but not for revenue growth that we saw inflation driven over the past few years, to the question, "Is that helping sales of those items?" McMillon said "It helps unit sales. But you gotta sell 6% more to have $1 increase in retail."

Finally on the consumer, "If we had been talking last spring or at the beginning of last year, I expected more softness by this time of the year than we're actually experiencing. And I think employment and other things have propped that up." The impact of cumulative inflation, the end of SNAP and resumption of student loan repayments are all headwinds "But there's also some positive things happening. So all in all I look at this year and it's stronger than what I would've though this year that we're getting ready to wrap up. Next year's a different story. And I don't know what next year's gonna look like as credit balances go up, the balance sheet of the consumer is not in as good of shape as it was six to 12 months ago or a year ago. But we still may find that we're back to growth rates that look like 2018, 2019 in terms of total retail."

Chewy talked about a more careful consumer, "the softness that we called out last quarter that we started seeing in the July-August timeframe has persisted. We're seeing the impact of this softness most materially in the non-Autoship portion of our business (Autoship is a subscription service sending non-discretionary consumables and health products)...And primarily across highly discretionary components, some consumable components, this is related...making forecasting a little bit difficult across the macro that is keeping discretionary soft and overall spending patters a little bit opportunistic."

Also, "promotional activity during Black Friday was slightly steeper than prior year, although it remained broadly rational."

I was pretty interested to hear what Ally Financial had to say at the Goldman financial services conference and here were some notable quotes from the CFO on the auto lending division specifically:

"Within the auto business, we continue to see kind of modest increase in retail auto assets, continued normalization of dealer floorplan as dealer inventory levels recover from the pandemic lows, offset by lease, where we continue to see kind of declines in the size of our lease asset portfolio. Yes, translating into kind of flattish to modestly up asset portfolio on the auto side overall. As many of you know, we've taken curtailment actions across our unsecured lending book, and so growth there has moderated."

In terms of credit quality risks, he highlighted the 2022 vintage loans where "delinquency and loss levels have been elevated" but "we've seen encouraging signs in terms of how those vintages have performed as they season, and we continue to see that encouragement." As they tightened lending standards this year, the 2023 vintages seem ok.

Here were the caveats though, "our expectation is that unemployment is increasing. We assume unemployment going to 4.4% next year. When you look at how we set our reserves, we assume a reversion to mean to just about 6%" and if the case on higher unemployment, those 2022 higher delinquency loans will "hit their peak loss periods in the first half of 2024."

US Bancorp said this at the Goldman conference:

On the economy, "I think if I were going to use two words, it would be strong, but moderating." The CEO said the consumer was strong, still spending but the excess savings is coming down.

"On the loan front, I think corporations and businesses are being very prudent right now. They're cognizant of the increase in rates and the impacts on their business models. There's still some uncertainty about the economy. And I think that is creating a little bit of sort of limited loan growth for us and for the industry."

Shifting to stock market sentiment, last week we saw the bull boat get pretty full, and stocks have chopped around since. Yesterday, II said Bulls fell to 55.1 from 55.7, those still remaining 'stretched' as I call it. Bears rose a touch to 21.7 from 21.4, with a pretty wide spread between the two. AAII today said after rising for 4 straight weeks by a cumulative 24.5 pts, Bulls fell by 1.5 pts to 47.3, a still very elevated level. Bears, after falling to the lowest level since January 2018 last week, rose by 7.8 pts to 27.4.

Bottom line, there is still excitement and giddiness in stocks on the hopes the Fed cuts rates next year and it just happens to be that time of the year, and worries about slowing economic growth be damned.

Quickly overseas, China's exports in November rose .5% y/o/y which was a touch better than expectations of no change. Imports though fell by .6% y/o/y vs the estimate of up 3.9%. China's challenge with manufacturing and trade is a global phenomenon.

There are many classes of loans (e.g., mortgages) that are priced against SOFR:

From Arthur Cashin: 

The Wall Street equity bulls could scarcely claim that what happened to them on Wednesday was a surprise attack. The market had begun stalling, stuttering and prices were actually moving lower for at least two days prior to Wednesday's session and they had a variety of reasons that they wanted to attribute to this pullback, but it was, in some sense, a consolidation or perhaps reconciliation of what had happened after the terrific November rally, in particular, in the borderline levitation they saw at the end of last week, but certainly the consolidation, the pullback, and the stall was no surprise.

As I had mentioned in days prior in these Comments, the skilled technical strategist, Tom DeMark had been talking about the rally possibly topping out and traders were looking to see where that might lead us. Wednesday's session saw a lot of contributing factors. The energy sector was certainly a drag on the former rally as oil had dipped way back, taking it below key technical levels and that may have disturbed a variety of traders, but it was key sectors that pulled things back. In addition, the markets were trying to reconcile the somewhat new style reaction of the Dow to the drop in yields, which had begun to accelerate. We covered a bit of that in this late morning update:

Late Morning Update 12.06.23 - The drop in yields, particularly on the ten-year, turned almost into a plunge and interestingly, it did not have the impact on the Magnificent Seven as it has had for weeks on end. It is too early to tell, but there may be the early stages of a rethink about whether the drop in yields is beginning to indicate a weakening economy and that may separate or limit the inverse reaction we have gotten between stocks and yields. The odd man out appears to be the Nasdaq as the high cap techs are showing that the divergence we just noted of the regional and community banks as well as the Russell now appear to be the beneficiaries.

We will continue to watch the yields, particularly the ten-year, but with a bit of a grain of salt and the question of the economy softening seems to be moving back on stage. The other thing traders are concerned about is the S&P is nearing the presumed resistance at 4600 and will that be slowing things up. The action of the balance of this week and all of next week will be watched carefully to see if the market seems to be moving into a transitionary phase after the rally begins to stall after last week's outstanding performance.

Luckily, the geopolitical headlines have not yet been of the kind to shake the equity markets. We think the market will test its own internals and that is what we will be looking for. So, while the equity bulls will worry about the resistance, they will also worry about the rally. It is one thing for it to ease back, but they can scarcely afford for the Dow and the Nasdaq go negative on them and/or, particularly to make lower lows. We will get out the compass and protractor to see if we can develop those numbers. In the meantime, stay safe. 

The idea of the yields representing more than just a slow economic easing back vs the fact that they might represent something a bit more dramatic continued to be a puzzlement as the trading session wore on. Oil remained a drag as we noted earlier and continued and, while it did not worsen greatly, nevertheless, the bulls struggled to try and regroup and get their act together and they certainly were not entirely successful. The perception that the rally was wounded, hopefully not fatally, but wounded nevertheless, continued to be a perception in the bull's favor.

The Russell was one of the better performing of the indices, giving aid and comfort to the small and medium cap stocks and that, in turn, was helped by a mild strengthening in KRE or the community and regional banks, which represent a decent proportion of the Russell's small and medium caps. The game will play out over the next several sessions, but we will begin to look further into where the techncials lead us. Certainly, there was evident resistance as we approached the 4600 level in the S&P and the question will be - do we pull back further and we do we make lower lows and again, we will try and develop some numbers along those lines. In the meantime, as is customary, we should pause now and take a look at what our cousins offshore did in response to what happened in New York and see how they seemed to assess what is going on.

Overnight, global equity markets are trading rather anxiously as the biggest hits came from Asia where Japan closed down the equivalent of about 630 points in the Dow. Hong Kong closed down the equivalent of about 280 points in the Dow. Mainland China, however, was off only fractionally as was India. Over in Europe, as we go to press, they are all seeing fractional losses too. They are within one piece of news or data of potentially changing the moves. The U.S. economic calendar is rather modest.

It is Thursday, so we will wind up with the Challenger Layoff Report, followed at 8:30 by Initial Jobless Claims. At midmorning, we get Wholesale Inventories, followed by Natural Gas Inventories. At 3:00 p.m., we get to see Consumer Credit and see how stressed those consumers are and then, after the close, everyone will go to the newsticker to look at the Fed Balance Sheet and see if quantitative tightening is becoming a bit more active as a factor in what is going on. The overnight geopolitical rumors are a bit lighter than they were in the preceding days, but that can change in a moments notice. We think the anxiousness may continue as we move through the day.

Traders will keep their eye on yields and watch to see if this minor divergence that has evolved between movement in yields and the reaction in stocks continues because that will become a key factor. So, with geopolitics still lurking in the background, let's stick with the current drill.

Stay close to the newsticker. Keep your seatbelt fastened. Stay nimble and alert and watch if and how equities react to bond yields and again, with the FBI warning that alarm bells are ringing all over the place, it is urgent that you stay safe.

* Breadth was mixed:

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* Financials looked like they might be exhausted - note the reversal in Bank of America's (BAC) shares during the day (up by nearly $1 to a multi month high, ending lower). 

* Tech, too looked tired. Nvidia (NVDA) , which traded over $470 near the opening -- I shorted stock in premarket at $472.23 as it initially gapped higher from Monday -- closed much lower (at $455). 

* The drop in the price of oil and the marked rise in Treasury prices (lower yields) looked recessionary. I am now fearful that these two factors might dent the Goldilocks, soft landing and bullish market views. 

* Speaking of oil, I am hopeful that the move lower in energy stocks was capitulatory. 

* The S&P Short Range Oscillator moved further into oversold ground at 5.57% vs. 4.84%.

This morning Morgan Stanley (MS) cuts (CHWY) price target from $48 to $25, which might tell you more about Wall Street sell-side research than the prospects for Chewy.

At 8:50 am:

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This table is a valuable resource for momentum-based short-term traders:

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Upside

- (CYN) +72% (granted its 17th US patent)
- (BNED) +19% (earnings, guidance)
- (CERE) +14% (confirms AbbVie to acquire Cerevel Therapeutics in $8.7B deal at $45.00/shr cash)
- (SMTC) +13% (earnings, guidance)
- (VRNT) +9.2% (earnings, guidance)
- (JBLU) +8.9% (raises guidance)
- (BRZE) +8.3% (earnings, guidance)
- (CDTX) +6.7% (presents new promising preclincal data on novel Dual-Acting Drug-Fc Conjugates at ESMO Immuno-Oncology Annual Congress)
- (SLDB) +6.7% (receives FDA fast track designation for Duchenne Muscular Dystrophy Gene Therapy SGT-003)
- (SCWX) +6.5% (earnings, guidance)
- (EGRX) +6.1% (unique J-code for Barhemsys (J-0184) from CMS effective on January 1, 2024)
- (SATL) +5.0% (Uzma and Satellogic sign multi-million dollar +3-year agreement to advance geospatial capabilities in Southeast Asia)
- (DG) +3.4% (earnings, guidance)
- (IMMP) +3.4% (receives A$2.6M R&D Tax Incentive from French Government)
- (BMBL) +2.0% (Wells Fargo Initiates BMBL with Overweight, price target: $19)


Downside

- (CXM) -30% (earnings, guidance)
- (WVE) -22% (prices 20M shares at $5.00/shr in $100M offering)
- (NKLA) -20% (files to sell $100M in common stock, $200M in unsecured green convertible bonds)
- (GBLI) -13% (suspends the exploration of the Sale or Merger of Penn-America and Global Indemnity)
- (SEAT) -13% (holder Hoya Topco, LLC to sell 18.5M share secondary offering of Class A common stock)
- (AI) -12% (earnings, guidance)
- (CHWY) -12% (earnings, guidance)
- (SPWH) -9.8% (earnings, guidance)
- (NAPA) -8.9% (earnings, guidance)
- (GME) -7.4% (earnings)
- (HCI) -7.3% (prices 1M shares at $78/shr)
- (ETNB) -4.4% (prices upsized $150M offering at $9.25/shr)
- (CNM) -4.3% (files to sell secondary offering of 15M shares and announces 5M share repurchase)
- (PYCR) -3.0% (files to sell 5M share common stock offering by selling stockholder Pride Aggregator, LP)
- (VEEV) -2.7% (earnings, guidance)

From JPMorgan:

So far, this week, there has not been a material change to the macro narrative and Friday, if we see NFP print in line, may not change that.

The reason I sold out 99% of my Chewy (CHWY) was clear in the company's press release after the close:

Cuts FY guidance citing industrywide pressures;

Guides Q4 Rev $2.78-2.80B v $2.92Be

Chewy misses by $0.02, reports revs in-line; guides Q4 revs below consensus; guides FY24 revs below consensus (19.35 +0.93)

• Reports Q3 (Oct) loss of $0.08 per share, $0.02 worse than the FactSet Consensus of ($0.06); revenues rose 8.2% year/year to $2.74 bln vs the $2.75 bln FactSet Consensus.
• Co issues downside guidance for Q4, sees Q4 revs of $2.78-2.80 bln vs. $2.93 bln FactSet Consensus.
• Co issues downside guidance for FY24, sees FY24 revs of $11.08-11.10 bln vs. $11.23 bln FactSet Consensus.

Chewy appoints David Reeder as CFO, effective Feb 14 (19.35 +0.93)

David joins Chewy from GlobalFoundries ( (GFS) ), a semiconductor manufacturer, where he has served as CFO since 2020 and led their financial strategy, including their 2021 initial public offering.

I am a sub $17 buyer.

I have a board meeting, a conference to attend and a research meeting with a company outside of the office between 10 a.m. and noon today.

Radio silence during that period.

* A new feature... (tell me what you think about this in The Comments Section)

Bespoke ' My Research (bespokepremium.com)

Stock Market Video Analysis December 6, 2023 - Alphatrends

Things You Don't See in A Recession - Carson Group

Ethereum Breaks Out of an 18 Month Base - All Star Charts -

Almanac Trader - December Almanac: Stronger in Pre-Election Years (tumblr.com)

* Oil vey!

Charlie Munger tells a story about human nature:

"One of my favorite stories is about the little boy in Texas. The teacher asked the class, "If there are nine sheep in the pen and one jumps out, how many are left?"

And everybody got the answer right except this little boy, who said, "None of them are left." And the teacher said, "You don't understand arithmetic."

And he said, "No, teacher. You don't understand sheep."

Charlie's quip applies to the market and "Group Stink" and the herd-like mentality of investors, and, to some degree, why buyers live higher and sellers live lower.

And it helps to explain why I purchased financial stocks during the regional banking crisis (earlier this year) and that I am now buying energy shares. (Yesterday I placed Occidental (OXY) , Chevron (CVX) and Exxon Mobil (XOM) on my Best Ideas (Watch) List.)

That said, let's move forward.

Here is a summary of this morning's early action in a variety of asset classes:

* The U.S. dollar is much weaker against the yen as Japanese bond markets appear to be pricing in the removal of negative interest rate policy at the December 19 meeting.

* Commodities are higher, led by the price of crude rallying by a buck (and back over $70/barrel) from yesterday's schmeissing (capitulation?).

* U.S. Treasury yields are two basis points higher -- perhaps in reaction to the aforementioned currency moves.

* Mr. Softee weaker (-$2 in premarket) after Tuesday's weakness.

* VIX a bit higher, after three days under 13.

Oh... and this:

I added to my very large (QQQ) short in the premarket at $386.01.

Wolf Street howls about subprime (it's always subprime!)

From my friends at Miller Tabak -- a dent in Goldilocks:

Wednesday, December 6, 2023

The Productivity Surge Is Running Out of Steam

For months, we have written that productivity, and not the Fed, has been the main driver of the U.S. economy. 3Q2023 labor productivity was just revised upwards to a staggering 5.2% which was largely responsible for last quarter's rapidly falling inflation and strong GDP growth. Despite its remarkable third quarter, however, three other pieces of data suggest that productivity growth was falling off as early as October and will be back to normal by the new year.

The first evidence is job openings falling from 9.4 million to 8.7 million in October. After stronger than expected data in August and September, these have resumed a steady decline from their peak of 12.0 million in January. The second is the October PCE inflation report which shows annualized m/m core-inflation at just 2.0%. At first glance, this is just the latest in a series of inflation reports that make a dovish shift from the Fed overdue. The San Franciso Fed's breakdown of the data, however, show that October was very different than earlier months. During the summer, strong productivity growth was the main source of falling inflation. This changed in October. Then, reduced demand had its biggest negative impact on core-inflation since October 2020. In other words, the goods and services showing the biggest price drops also saw sales declines. Finally, the excess bond premium, an excellent indicator of risk aversion from the corporate bond market and a first-rate leading indicator, is up to its highest level since the pandemic, indicating a reduced taste for risk. We now expect growth to slow to around 1% this quarter and remain near that level at least through 1Q2024.

Figure 1: Supply and Demand-Driven Core-PCE Inflation

View Chart »View in New Window »

Weaker data are already causing talk of "growth scares" and, as we wrote last week, recession calls may soon resume.[1] So far, however, we are unconcerned. GDP growth was so strong in 3Q2023 (5%), that a rapid drop to around 1% seems worse than it really is. With job openings still well above available workers, unemployment will remain in the ballpark of 4%. We also doubt that the weaker data are behind falling yields with the 10-year yield at just 4.11%. As we have repeatedly written, yields near 5% were always unsustainable and were at least 100 bps too high.

* Recession alert...