Closing Breadth remains negative and look at the red names in the Heat Map. Look at the "quality" of the stocks in the red:

Breadth

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Movers

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Heat Map

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I am jumping off right at the close as I have to make the trip to Ft. Lauderdale and to my fireside chat with Lee Cooperman (with Broke Investor!) for The Wharton Club of Florida. 

A heads up.

For the third day in a row, St. Joe (JOE) trading well.

Reading61

1 hour ago

Does the (QQQ) ever come down ? ;-)

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Congrats to Broke Investor for winning our Trivia Contest.  

BI correctly stated that Buffett and I both went to Wharton and we both had prostate cancer. 

Here are some other things in common: 

* We both created and sold horse tip sheets at racetracks.

* We were "stoopers" - someone who collects thrown away betting tickets from the floor of a racetrack.

* We both had an early interest in the stock market.

* We have relatives who attended Northwestern University.

* We both love baseball.

* We both are liberal leaning in our politics.

* Warren and I are allergic to penicillin.

* We both had train sets as children.

* Warren and I had newspaper routes.`

Maybe it's nervousness ahead of CPI tomorrow, the Fed meeting Wednesday or maybe in response to the sharp drop in rates over the past month that makes them less attractive but the 3 yr note auction was poor. The yield of 4.49% was about 2 bps above the when issued. The bid to cover of 2.42 was well under the one yr average of 2.70 and that is the lowest since February. Also, dealers got left with the highest percentage of any 3 yr auction since October 2022. The 3 yr yield is quietly back to a 2 week high.

The 10 yr auction was weak too but not as much as the 3 yr. The yield of 4.296% was about 1.5 bps above the when issued. The bid to cover of 2.53 was just above the 12 month average of 2.47. Direct and indirect bidders took 83% of the auction vs the one yr average of about 85%, leaving the dealers with the balance.

Treasuries, which were weak before the results, saw yields go to the high of the day after the bad 3 yr and are little changed in response to the 10 yr. Obviously CPI and the Fed are key from here and we've seen the inflation expectations reports in Friday's confidence figure and what we saw today, which I talk about below, had little impact.

With regards to the NY Fed's Consumer Expectations survey, one yr inflation expectations ticked down by 2 tenths to 3.4% which is the smallest read since April 2021 as it was accelerating then. The longer term guess of 3 and 5 yrs were unchanged at 3.0% and 2.7% respectively. Leading the one yr moderation were expectations for lower gas prices, as we saw in the UoM release, food, rent and college while medical care costs were unchanged at a robust 9.1%.

The answers to the labor market questions were mixed. While more people thought we'd see a drop in the unemployment rate one yr from now, there was a rise in the "perceived probability of losing one's job in the next 12 months." And if one lost a job, there was a drop in the "probability of finding a job" to the lowest since April. Income expectations were down a touch.

In terms of spending growth expectations, it fell to 5.2%, down one tenth and has been in a 5.2-5.4% range over the past 6 months and above the 3.1% pre Covid growth rate. On the credit side, "Perceptions of credit access compared to a year ago improved for the 2nd consecutive month with a smaller share of respondents reporting that it is harder to obtain credit today compared to a year ago." And, consumers were optimistic about future credit access with a decreased share of respondents expecting tighter credit conditions a year from now." Part of this on credit could be that expectations for higher interest rates on savings accounts is lower.

Bottom line, as seen in the UoM consumer confidence survey, consumers are certainly experiencing the slowing rate in the cost of things, though still dealing with the cumulative impact of a 40 yr high spike in inflation on their standard of living. Again with Jay Powell, he's certainly happy with what he's seeing but he won't be fully satisfied until we see a SUSTAINABLE trend of inflation around 2.0%, however arbitrary even that number is.

One yr Inflation Expectations

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Brent crude oil has reversed its early morning weakness.

After hitting the day's low at $75.10, Brent crude is now $76.29, for a gain of +$0.47/barrel.

I have used the weakness to aggressively add to (XOM) and (OXY) .

* Market structure and concentration risks...

Felix Zulauf at the 13 minute mark. 

* Bond yields are at the high of the day

* Bond prices are at the low of the day

The two year US note yield is +4 bps to 4.76%.

The ten year US note yield is +4 bps to 4.28%.

The long bond yield is +4 bps to 4.36%.

The yield on the ten-year pushed up above 4.27% in pre-opening trading and that put some pressure on the equity indices and had them all trading lower before the opening bell rang here in New York. The yield has since eased back to below 4.25% and that has given equities a bit more breathing room.

Traders will look to see how much resistance the S&P is finding in the area between 4600 and 4615. It does not look all that heavy on the cocktail napkin charts, but we will have to wait to play the game out and see what the directions are.

We will be looking to the geopolitical headlines with the Middle East the most likely area for surprise. The issue over the aid for Ukraine is bringing in a lot of talk about striking for a stalemate settlement.

At the risk of being more boring than usual, it looks like it will be all about the yield on the ten-year - - up above 4.25% may bring some pressure.

In the meantime, stay safe.

Arthur

Getting my sealegs back.

At 10:30 am:

- NYSE volume 143M shares, flat to its one-month average 

- NASDAQ volume 1.74B shares, 26% above its one-month average

Breadth

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Biggest Movers

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Heat Map

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This contest is obviously restricted to South Florida subscribers! 

Tonite, in conjunction with The Wharton Club of South Florida I am doing a fireside chat with Lee Cooperman in Ft. Lauderdale (See details below). 

The winner (please give me your answer in our Comments Section) will receive a free pass for tonite's event! 

The Trivia Question

In my book, Doug Kass On The Market: A Life on The Street, I mentioned that Warren Buffett and I shared a number of experiences - name two of them! 

Here is a description of tonight's event:

2024 Economic & Market Expectations - A Fireside Chat with Leon Cooperman of Omega Advisors

* This is important...

The below intraday charts show the sharp divergence between the QQQs and the Mag 7 (the largest components)- it makes no sense... and I am aggressively expanding my (QQQ) short at $393.52. 

Moreover, breadth on the Nasdaq is 1700 advancers to 2400 decliners.

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I have covered my trading short rentals in Google (GOOGL) $132.62 and Microsoft (MSFT)  $368.29 for a profit.

From Arthur Cashin:

Unlike the situation with the Bank of the United States, Friday's trading session was not about a run on the banks. That, however, was not completely evident in the immediate pre-opening trading and we touched on that in this late morning update:

12.08.23 LATE MORNING UPDATE - Wall Street traders had a bit a bi-polar morning. The non-farm payrolls and unemployment data were all economically stronger than expected. That sent the yields on the 10-year higher. That, in turn, seemed to split the equity traders, and all three indices moved lower both before and into the opening. Then the University of Michigan Sentiment data hit and that was also stronger than expected, but the bond guys seemed to shrug that off and the yields eased back, which seemed to bring bids back into the equity market. So, it looks like yields continue to be the dominant factor and now that the yields have come off the highs, the bulls have been able to attain some solid equity bids. So, we will spend the rest of the day homing in on where those yields go and what stocks do to follow them. No major geopolitical news so far, although we will watch out for that.

At weeks end, there may be a surprise slipped in, and you can only watch those things rather than try to predict them. The bulls are back in control because of the yields. Let's see how they proceed for the balance of the day. Friday has a mild bias to the upside, and we'll see how far that continues to go. At any rate stay safe. As we noted in the update, there were early fears that the data was strong enough that it might push the Fed for a further rate hike or, perhaps, further tightening through their quantitative tightening process, which is still in progress, although not a major factor.

As they managed to walk past the concerns about yields and the banks at the opening, some of that may come back this week as we are getting not only ready for the FOMC decision, but decisions from a variety of other central banks and even some key rate moves possible from the Bank of China where the property sector, the key to their economy, is virtually strangling them.

Apparently, the game will be before us as we watch the various central banks meet, discuss, and tell the public what is going on and, of importance, with the FOMC meeting, it will be a day when we get to see a rearrangement of the so-called "Dot Plots". That is the list of the individual projections of each individual member of the FOMC and we will see if they pare back the idea of potential further tightening going on, which is certainly in the list of potential moves. We will pause now because of some emerging technical difficulties (we do not want to burn out our system before we get the Comments up and rolling).

Let us move over to our next step, which is reviewing the foreign equity markets and how they reacted to New York and what we can hope to foretell from those projections and, we also will take a look at the calendar, not just for here today, but for those movements that we spoke of during the week from the central banks. Overnight, global equity markets are once again displaying individuality. Japan closed up the equivalent of 500 points in the Dow. Hong Kong was down about the equivalent of 250 points in the Dow. Mainland China was up 200 points in the Dow. India closed fractionally higher.

As we go to press, London is down about 120 points in the Dow and Paris and Frankfurt are up fractionally. As we suggested earlier, this will be somewhat of a busy week from both the central banking aspect and the broader economic indicators around the globe both here and in Asia and in Europe. As we stated earlier, it will be a busy week with a rate decision coming from the Fed on Wednesday and then on Thursday, we will hear from the ECB and the Bank of England and possibly the Swiss National Bank and the Norwegian Bank. We will also get a Triple Witch Expiration. There will be rebalancing of a variety of things, including possibly the S&P and the NDX. Toward the end of the week, we will get PMI data from Asia and from Europe and that is only part a of what we have coming.

The important thing with the Fed decision on Thursday, is it will show a series of revision in the dot plots, which we discussed earlier. So, we may be moving toward the holidays, but this certainly does not strike us as a dull week. While this week will be economically and financially heavy with data and actions, you start out with a day that is relatively calm. At 11:30, we will get to see the results of the three-year note auction and 1:00 p.m., the results of the ten-year note auction.

Away from that, the data will be rather skimpy, and the Fed remains in its quiet period with the two-day meeting beginning Tuesday with the decision and statement at 2:00 and the press conference at 2:30. So, you know the current drill. Given the events in the Middle East and elsewhere, we will be looking for geopolitical headlines. So, stay close to the newsticker. Keep your seatbelt fastened. Stay nimble and alert and as we caution each day in these fractious times, try extra hard to stay safe.

I'm sure the bond bulls (I'm bullish/long on duration up to 3 years, bearish past 6 and neutral in between) are all excited about the Barron's weekend cover article titled "Higher Interest Rates Are Here to Stay. What That Means for the Economy." Rather than a contrarian indicator, the piece was much more nuanced and focused only on the fed funds rate and just compared the coming years to the 15 years of zero and near zero rates, not a tough hurdle to clear. In the article, it states we of course have the possibility of the Fed cutting rates next year but "The better question is where rates will settle in the coming decade.

The probable answer: below today's target range of 5.25-5.5%, but higher than many economists and policy makers expected a year or two ago, and far higher than the near zero rates of the past 15 years." The article did not speculate on the direction of long term interest rates. By the way, according to my friend Brent Donnelly, who writes Spectra Markets, he back tested Barron's covers and "they're not contrarian, they're random and coincident indicators vs The Economist which is late cycle contrarian" he stated on X. 

I say they better stay 'far higher than the zero rates of the past 15 years' because that and QE did damage to the economy in creating major distortions in the flow of capital that did not go to its most efficient places and instead flowed to anyone with a power point presentation and a heartbeat and got market participants drunk, particularly wasted in February 2021. Having interest rates above the rate of a sustainable pace of inflation is a good thing, it creates discipline in investing and lending, it is a benefit to savers, it creates a lending spread for banks, and it helps to keep prices stable, a key foundation of healthy growth.

This all said, the 15 years of zero and many rounds of QE was a huge drug for markets and the economy that is not easy to shake and we're still in the midst of a major transition/withdrawal that will still take a few years to adjust to and not without pain. 

In 2024, just looking at investment grade, high yield and leveraged loans (bank loans), and not including many other forms of debt like private credit, there is about $700 billion of debt that needs to reprice and in 2025 that number is about $1.1 trillion. This on top of all the debt that has repriced in 2023, including all that floating rate where I've seen interest expense for some double this year. My friends at Quill Research highlighted in their Weekly Quill said as of data last Monday "US business Chapter 11 filings were up 141% y/o/y, which took out the prior record of 139% y/o/y set during the GFC."

Now many of these are due to the higher cost of capital that has exposed challenged business models rather than due to an economic downturn of note. Imagine if we now have an economic downturn that some rate cuts won't fix, assuming we don't go back to zero rates again. Again, the transition/withdrawal will be painful and will take time but big picture and long term it is a good thing. 

Bottom line, is the Fed Put back and the Fed has learned no lessons from their 15 yr rate and balance sheet experiment or should we expect a sustained period of time of REAL positive interest rates and a smaller Fed balance sheet that lets more of the market work rather than the FOMC continually trying to play god over interest rates. I hope for the latter. 

With respect to Wednesday and what the FOMC and Jay Powell will say, it was only 10 days ago at the Spelman College fireside chat that Powell said "It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease. We are prepared to tighten policy further if it becomes appropriate to do so." I expect him to repeat these words and also put yourself in his shoes. He knows full well and via a tough lesson that his crystal ball doesn't work, just like the rest of us so Powell mostly likely is approaching 2024 meeting by meeting, CPI/jobs print, print by print, while still not forgetting the lesson of the 1970's. 

Let's roam around the world, sang the B-52's. China said its November CPI fell by .5% y/o/y vs the estimate of a two tenths drop and I'm hearing the panic and word 'deflation' and how it is some bogeyman. Sometimes yes, sometimes no. And it was all due to the 4.2% y/o/y drop in food prices. Is that not a good thing for people who need to eat each day? Prices ex food and energy rose .6% y/o/y, no change from October. Consumer goods prices is where the price pressures are occurring, just as they are in the US, falling 1.4% y/o/y. Service prices were up by 1% y/o/y. 

China's PPI fell 3% y/o/y after the 2.6% fall y/o/y in October. When Chinese manufacturing and commodity prices inflect higher, prices will as well but for now the price drops are a symptom of the global manufacturing recession that we're all experiencing. 

The yen is getting slammed after the BN story that said "Bank of Japan officials see little need to rush into scrapping the world's last negative interest rate this month as they have yet to see enough evidence of wage growth that would support sustainable inflation, according to the people familiar with the matter." Oh man, we're talking all of 10 basis points that would end this dumb idea of NIRP and the BoJ still has it backwards as they should focus on lowering inflation in order to raise REAL wages rather than keeping policy so easy on the hopes of raising wages nominally and hope the growth surpasses the rise in inflation, thus raising them in real terms. 

This story came out at around 2:30am so JGB's didn't have much time to respond but futures are rallying and doing so for the Nikkei too. Expectations still remain fully priced in for a rate hike by April. 

Yen intraday move

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"Fly the great big sky. See the great big sea. Kick through continents. Busting boundaries. Take it hip to hip, rocket through the wilderness. Around the world the trip begins with a kiss. Roam if you want to. Roam around the world."

At 8:43 am:

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Upside

- (KTTA) +103% (Pasithea Therapeutics announces positive In Vivo preclinical efficacy data for PAS-004 from NRAS Mutation Cancer Xenograft Models)
- (PSTX) +23% (presents Positive Early Results from its Phase 1 Trial of Allogeneic CAR-T P-BCMA-ALLO1 in Relapsed-Refractory Multiple Myeloma at the 65th American Society of Hematology (ASH) Annual Meeting)
- (M) +16% (reportedly received $5.8B offer to be taken private from Arkhouse Management consortium at $21/share)
- (MRKR) +14% (announces Sustained Complete Response in First Lymphoma Patient Treated with MT-601 following CAR T Relapse)
- (CI) +13% (Cigna to end attempt to negotiate acquisition of Humana after firms agreed on strategy but not price; affirms FY23 and FY24 outlook and will spend additional $10B on share buyback)
- (SNDX) +6.9% (announces positive data for Revumenib in patients with Acute Leukemias from the BEAT AML, SAVE AML and AUGMENT-102 Phase 1 Combination Trials)
- (NVRO) +5.3% (Activist investor said to take position)
- (SNAP) +4.7% (Wells Fargo Raised SNAP to Overweight from Equal Weight, price target: $22)
- (AGEN) +4.5% (to receive $25M milestone payment from BMY for BMS-986442, an Fc-enhanced bispecific TIGIT antibody)
- (PINS) +2.8% (RBC Raised PINS to Outperform from Sector Perform, price target: $46 from $32)
- (AVTR) +2.6% (TD Cowen Raised AVTR to Buy from Hold, price target: $28)
- (ATNM) +2.4% (four presentations at ASH highlight the positive outcomes for Iomab-B and Actimab-A in patients with Relapsed or Refractory Acute Myeloid Leukemia)
- (DLO) +2.3% (Barclays Raised DLO to Equal Weight from Underweight, price target: $18)
- (DASH) +2.0% (to be added to NASDAQ-100 Index)
- (HUM) +2.0% (Cigna to end attempt to negotiate acquisition of Humana after firms agreed on strategy but not price)
- (KTB) +2.0% (authorizes $300M share repurchase program)
- (SPOT) +2.0% (Rosenblatt Securities Inc. Raised SPOT to Buy from Neutral)
- (YPF) +2.0% (reportedly to increase fuel prices by an average of 25% in Argentina)

Downside

- (SNCR) -89% (completes Cloud-only transformation, reaffirms 2023 and 2024 guidance)
- (COGT) -31% (adverse events report in study for Bezuclastnib)
- (XFOR) -20% (announces presentation of additional data from Mavorixafor Phase 2 Trial in Chronic Neutropenia at ASH 2023)
- (NMTC) -17% (Medical Tech is targeting 1H 2024 commercial launch)
- (BMEA) -13% (announces near doubling percentage of patients with Durable HbA1c reduction in 200 mg Dose Cohorts to be reported in March 202)
- (SE) -12% (hearing DBS Vickers Cuts SE to Hold from Buy, price target: $42)
- (CRIS) -8.9% (presented clinical data from the TakeAim Leukemia Study at the 2023 ASH Conference)
- (AFMD) -7.1% (announces updated Phase 1/2 data from Acimtamig in combination with Allogeneic NK in Hodgkin Lymphoma patients who failed prior Chemotherapy and Are Double-Refractory to Brentuximab Vedotin (BV) and Checkpoint Inhibitors (CPIs))
- (RNG) -5.5% (Vlad Shmunis returns as CEO, effective immediately; affirms Q4, FY23 guidance)
- (SMCI) -3.3% (Susquehanna Cuts SMCI to Net Negative from Net Neutral, price target: $160)

Occidental to acquire CrownRock in deal valued at $12B in cash and stock OXY Occidental announced it entered into a purchase agreement to acquire Midland-based oil and gas producer CrownRock L.P., a joint venture of CrownQuest Operating LLC and Lime Rock Partners, for cash and stock in a transaction valued at approximately $12B, including the assumption of CrownRock's debt. Occidental intends to finance the purchase with the incurrence of $9.1B of new debt, the issuance of approximately $1.7B of common equity and the assumption of CrownRock's $1.2 billion of existing debt. The transaction is expected to close in the first quarter of 2024, subject to customary closing conditions and the receipt of regulatory approvals.

"We believe the acquisition of CrownRock's assets adds to the strongest and most differentiated portfolio that Occidental has ever had. We found CrownRock to be a strategic fit, giving us the opportunity to build scale in the Midland Basin and positioning us to drive value creation for our shareholders with immediate free cash flow accretion," said Occidental President and Chief Executive Officer Vicki Hollub. "We are excited about combining CrownRock's high-performing team into our organization and expect to continue Occidental's exceptional operational and financial results for years to come."

Occidental Petroleum just upgraded at Morgan Stanley, here's why OXY Morgan Stanley analyst Devin McDermott upgraded Occidental Petroleum to Overweight from Equal Weight with an unchanged price target of $68. The stock's historical valuation premium versus its large-cap U.S. peers has eroded, the analyst tells investors in a research note. The firm says Occidental has a high quality asset portfolio with attractive inventory depth. It sees a path for the stock to return to its full historical premium through further balance sheet improvement, preferred redemption, and ultimately a more meaningful base dividend.

* Friday's market was an extension of the five week rally with the Mag7 again responsible for much of the market's gain

* Sentiment follows price and investor sentiment remains optimistic with the S&P Short Range Oscillator still an elevated 4.61%

* This morning the decline in crude continues (-$0.50) (+$1.49) and yields (+1-2 basis points) are higher - stock futures are not budging much...

Monday mornin' feels so bad
Ev'rybody seems to nag me
Comin' Tuesday I feel better
Even my old man looks good
Wed'sday just don't go
Thursday goes too slow
I've got Friday on my mind

Gonna have fun in the city
Be with my girl, she's so pretty
She looks fine tonight
She is out of sight to me
Tonight I'll spend my bread, tonight
I'll lose my head, tonight
I've got to get to night
Monday I'll have Friday on my mind

- The Easy Beats, Friday On My Mind

"The stock market will do whatever it has to do to embarrass the greatest people to the greatest extent possible." - Wally Deemer

"Workin' on our night moves Trying to lose the awkward teenage blues Workin' on our night moves In the summertime And oh the wonder Felt the lightning And we waited on the thunder Waited on the thunder."

- Bob Seger, "Night Moves"

This daily Futures feature is like inside baseball. I try to show you and write about what I believe thoughtful hedge fund managers are looking at when they awake -- let's call it our normal routine -- setting the stage for their strategy for the day. The market is a complicated mosaic and the more info you have, the better trader and investor you will be!

The market (and money) never sleeps -- and neither do I, it appears! I have previously described the importance that overnight futures trading hold for me here. It is a guidepost to my strategy in the regular trading session. Moreover, the overnight/early morning futures hold opportunities as they are (1) inefficient, though liquid and (2) it seems fear and greed are often exaggerated outside the regular trading session. I frequently try to capture those efficiencies by trading actively both in the pre- and after-market sessions.

Here are brief observations I wanted to highlight and provide a summary of overnight price movements in various asset classes:

* Stock futures were mixed throughout most of the overnight session in another narrow trading range. S&P futures peaked at +6 and bottomed at -7. Nasdaq futures peaked at +15 and bottomed at -51. At 5:52 a.m. ET, S&P futures were -4 and Nasdaq futures were -40. 

and...

* The S&P Short-Range Oscillator remains overbought at 4.61% vs. 5.57%.

* The VIX is now finally higher at 13.08, a gain of +0.73.

* The U.S. dollar is much higher against the yen, euro and sterling.

and...

* Treasury yields are somewhat higher this morning. The 2-Year Treasury yield is +2 basis points at 4.748% and the 10-Year is also +2 basis points at 4.258%. Over there, the yield on the 10-Year U.K. Gilt bond is flat.

and...

* Overnight, the inversion of the 2s/10s Treasuries curve is slightly higher at -48 basis points. Real rates remain quite elevated; the 10-year is still over 2 (again in real terms).

* Commodities are mostly lower. Brent crude is -$0.58 to $75.26.

and...

* Gold is -%5.70 flat at $2,008 after the recent spate of volatility.

* The newest shiny object, Bitcoin, is down by -4% or -$1700 to  $42.2k

Here is a synopsis of some of my columns I believe were important, or in the event you were out for the day and/or did not read my Diary. The principal intent is to review the logic of my market moves and other factors:

More Insider Mag 7 Selling

More Wisdom from Charlie Munger

Marko Digs In

Good News Is Bad News

Paramount Global Analysis

Introducing the Nasdaq 100 Enhanced Options Income ETF (Good God, Man!)

From the Engine of World Economic Growth

Here were Friday's trades:

* Day traded (RH) and (LULU) on the short side.

One of my big Surprises for 2024 - out in the next week or so - surrounds the price of oil...

I will be at a Board meeting from 10 am to noon today.

Break in.

Occidental Petroleum to acquire CrownRock for $12 billion.

The shares are -$0.53 to in premarket trading - I am adding to at $55.92.

Form Mohamed El-Erian:

The story of the morning is a policy pushback from the Bank of Japan.

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

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From JPMorgan:

US: Futs are flat as we kick off a week of significant macro data. Bond yields are 2bps higher as the curve parallel shifts higher. BOJ sees "little need" to end negative rate policy next week, which had started to impact FX and yields recently. USD is flat and cmdtys are weaker with Energy underperforming and Metals weaker. Keep an eye on Retailers following the Macy's big; XRT is up almost 16% from its Oct lows and sits about 11% from its 52-week high. Is this squeeze rally enough for the SPX to breakout above 4,600? Much of the rest of the note is an investigation of that question. Today's macro data focus is the Fed's 1-year inflation expectation; it may reflect similar optimism as the Univ of Michigan data which saw 1-year expectations fall from 4.5% to 3.1%.

and...

NOTE: US Market Intelligence last publication for 2023 will be on December 14. Happy Holidays and thank you for reading!

EQUITY AND MACRO NARRATIVE: On Friday, the SPX completed a six week rally that added almost 12%, taking the index from ~4,100 to over 4,600. With several macro catalysts this week, can we go higher? We think yes but with some caveats. What follows is an update on our views, analyses of consumer and corporate health, Feroli's Fed preview, and some thoughts on this week's catalysts. Plus, we have an update on positioning from Schlegel and team.

• US MKT INTEL ON NFP- I would buy this dip in stocks. The bond market is focusing on the labor demand strength and uptick in MoM hourly earnings. I do not think this matters given the disinflationary trend in CPI, which is the dominant factor here. Unless you see CPI print above 4% next week, the Fed is done absent an exogenous shock. On the positive side, the increase in labor force is a good thing. Fed data shows an increase in foreign-born workers driving this. Historically, those workers have skewed to lower income jobs which, over time, should temper wage inflation. My view remains growth without inflation. I think the economic risk is above expected GDP which translates to higher earnings.
• US MKT INTEL ON UNIV. OF MICHIGAN- This data is great for bulls. Improving economic outlook with lower inflation. Again, supports the growth without inflation narrative. It remains to be seen how much this sentiment will translate to future spending but perhaps the stronger read-through for Equities/Credit is does this mean that corporate management will see a clearer outlook? Stated differently, the most recent earnings period had +9% YoY EPS growth ex-Energy, which is a very strong quarter; but stocks were not rewarded given the murky forward guidance. If forward guidance solidifies, are we setting up for the next earnings period to see beats rewarded and misses overlooked? If yes, then we should be able to meet/breach 5,000 in the SPX in 24Q1.
• US MKT INTEL TACTICAL VIEW - Cautious this week and then tactically bullish. With few remaining catalysts in the year, I think those will be net positive, but the more dominant factor will be bond yields. Given the loosening of financial conditions amid the recent bond rally, it seems likely that that Fed will attempt to talk yields higher. If successful, we may see Tech sell off with yields higher potentially leading to a consolidation and the end of this short covering induced rally. Further, the SPX has failed at 4,600 previously so it may require another shift in the market narrative to get through 4,600. What leads to that shift? Again, look to yields. While it seems consensus that the Fed has concluded its hiking cycle, we have not seen the bull steepening of the yield curve that typically comes with the end of a hiking cycle. I think you need to see this happen and possibly a disinversion of 2s/10s to get investors more comfortable with adding risk. Thought differently, are we in inning 5 of a business cycle that began last summer (recall 2022H1 saw negative GDP growth) and will continue for another 1-2 years or are we about to see a double dip recession? I think the former. If so, then another component will be improved earnings and forward guidance. Currently, we are seeing earnings revised lower as we are about a month away from 23Q4 earnings season.

Another Tweet from Charlie.

Wolf Street howls about employment.