As of 4:20 p.m.

(Please click here for a larger view)

Closing Volume

- NYSE volume 458M shares, 14% above its one-month average;

- NASDAQ volume 4.21B shares, 7% above its one-month average

- VIX: down 4.52% to 18.36

Breadth

% Movers (Click here for larger view)

Nasdaq 100 Heat Map (Click here for larger view)

I have a research call from 3:45 pm to 5 pm today.

Radio silence.

* Insane in the brain...

For those that watch the market closely, moves like we have seen in the last 10 minutes is insane.

In fact, if the market was a song it would be...

Who you trying to get crazy with ése?

Don't you know I'm loco?

- Cypress Hill, Insane in the Membrane 

Insane.

With the S&P (cash) -14 handles, I am selling some SPY June $500 puts.

Modestly net long now.

JNJ is trading much lower (to $143.80, -$4) on mixed results and weak guidance. 

This was a good sale, based on our analysis that the numbers might be weaker than consensus expectations, six weeks ago:

Johnson & Johnson Sale

Selling some (JNJ) at $161.87.

FEB 23, 2024 12:10 PM EST

No, I get by with a little help from my friends

Mm, get high with a little help from my friends

Mm, gonna try with a little help from my friends

- The Beatles, With A Little Help From My Friends     

I am getting busy in cannabis.

Earlier today I moved to very large MSOS.

I have also initiated a position in Trulieve TCNNF and I am adding to Curaleaf CURLF and TerrAscend (TSNDF).

Will this summit be a positive catalyst for the cannabis sector tomorrow? 

Wolf Street howls about currency movements. 

My two large-cap tech stocks continue to do a yeoman's job on the downside - Tesla TSLA and Apple AAPL.

And we shorted them when it was not popular!

- NYSE volume 146M shares, 11% above its one-month average

- Nasdaq volume 1.54B shares, 11% above its one-month average

- VIX down 1.51% to 18.94

Breadth

Biggest Movers

View larger here.

Nasdaq 100 Heat Map

I have moved to very large MSOS at $8.60.

News that Israel is planning to shortly respond to Iran's attack is the likely reason for the leg lower (S&P cash -15 handles).

I am now market neutral.

I put on a June SPY $500 straddle on top of my other straddles today as the market dropped - S&P was -13 handles at the time.

Housing starts in March missed expectations by about a rather large 160k, only partly offset by an upward revision to February of 28k. As you’ve heard me say many times, good luck raising equity and getting a loan to build a multi family apartment building right now and that was reflected in a further decline in multi family starts which totaled just 299k, down from 382k in February and which touched 506k in December. Not including Covid, that’s the least amount since August 2017.

Single family starts totaled 1.022mm down 145k m/o/m but after rising by 149k in February. Smoothing this out, the 3 month average is now 1.069mm vs the 6 month average of 1.062mm and the 12 month average of 1.005mm.

As for permits, builders still want to build multi family as permits held steady at 485k vs 491k in February but we’ll see what equity and debt can be raised and how many project eventually gets started. Single family permits slowed by 59k m/o/m.

Bottom line, with a near record 957k multi family units currently under construction, there is a notable fall in brand new multi family construction because of the higher cost of money and the flattening of rental gains. Once the 2024 supply is absorbed though, and it will especially with the affordability challenges being felt by first time buyers, rental increases will inflect higher again in the 2nd half of 2025 and 2026 because less new projects are getting green lit now. 

As for single family, we have big builders that continue to fill the needed supply vacuum but smaller builders that have more struggles with high land, labor and raw material costs, along with higher borrowing costs that are all not as easily dealt with.

Multi Family Starts

Single Family Starts

On the opening I went to very large long VKTX.

I want to touch upon the yen again and why the weakness matters for us here. It matters because the Japanese are the largest foreign owner of US Treasuries at $1.15 Trillion as of 1/31 (we'll get fresh data tomorrow). It matters because Japan imports about 97% of its energy needs according to the US Energy Information Administration as of 2022 when in 2023 they last updated their stats.

I'm guessing though it's now less than that as more nuclear plants have been turned on in Japan but their import needs are very high, likely above 90% and the weaker yen makes it more expensive. So connecting the two, the weaker yen and the need to pay up for their higher cost energy inputs means the Japanese sell US Treasuries to help finance it, leading to higher interest rates in the US.

And the weak yen leads to higher Japanese bond yields because of worries that inflation will continue higher in Japan. That yield move up then flows into higher European and US yields and you can now understand why a weak yen really matters here for all of us.

Overnight the 10 yr Japanese inflation breakeven closed a hair shy of the highest level since this security was introduced in 2013 at 1.49%. The 10 yr JGB yield was up almost 1 bp to .87% while the 40 yr yield closed up by 2 bps to a fresh 13+ yr high.

Yen in white, Oil in orange

Japanese holdings in US Treasuries in white/Oil prices in orange

Japan 10 yr Inflation Breakeven

40 yr JGB Yield

And the US dollar strength against a variety of currencies is now getting some upset outside of the Japanese where verbal intervention has done nothing to stem the weakness. A statement from the South Korean's said "Foreign exchange authorities are closely watching exchange rate movements, supply and demand dynamics in the foreign exchange market and other factors with special vigilance...Excessive one-sided moves in the foreign exchange market are not desirable for the Korean economy."

The Bank of Indonesia actually intervened to buy the rupiah as it fell to a 4 yr low vs the US dollar. See below the intraday rally in the rupiah after the intervention.

I'm sure you've seen the price of cocoa over the past few months but have you seen the price of coffee this month? Today the price per pound is rallying to the highest level since January 2022 at $2.28.

Coffee

Voting Fed member Mary Daly spoke last night and repeated what she said last week that she's not in a rush to cut. "The worse thing we can do right now is act urgently when urgency isn't necessary...We're in the ready positions. We can respond as the economy evolves. The labor market's not giving us any indication it's faltering, and inflation is still above our target, and we need to be confident it is on a path to come down to our target before we would feel the need, and I would feel the need, to react."

The 2 yr US inflation breakeven was 2.02% on the last trading day of 2023. It stands at 2.94% as of this writing. The Fed might want to cut this year still but this is complicating their desires.

2 yr US Inflation Breakeven

Here was David Solomon's lay of the macro land in yesterday's Goldman Sachs earnings call:

"Turning to the macro environment, we continue to be constructive on the health of the US economy. The Fed most recently telegraphed three rate cuts in 2024, but last week's CPI print has lowered market expectations. This will continue to evolve and be highly data dependent. I am also mindful that US equity markets are hovering near record levels at a time when we see headwinds, including concerns around inflation, the commercial real estate market, and escalating geopolitical tensions around the world.

This combination would slow growth. But that said, the US economy has proven to be resilient, supported by a number of factors, including government spending as well as labor force growth driven by above trend levels of immigration. So, while the environment is constructive and markets expect a soft landing, the trajectory is still uncertain."

China's economy in Q1 exceeded expectations with a 5.3% y/o/y increase, well above the estimate of 4.8% but looking at some of the March stats, it seems that January-February carried the quarter. Retail sales in March rose 3.1% y/o/y vs the forecast of up 4.8%. Industrial production grew by 4.5% in March y/o/y but that was less than the expected gain of 6%. 

The Chinese economy has a lot of moving parts right now. Residential developers remain under stress but debt via restructurings and bankruptcies is getting cut sharply. The sale of new apartments remains under pressure but doing better for existing ones. Manufacturing has remained weak but is trying to find a bottom. The Chinese consumer is spending more on services/experiences but less on stuff. Chinese stocks sold off overnight as did most markets in Asia following the global weakness.

Hopes for improvement in the German economy was seen by investors in the April ZEW report. This index rose to 42.9 from 31.7 and better than the estimate of 35.5. That was the lone bright spot though as the Current Situation remained deeply negative at -79.2 vs -80.5 in the prior month. For this export dependent economy, the weaker euro is helping the mood as are expectations for ECB rate cuts.

The UK jobs data was softer than expected as for the 3 months ended February saw their unemployment rate rise to 4.2%, the highest since last summer, from 4% and the number of employed fall by 156k vs the estimate of a gain of 74k. Also, in March, the number of jobless claims rose again. The bright spot was continued strength in wage growth which rose 6% ex bonuses, finally exceeding the pace of inflation. The BoE is in a tough spot too.

UK Unemployment Rate

View larger here.

Upside

-MCBC +40% (Wintrust Financial Corporation and Macatawa Bank Corporation announce plans to merge in all-stock transaction)

-BRTXD +28% (receives FDA clearance of phase 2 BRTX-100 clinical study protocol amendment; affirms already established 2024 enrollment completion target)

-OPTT +24% (signed teaming agreement with major international defense contractor to deploy maritime domain awareness solutions)

-ITCI +19% (Phase 3 topline results from study 501, evaluating Lumateperone as Adjunctive Therapy, in patients with major depressive disorder achieved statistically significant and clinically meaningful results in both the primary and the key secondary endpoints)

-PRSO +17% (Panasonic introduces new mmWave Wi-Fi Solution utilizing Peraso's X710 Chipset technology)

-LXEO +12% (granted FDA Fast Track Designation for LX2006, an AAV-Based gene therapy candidate for treatment of Friedreich’s Ataxia Cardiomyopathy)

-UNH +7.7% (earnings, guidance)

-ABOS +4.8% (presents first comprehensive clinical and biomarker data for Sabirnetug (ACU193) at American Academy of Neurology 2024 Annual Meeting)

-MS +3.5% (earnings)

-DJT +2.7% (to launch streaming platform in three phases; finishes R&D on its own content delivery network, announcing plans for phased streaming introduction)

-PRPH +2.2% (unveils Project ZenQ-AI, aims to leverage AI platform, massive genomics database and patented esophageal cancer insights for Antibody Drug Conjugates development)

Downside

-RVYL -40% (files to sell underwritten public offering of common stock of indeterminate amount)

-SKIL -20% (earnings, guidance; names new Executive Chair and CEO retirement)

-PACB -16% (prelim earnings, guidance)

-LYV -9.1% (DOJ to file antitrust suit against Live Nation as soon as next month)

-MITK -3.6% (earnings, guidance)

-GOLD -2.2% (reports prelim Q1 gold sales) 

View larger here.

Starbucks price target lowered to $94 from $100 at Jefferies Jefferies lowered the firm's price target on Starbucks (SBUX) to $94 from $100 and keeps a Hold rating on the shares. For companies reporting Q1 earnings through the week of April 29, recent industry data has remained "somewhat choppy," the analyst tells investors. In a preview for the U.S. restaurant group, the analyst added that the firm sees opportunity for "modest upside" at Bloomin' Brands (BLMN), BJ's Restaurants (BJRI), Domino's Pizza (DPZ) and McDonald's (MCD), while calling out Starbucks, where the firm sees risk relative to Street expectations.

9:00 AM: Fed Vice Chair Philip (Voter) speaks on "Monetary Policy During Periods of Uncertainty" before the International Research Forum on Monetary Policy hosted by the Federal Reserve, Washington, DC (Text available. No Q&A. Webcast at www.federalreserve.gov OR www.youtube.com/federalreserve);

12:30 PM: Fed Bank of New York President Williams (Voter) with Governor of the Banque de France Francois Villeroy de Galha moderates a discussion before the Economic Club of New York (No text. Livestream available);

1:00 PM: Fed Bank of Richmond President Barkin (Voter) speaks on the economic outlook before the Rotary Club of Winston-Salem, NC (No livestream. No new text. Audience Q&A expected. No media Q&A);

1:15 PM: Fed Chair Powell with Bank of Canada (BOC) Gov Macklem participates in moderated discussion before the Washington Forum on the Canadian Economy, Washington, DC ( No text. Q&A from moderator. Webcast at https://www.wilsoncenter.org/

Reading61

Nice article Bret!

Pfizer Eyeing Viking Therapeutics? A Scenario Among All The M&A Talk (NYSE:PFE) | Seeking Alpha

I will try to produce a "Futures" column but we have a lot of EPS releases, especially of a bank-kind, to review and analyze.

After covering my Index common shorts late yesterday, I have moved back to market neutral from net short.

More to come but I wanted to give you all a heads up and I want to continue to be transparent.

From yesterday.

“Wealth is the ability to fully experience life.”

- Henry David Thoreau

Bonus - Here are some great links:

Tax Day Selloff

What Happened Last Week

Is Gold Going Much Higher?

Phil D Gapp from my Pal Wally and Uncle Bob Farrell

Big Mac Inflation

* And why I am short, in a nutshell

Relatedly, Citigroup reduces MCD price target from $312 to $297 this morning.