* In another day of "no broadening"... 

* Same bad breadth with low volume...

Closing Volume

- NYSE volume 346M shares, 14% below its one-month average;

- NASDAQ volume 4.04B shares, 27% below its one-month average

- VIX up 1.65% to 12.95

Breadth

% Movers

Nasdaq 100 Heat Map

kenlud

FWIW dept:

June 5, 2024

RBC Uranium Watch Takeaways from World Nuclear Fuel Market Conference

We attended the 2024 World Nuclear Fuel Market conference in Atlanta on June 3-4, meeting with industry participants across the nuclear fuel cycle. We think near-term, market activity may be tempered by comfortable contract coverage and the likelihood of waivers granted to US utilities seeking exemption from the Russian uranium import ban. However, there was wide acknowledgement among conference participants that the nuclear fuel market is tight across the supply chain long-term and more investment in capacity is needed. The conversion market in particular is considered a potential bottleneck while the uranium deficit is set to widen with significant supply risks. Within our coverage, we see opportunities for Cameco (expand conversion capacity, sell proven uranium production into rising demand) and NexGen (develop new production to meet long-term deficit)."

Well, that sale (below at $12.28) was timely!

Paramount Global's  (PARA)  shares fall (to $11.22) after a Wall Street Journal report that Shari Redstone is dropping plans to sell her controlling interest to Skydance's David Ellison.

My previous post (!):

Housekeeping

Housekeeping item.

I have sold my Paramount Global (PARA) for a modest profit.

Position: None

BY DOUG KASS JUN 11, 2024 2:50 PM EDT

Housekeeping item.

I have sold my Paramount Global  (PARA)  for a modest profit.

Advancers

DECLINERS

*  (SPY)  -0.04%

*  (QQQ)  +0.33%

*  (IWM)  -0.39%

*  (RSP)  -0.40%

From Peter Boockvar:

Solid 10 yr note auction, why?

The 10 yr note auction was solid. The yield of 4.438% was 2 bps below the when issued pricing. The bid to cover of 2.67 was well above the 12 month average of 2.49 and the highest since February 2022. Also, direct and indirect bidders took almost 89% of the auction, leaving dealers with about 11% and that is the least since August 2023.

Bottom line, after a soft 3 yr auction, this is the best 10 yr auction we’ve seen in a while, and as stated the best bid to cover since February 2022. As I always say, I wish we can hear the messaging from the buyers to discover their motive, whether buying is strong or weak. Either way, the US Treasury is finally smiling after many, many months with at best mediocre auctions. The 10 yr yield is at the low of the day in response, down a few bps from right before the results were reported. It seems that the 4.50% 10 yr level is a swing level that the market is carving out.

Is the market sniffing out a softer CPI tomorrow? Worried about economic growth? Believing the Fed is going to follow its peers with rate cuts? Happy that the Fed has more than cut in half its QT of US Treasuries?

Finally, and maybe a factor in the better auction, the total sale was $39b after $42b was sold in May so there was a bit less supply than the last one.

I’m still sticking to my belief that a bond bear market is going to continue and a 5% retest in the 10 yr yield will happen this year.

Intraday 10 yr yield move

Bid to Cover

* This was a low conviction trade that worked out...

I have covered my  (BITO)  ($25.11) short for a profit.

From late last month:

Bitcoin Short

I remain short bitcoin (after all these days!):

First Time Long Time

I shorted a small, starter position in bitcoin on the opening (BITO $28.84).

Position: Short BITO (VS)

BY DOUG KASS MAY 21, 2024 9:35 AM EDT

This is a low conviction trade as I have no sense of the intrinsic value of this investment class/vehicle!

Position: Short BITO (S)

BY DOUG KASS MAY 24, 2024 6:35 AM EDT

* Breadth, Nasdaq Heat Map and S&P 500 Sector Indices (all negative but for information technology)...

Breadth

Nasdaq 100 Heat Map

S&P 500 Sectors

I am going to take a nap for an hour or so.

With S&P cash rallying to down only -10 handles I am adding to my short calls in SPY and QQQ.

In the money for July.

Damn good out in Sprott Uranium Miners ETF  (URNM)  above $58 recently, now -$1.70 on the day and -$8 from the recent sale price.

I am a buyer of the uranium ETF $48-$50.

I plan to press my  (XLF)  short on any strength.

(GS)  -$9, Berkshire  (BRK.B)  -$4, etc...

From yesterday:

Finicky!

Bank stocks are rolling over a bit.

I am pressing my (XLF) short.

Position: Short XLF (M)

BY DOUG KASS JUN 10, 2024 10:55 AM EDT

From Peter Boockvar:

Consumer vibes/Bond yields/NFIB/UK jobs

In the NY May survey of Consumer Expectations survey seen yesterday, the answers to the inflation guesses were mixed. The one yr view fell one tenth m/o/m to 3.2%, was unchanged out to three years at 2.8% and rose two tenths for the 5 yr time horizon to 3%. So mix it all up and we're looking at expectations of around 3% inflation, still well above the 2% statistical hopes of the Federal Reserve.

Price expectations for the necessities remain high. For gas, 4.8%, food, 5.3%, rent, 9.1%, medical care, 9.1% and college at 8.4%. As for home prices, they were unchanged at 3.3%. Whether realized or not (rent growth obviously now much less), the perception impacts consumer behavior.

The job market results were mixed too. Unemployment expectations rose 140 bps to 38.6% for those seeing an increase and that is above the 12 month average of 37.8% but "the mean perceived probability of losing one's job in the next 12 months decreased 2.7% percentage points to 12.4%, falling below the 12 month trailing average of 13.2%." Off the lowest level since April 2021, the probability of "finding a job if one's current job was lost increased by 1.3 percentage points to 52.2%." There was little change in expectations for earnings and household income.

Spending expectations did slip by two tenths to 5% but has been steady between 5-5.2% over the last 6 months. Expectations for future credit access "deteriorated, with a larger share of respondents expecting tighter credit conditions a year from now, and a smaller share expecting easier conditions." There was a drop though in those who think they'll miss a minimum debt payment over the coming three months.

Also of note, "Perceptions about households' current financial situations improved, with more respondents reporting being better off than a year ago and fewer respondents reporting being worse off. Year ahead expectations also improved."

Finally, and file this with other stock market sentiment indicators, expectations for stock prices that they'll be higher 12 months from now rose to the highest since May 2021 at 40.5%.

My bottom line, we know the upper income consumer/saver is benefiting from interest income and higher stock prices while lower to middle income consumers are price conscious, value seeking and prioritizing spend on non-discretionary stuff.

With regards to the stock market, you can drive a truck thru the headline record high in the S&P 500 and the number of stocks hitting 52 week highs on the NYSE. I include also the 52 week high count for the NASDAQ which is at just 60 names.

SPX in orange, 52 week NYSE high in white

NASDAQ in orange/52 week highs in white

French bonds are selling off again after the election news over the weekend and ahead of the early parliamentary election process starting in a few weeks. The 10 yr yield rose by 13 bps Monday and by another 6 bps today. Since last Wednesday, the day before the ECB cut the overnight deposit rate by 25 bps, the French 10 yr yield is up by 29 bps, thus completely offsetting it. Italian yields are jumping too and are up 24 bps over the past 4 trading days.

French Oat 10 yr Yield

The May NFIB Small Business Optimism index rose to 90.5 from 89.7. While still well below the 50 yr average of 98 and bouncing along 10 yr+ lows, that is the best read since it was at 91.9 in December. The 6 month average is 90. The internals were mixed.

We did see a rebound in Plans to Hire by 3 pts to 15% after hovering near lows not seen since 2016 not including Covid. Job openings rose 2 pts but the two compensation components fell. Those who increased Capital Spending rose 1 pt but Plans to Increase Inventory was unchanged. Those that Expect a Better Economy improved by 7 pts but those that Expect Higher Sales fell 1 pt and the Good Time to Expand category was unchanged at the lowest since May 2023, one yr ago.

On inflation, Higher Selling Prices remained unchanged at 25 which compares with the 6 month average of 24. The earnings picture softened by 3 pts to -30% and that is near the lowest since 2012.

Also, there was a 2 pt increase in Easing of Credit Conditions and the average one yr loan rate fell to a still high 9% from 9.3%. However, "6% of owners reported that financing was their top business problem in May, up two points from April. The last time financing as a top business problem was this high was in June 2010."

Notwithstanding the modest lift in confidence, the bottom line from the chief economist at the NFIB was still downbeat. Highlighting the small business sector contribution to GDP and employment of over 40%, "for 29 consecutive months, small business owners have expressed historically low optimism and their views about future business conditions are at the worst levels seen in 50 years. Small business owners need relief as inflation has not eased much on Main Street."

Similar to the two lane consumer highway we have, it seems to be the case too between better capitalized big companies and more challenged smaller ones in how they are able to manage through higher inflation and an expensive cost of capital.

NFIB

Plans to Hire

Earnings Outlook

Higher Selling Prices

The only thing to highlight overseas was the UK Jobs data. Employment weakened more than expected in the 3 months ended April as their unemployment rate rose to 4.4% from 4.3% where no change was forecasted. And, there was a reduction of 139k in the number of those employed vs the estimate of a drop of 98k. Also, there was a large 50.4k person increase in those filing for jobless claims in May. That's the biggest one month increase since February 2021.

Wage growth continues to be pretty solid, rising by 6.0% y/o/y in the 3 months thru April ex bonuses, the same pace seen in March. This is now running well above the rate of inflation after suffering below for a while.

In response, the 2 yr gilt yield is lower by 3.4 bps to 4.38%, though after rising by 8 bps in the two prior days. The 10 yr yield is down about 2 bps while the pound is little changed, though still hovering around one yr highs vs the US dollar. The FTSE 100 is down .7% but there is stock weakness across the European continent. Rate cut odds by the BoE for August are at 45%, 69% for September and 100% by November. By yr end, there is a 40% chance of two 50 bps rate cuts priced in.

Only a miracle, seemingly, will get Rishi Sunak reelected.

UK Unemployment Rate

As of 8:34 a.m.:

As of 8:55 a.m.:

Upside:

-AISP +21% (announces six-figure sole-source contract award within the Department of Justice for Acropolis Enterprise Video and Data Management Platform)

-ZDGE +18% (earnings)

-VCIG +17% (to develop Next-Generation AI Computing Data Center in Malaysia)

-CVGW +14% (earnings)

-MPAA +4.6% (earnings, guidance)

-KLTR +4.2% (affirms guidance; announces $5M share repurchase program)

-DXC +3.3% (reportedly Apollo and Kyndryl are discussing a joint bid for DXC at $22-25/shr)

-REBN +1.9% (unveils major global expansion for premium brand growth in China and Southeast Asia)

-SPOT +1.9% (said to introduce a new, higher-priced premium plan for access to better audio and new tools for creating playlists and managing song libraries later this year)

Downside:

-TH -35% (confirms US government intends to terminate South Texas Family Residential Center located in Dilley, Texas)

-CTGO -21% (prices 731K units at $21.60)

-PROK -14% (files to sell $125M public offering of Class A ordinary shares and concurrent registered direct offering)

-MIND -13% (earnings)

-YEXT -13% (earnings, guidance)

-HOVR -7.0% (files to sell offering of common shares, warrants through EF Hutton of indeterminate amount)

-ASO -6.1% (earnings, guidance)

-ATAT -4.5% (files to sell registered secondary offering of 10M American Depositary Shares by Legend Capital)

-ARRY -4.2% (CFO Kurt Wood departs, effective end of Q2)

More great stuff from Danielle DiMartino Booth.

The Daily Feather — Ode to Captain Pete Mitchell

Maverick: Time is your greatest enemy. Phase one of the mission will be a low-level ingress attacking in two-plane teams. You’ll fly along this narrow canyon to your target. Radar guided surface-to-air missiles defend the area. These SAMs are lethal. But they were designed to protect the skies above, not the canyon below.

Rooster: That’s because the enemy knows no one is insane enough to try and fly below them.

Maverick: That’s exactly what I’m going to train you to do. On the day, your altitude will be one hundred feet – maximum. You exceed this altitude, radar will spot you, and you’re dead. Your airspeed will be 660 knots – minimum. Time to target: two and a half minutes.

This scene in Top Gun: Maverick (2022) introduced a specialized mission the likes of which no living pilot had ever seen. Only (the fictional) Captain Pete “Maverick” Mitchell could lead the hotshots into the unknown – and make it back home -- flying under the radar the whole way.

When Wall Street is obsessed with the jobs data on Nonfarm Payroll Fridays, other releases can fly under the radar. Those toiling away on the Business Cycle Dating Committee at the National Bureau of Economic Research have no such luxury. Every data point that feeds their process must be monitored and additive to their running cycle-tracking machine. Gauging the seven measures on their dashboard by strongest to weakest on a six-month-annualized trend basis, the well-documented divergence between nonfarm payrolls and household employment jumps off the page. But inflation-adjusted Wholesale Sales, at -3.3% annualized rate in April (largest red bar in table), also starkly contrasts with the positive momentum in real Consumer Spending, Retail Sales, and Personal Income less Transfer Payments, as well as Industrial Production’s modest advance (green bars).

The soft spot in wholesale demand wasn’t just an April story; it’s built negative momentum as 2024 has unfolded. April’s -0.5% month-over-month (MoM) followed March’s -1.9% MoM drop and extended the losing streak to the third down month in the last four (January was -2.1%; February was up 0.9%). The weakness was also not industry-specific -- MoM declines were equally conspicuous in Durable Goods and Nondurable Goods.

The wholesale machinery industry was particularly weak, which resonates upstream to the production and capital spending channels. Smoothing the trend via a two-quarter annualized prism, the volume of wholesale machinery sales has contracted for five straight quarters beginning in 2023’s second quarter (purple line). While supply should follow demand, that’s not been the case for real machinery inventories, which have run at low double-digit rates over the same period (orange line). The depth of the drag flags an inventory correction. The ripple effect should draw a deeper ravine for real business equipment investment that’s been declining on a two-quarter basis since 2023’s fourth quarter (lime line).

Given the outsized demand-supply imbalance in the machinery space, could it help inform the core inflation backdrop? In a word, ‘yes.’ Flipping the real wholesale machinery inventory/sales ratio on its head (red line, inverted) draws a similar path to core goods consumer price (CPI) inflation (blue line). The post-pandemic supply chain interruption aside, the relationship between the ratio and inflation is clear; the causation, not so much. It’s not as if consumers are buying humungous earth-moving machines or mega agricultural farming equipment! That said, both metrics do capture elements of the most cyclical industry -- durable goods. That common denominator allows for the relationship to signal that deflation will persist at the consumer level. The takeaway: The wholesale machinery sector is a buried nugget that picks up the radio frequency of other business cycle forces.

The New York Fed’s Survey of Consumer Expectations (SCE) could not care less about the rumblings of a “middleman” industry. Its mandate is informing its readers about top-of-mind perspectives on the narrative at hand, such as the convergence of inflation and unemployment. May’s installment showed a continued stickiness in short-run inflation expectations and a gradual uptick in unemployment expectations. Households anticipated a median one-year ahead inflation rate of 3.17% ticked down from April’s 3.26% (green line). It’s been four years since there was a two-handle on one-year inflation expectations. Meanwhile, consumers were slightly more bearish on the jobless outlook -- the mean probability that the U.S. unemployment rate would be higher one-year from now rose to 38.65% in May from 37.17% in April, squarely below October 2022’s post-pandemic peak of 42.95% (yellow line).

While on the surface, there was no cause for alarm, that was not the case under the radar for the most vulnerable in the workforce – the least educated and smallest earners. Spikes in higher unemployment expectations were evident for those with a high school education or less and those who earn less than $50,000. More persistent negative divergences for these two cohorts vis-à-vis those with higher educational attainment and those who command higher pay were also evident in expectations for one-year forward earnings growth, household income growth, and the prospects for finding a job.

Need we share that the authors of the SCE highlighted that consumer optimism about the stock market reached a three-year high in May? The read-through: Asset holders (i.e., the haves) are relatively chippier, which echoes the outperformance in the RCM/TIPP survey of investors compared to their non-investor counterparts. It follows that the least educated and smallest earners (i.e., have-nots) are not near as sanguine about what tomorrow holds.

I will be out of the office at a medical appointment (to get some relief from my flu) from 9 a.m. to 10 a.m..

Radio silence.

“The wise investor recognizes that success is a process of continually seeking answers to new questions.”

- Sir John Templeton

Bonus - Here are some great links:

Apple's Golden Moment? (I challenge!)

Three Takeaways

Struggle Bus

The 10 Year Yield is Too High

Slow start.

Under the weather.

Back shortly.