As of 4:17 p.m.:

Closing Breadth

S&P 500 Sector ETFs

% Movers

Nasdaq 100 Heat Map

Advance Decline Intraday

* To stay abreast and as a reminder — I introduced this new column last week.

* The column recaps the meaningful trading/investing moves that I did during the trading session.

* Please give me feedback in the Comments Section if this is helpful or if you would like me to add anything to the column.

I came into the day with a small long and I am now back to about market neutral:

* I added to a small Index short — in several tranches. (SPY $556.60, QQQ $472.10).

* I added to my XLU short ($77.35).

* I added to my MSOS $6.82, OIH $268.23 and OXY (under $51) longs.

* I shorted around the fringe of a number of individual names.

Wolf Street howls about the rebound in services PPI.

The S&P Index is up by about 185 handles from the lows yesterday morning.

That was not on my bingo card.

I will be in a research call from 1:30 p.m. to 2:30 p.m.

Radio silence.

As of 10:40 a.m.:

Breadth

S&P 500 Sector ETFs

Nasdaq 100 Heat Map

Oaktree Management's Howard Marks on risk.

How to Think About Risk with Howard Marks (oaktreecapital.com)

I added to my SPY (at $555.34) and QQQ (at $469.71) shorts just now.

Adding further to my energy exposure.

This is the first day the oil equities are displaying any strength.

From Peter Boockvar: 

ECB and quick review of the data

As the ECB cut its deposit rate by 25 bps to 3.50% and they forecast a 2.50% inflation rate this year, they consider a REAL rate of 100 bps to still be restrictive. ‘Restrictive’ is in the eye of the impacted. As to what comes next, “The Governing Council is not pre-committing to a particular rate path.”

And their QT continues on as “The APP (asset purchase program) is declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal payments from maturing securities.” Also, “The Eurosystem no longer reinvests all of the principal payments from maturing securities purchases under the PEPP (pandemic emergency purchase program), reducing the PEPP portfolio by 7.5b euros per month on average.”

Yields in Europe are down slightly and the euro is up a touch with stocks all green. No real surprises here and we await the presser.

The August PPI was about in line with expectations when we include the July revisions. The headline rate was up 1.7% y/o/y vs 2.1% in July. The core rate grew by 2.4% y/o/y vs 2.3% in the month before. Energy prices fell .9% m/o/m and down by 8.4% y/o/y. Food prices rose .1% m/o/m and by 2.3% y/o/y. Corn and soybean prices are low but have you seen the 13 yr high in coffee prices?

Core goods prices were up by .2% m/o/m and 2.1% y/o/y, staying positive for both. Interestingly, what led the gain was a 2.3% rise in non-electronic cigarettes. Jet fuel prices fell 10.5%.

On the service side, prices rose .4% m/o/m and 2.6% y/o/y. The BLS said “A 4.8% rise in the index for guestroom rental was a major factor in the August advance in prices for final demand services.” Also rising were wholesale prices for machinery/vehicle, residential real estate loans, furniture retailing, and professional and commercial equipment wholesaling. Down were prices for food/alcohol retailing and ‘membership dues, admissions, and recreational facility use fees.’ Transportation prices for rail, truck and air all fell m/o/m.

Bottom line, with the data in line, inflation breakevens are flat after rising yesterday off the lows. No surprises and the market cares more about CPI anyway. We’ve seen notable disinflation in goods prices and in the coming quarters we’ll see where it settles out at. Service inflation is NEVER transitory, whether on the consumer side or wholesale. Overall with the inflation stats, we should NOT be spiking the ball on conquering inflation on the downside. We should be spiking it ONLY when it stays SUSTAINABLY down. That will take quarters/years to determine.

Normalizing after the the Labor Day holiday, initial jobless claims totaled 230k, 4k more than expected. To smooth this out, the 4 week average is 231k vs 230k in the week before. Continuing claims at 1.85mm were as forecasted, up 5k w/o/w.

Bottom line, while it has risen this year, the pace of firing’s as measured here remains modest but the rate of hiring’s still remains more muted.

4 Week avg Initial Claims

Continuing Claims

I shorted more XLU at $77.32.

From JPMorgan:

US: Futs are higher with Tech leading. NVDA, GOOG, and META are the top performers among MegaCap Tech. Bond yields are higher and USD is lower; 2-, 5-, 10-yr yields are 2bp, 5bp, 10bp higher. Commodities are mixed with Oil and Base Metals higher, while Precious Metals are lower. Today, the key focus will be PPI and Jobless claims. 

Feroli expects PPI to print 0.1% MoM vs. 0.1% prior and Core PPI to print 0.2% MoM vs. 0.0% prior, both are in line with the Street. On earnings, keep an eye on consumer read-through from KR (before market-open) and AI/Tech sentiment from ADBE.

and...

EQUITY AND MACRO NARRATIVE: CPI yesterday came in largely in line with expectations with core came in modestly above consensus (0.3% MoM vs. 0.2% survey vs. 0.2% prior). However, a part of this upside surprise came from lagged shelter inflation data. For comparison, Blackstone CFO yesterday said that their own measure of inflation puts CPI at 1.7% YoY, not 2.5%, which is below the Fed’s target (BBG). On CPI, we shared the following in some IB chats immediately after the release: “This is a good print and while core came in above consensus this should not be conflated with stagflation given the jump in earnings, which should be reflected in higher spending and continue to support the view of above-trend GDP growth. It is disappointing to see shelter moving higher but we know the story is one of being lagged (see article below). Longer-term, continue to expect Core Goods to print negatively given the growth headwinds emanating from China. Now, the key question is whether Retail Sales beats next week to finally put growth fears to bed.”

• CPI THOUGHTS FROM JPM ECON (ABIEL REINHART) - The core CPI came in slightly firmer than expected in August, rising 0.281%m/m (consensus 0.2%, JPMC 0.21%), which kept the %oya rate at 3.2%, while core ex shelter rose a more mild 0.1%m/m. At the margin this will highlight for the FOMC that there is still some strength in portions of CPI, though they may downplay the lagging shelter measures, and the discussion at the next meeting will likely still focus primarily on the labor market. The headline rose 0.2%m/m (2.5%oya) in line with expectations. Core commodities declined 0.2%m/m similar to recent months, whereas core services increased 0.4%m/m, the highest reading since April, reflecting renewed firmness in shelter (OER and hotels) and public transportation (airfares), whereas medical care services surprised to the downside again, falling 0.1%m/m after a 0.3% decline the prior month. However, even excluding rent and OER the core services measure rose 0.3%m/m, the most since April.

(Note this data came in just after the open)

Upside: 

-ALK +4% guides higher 

-AURA +14% Phase 2 data 

-CSBR +13% earnings 

-NTGT +20% raises oultook 

-CTAS +2% upgrade 

-SIG +6% earnings 

-DAL +4% Q3 guides

-ALK +5% Q3 guides

Downside: 

-MRNA -6% R&D day 

-CURV -6% secondary 

-VNOM -5% secondary 

-OXM -10% earnings 

-FULC -70% data;suspends development 

-CAL -18% earnings

This is a valuable table for momentum-based traders:

Chart from 9:04 a.m. ET:

Chart from 8:44 a.m. ET

Premarket trading this morning:

* Reshorted SPY $556.15

* Reshorted QQQ $469.62

Just when I thought... Just when I thought I was out...they pull me back in. (youtube.com)

From Peter Boockvar: The AI tech trade won't go down without a fight/Other musings and see what Oxford said

I think the AI tech trade is over in terms of its dramatic outperformance relative to everything else as realism about the returns are now apparent. That said, as seen yesterday, it will not go down without a fight.

I understand the desire on the part of some to look at the inflation stats and parse out what they don't like, particularly shelter and look at the core rate ex housing in gauging an underlying trend. But, with respect to what the Fed should be looking at, they should absolutely not be ex'ing out housing, regardless of how it leads/lags the reality on the ground as there is NO OTHER sector of the economy that is more sensitive to interest rates. So, if the Fed's lever is interest rates, how can they ignore the sector that they most influence? And, housing costs make up about 30% of the average person's budget, especially when including property taxes.

Also, the Fed and the rest of us all debate at which level the Fed will take rates relative to the rate of inflation, the so called REAL rate that they think is neutral in terms of balancing growth and inflation. I'll add another metric they should use, much less economically scientific though. It is the rate at which below it people start to do financially stupid stuff, like we saw in the early to mid 2000's, some years in the teens and in 2021 to be specific. I'll define that by saying negative REAL rates, or even only slightly positive, for an extended period is what triggers the reckless, stupid financial behavior and misallocations of money.

The stock market choppiness has definitely cooled the bullish stance of market observers. Investors Intelligence yesterday said Bulls fell to 43.5 from 52.3 while Bears rose 1 pt w/o/w to 22.6. In today's AAII, Bulls fell by 5.5 pts to 39.8 after dropping by 5.9 pts in the week before. That's the least amount since early June. Bears rose by 6.1 pts to 31, a 5 week high. Below is the Citi Panic/Euphoria index that I saw on Saturday that has come off its highs but still remains just below Euphoria and nowhere close to panic.

Bottom line, we want to see the bullishness calm down from a contrarian standpoint but with Bulls still far exceeding the Bears, I'd call us more in no man's land right now sentiment wise. 

Container shipping rates continue to cool, certainly a good thing as companies are rushing to get product ahead of the holidays. The World Container Index price for a 40 ft box in the trip from Shanghai to Rotterdam fell by $1,067 w/o/w to $5,152, the least since May. It still though is well above the about $1,700 level it stood at in the beginning of 2024. The route to LA saw prices fall by $403 w/o/w to $5,627, also the lowest since May but up from $2,100 at year end 2023.

Shanghai to Rotterdam

From Oxford Industries, the apparel company with brands like Jack Rogers, Johnny Was, Tommy Bahama, Southern Tide and Lilly Pulitzer and whose stock is down sharply pre-market:

"Sales of $420 million and adjusted EPS of $2.70 for the quarter were below our guidance range, primarily due to a continued pullback from the consumer. The pullback worsened sequentially during the quarter, coinciding with consumer sentiment hitting and eight-month low in July, with a trend continuing into August and the start of our third quarter."

"While most underlying economic indicators remain reasonably strong, the cumulative effect of several years of inflation may be catching up with the consumer. Simultaneously, the 2nd quarter was also marked by several national and global noteworthy events that led to a more distracted consumer at several points over the summer. Certain factors that we may believe may have amplified these headwinds with respect to our particular business include, first, our focus on affluent 45 and up customers, who tend to be more headline and market sensitive; 2nd, our significant exposure to Florida, which accounts for over a 3rd of our bricks and mortar business and grew at an exceptional pace coming out of the pandemic, but has slowed down as the new post-pandemic world settles in."

These are noteworthy comments that it is not just low income consumers that have shifted their spend behavior and reacting to the stock market and we know Florida's economy has been strong with the help of an influx of population.

Also of note, and something we heard this week from Academy Sports & Outdoors, "Looking across the marketplace, the two areas where the consumer continues to respond positively are newness and value. During the quarter, we saw a strong full price response to fashion and new and differentiated products, while interest in core sales was more muted. The consumer also responded to value in the quarter, with a higher proportion of sales during the quarter occurring during promotional events and at our outlet stores than in last year's 2nd quarter."

How high will the BoJ eventually take interest rates? A hawkish member of the BoJ, Naoki Tamura today said higher than it is now. "I believe that we need to raise the short-term rate to at least around 1% in the 2nd half of the bank's projection period through fiscal 2026. That's needed to contain upside price risks and for achieving the stable and sustainable inflation target." He expects though a "gradual" pace of those increases. As he is known to be hawkish, there wasn't much of a market response.

This is an announcement of a critical debt refinancing at Green Thumb GTBIF today — my largest individual cannabis equity long.

Bonus — Here are some great links:

Daily Stock Market Analysis

Volatilty Anyone?

Historic Performance in Triple Witching Weeks

End of the Bull Market?

From The Credit Strategist on the Fed and Raphael Bostic, a frequent guest on CNBC:

Lawless Fed

From my friends at Miller Tabak:

Wednesday, September 11, 2024

Despite the Fed Starting Slow, Yields Still Have Further to Fall

With markets and the FOMC now focused on the labor market instead of inflation, it is challenging to disentangle the noisy and conflicting reports of the past week. July job openings were dreadful, falling from 8.2 million to 7.7 million (versus 8.1 million expected) while August job growth also came in at a tepid 144,000. In contrast, the unemployment rate, which relies on the household survey, was encouraging at 4.2% and jobless claims have also remained low. Figure 1 offers a simple way to consolidate these data by looking at the gap between job openings (from JOLTS) and unemployed workers (from the household survey). This gap has steadily declined since its October 2022 peak and is now all but gone. There were only 510,000 more openings than unemployed workers in July and the gap may be zero once the September data are available.

Figure 1: Job Openings (blue) versus Unemployed Workers (red)

Figure 1 should motivate the Fed to cut 50 bps next week. It shows an economy near full employment and, ideally, the Fed would be closing on neutral as the gap between openings and unemployed workers vanishes. It is important that the closing of this gap in 2024 has come from rising unemployment, rather than falling job openings as was the case in 2023. Restrictive rates will continue to cause the unemployment rate to trend upwards and we now expect it to peak around 4.5% by December. As a result, we still expect 100 bs of rate cuts this year (taking the Fed funds rate down to 425-525 bps) and another 125 bps of cuts in 2025 (to take rates to 300-325 bps). The FOMC, however, wants to start small and we thus put the chances of a 25 bps rate cut next week at 75% with a 25% chance of 50 bps. Chairman Powell will be be vague in describing the FOMC’s plans making the Fed’s upcoming new Summary of Economic Projections especially important. We expect it to show a slower rate of rate cuts than our own forecast.

The Short-Range S&P Oscillator is dead flat (-0.01%).