Closing Volume

- NYSE volume 21% below its one-month average;

- NASDAQ volume 4% below its one-month average

Breadth

S&P 500 Sector ETFs

Nasdaq Heat Map

Nasdaq 5-Day Advance Decline Intraday Graph

From Peter Boockvar

Positives,

1)September PPI was flat at the headline level but up .2% m/o/m core. The headline print was one tenth under the estimate and the core rate was as expected. Due to rounding though, the gains exceeded expectations with a 1.8% y/o/y gain headline and 2.8% core vs 1.9% and 2.6% in the month before. If we take out trade too, prices were up by 3.2% y/o/y vs 3.3% in the month before and up one tenth m/o/m. Core goods prices rose .2% m/o/m and 2% y/o/y. Service prices rose .2% m/o/m too and by 3.1% y/o/y.

2)Container shipping rates continue lower. The Shanghai to Rotterdam route saw the price of a 40 ft container drop by another $224 w/o/w, the 12th week in a row of declines and quite a relief ahead of the holidays. While still about double where they started the year, at $3,591 it is less than the half the July peak of $8,267.

3)The September NFIB Small Business Optimism index rose a touch m/o/m to 91.5 from 91.2, though remaining soft. The 3 month average is now 92.1 and the 6 month average is 91.3 and continues to bounce along the bottom. Going back to 1975, the NFIB Uncertainty Index rose to a record high. The bottom line from the NFIB, "Small business owners are feeling more uncertain than ever. Uncertainty makes owners hesitant to invest in capital spending and inventory, especially as inflation and financing costs continue to put pressure on their bottom lines. Although some hope lies ahead in the holiday sales season, many Main Street owners are left questioning whether future business conditions will improve."

4)From Delta: "Consumers are continuing to prioritize premium experiences, and our core customer base is in a healthy financial position with travel remaining a top spend category. Corporate travel continues to improve and Delta is well positioned as the business carrier of choice. And importantly, domestic supply growth continues to rationalize."

5)The UK said its economy grew by .2% m/o/m in August as expected with a rebound in manufacturing production offsetting modest growth in services, but retail was good. Construction was an add-on too to growth.

6)August German export figures surprised and rose by 1.3% m/o/m instead of falling by 1% as estimated. Exports to the US led the way, up by 5.5% m/o/m. They were up to their other important trading partner, China, by 1.9%.

7)The Bank of Korea cut its base rate by 25 bps as fully anticipated to 3.25%. However, they hinted that it will be next year and not next month before we get another one.

8)After starting its rate cutting process by 25 bps in August, the Reserve Bank of New Zealand stepped up the cadence to 50 bps overnight to 4.75% but that was expected. They said "The Committee agreed that the economic environment provided scope to further ease the level of monetary policy restrictiveness."

9)While the BoJ continues to hem and haw over when to raise interest rates again from .25%, base pay in Japan in August rose 3% y/o/y, up from 2.4% in July and it is the biggest increase since 1992.

10)As we await what Chinese officials will say tomorrow, Macau visitation numbers have exceeded 2019 levels and home buying interests have picked up sharply.

Negatives,

1)September CPI rose .2% headline and .3% core m/o/m, both one tenth more than expected. The y/o/y gains are now 2.4% and 3.3% respectively vs 2.5% and 3.2% for headline and core. Energy prices fell 1.9% m/o/m and are down by almost 7% y/o/y. Food prices though jumped .4% m/o/m and by 2.3% y/o/y. Service prices ex energy continues to be, and always is, where the inflation remains as prices rose .4% m/o/m and 4.7% y/o/y. Stemming a 3 month run of declines, core goods prices rose .2% m/o/m, though still down 1% y/o/y.

2)There was a huge jump in initial jobless claims to 258k from 225k and well above the estimate of 230k. I assume it’s mostly related to Hurricane Helene but leakage was seen elsewhere. Continuing claims, delayed by a week, did jump by 42k w/o/w to 1.861mm and that was 30k more than anticipated. That is just 10k from the highest since November 2021.

3)After rising to 70.1 in September from 67.9 in August, the October UoM consumer confidence index fell to 68.9. Both Current Conditions and the Expectation components fell m/o/m. One year inflation expectations bounced to 2.9% from 2.7% and back to where it was in July. The main reason for the lift was the rise in expectations for higher gasoline prices after the recent drop. The 5-10 yr guess was 3% vs 3.1% in the month before. The employment component improved by 3 pts to a 6 month high but income went into negative territory with more people expecting ‘lower income’ than ‘higher income.’ With spending intentions, there was a 9 pt rise in ‘Good Time to Buy a House’ and a 3 pt increase in ‘Good Time to Buy a Vehicle.’ There was a 1 pt gain in the major household category. From UoM, “While inflation expectations have eased substantially since then (when it peaked in 2022), consumers continue to express frustration over high prices. Still, long run business conditions lifted to its highest reading in six months, while current and expected personal finances both softened slightly.”

4)With the average 30 yr mortgage rate jumping by 22 bps w/o/w to 6.36%, the MBA said refi’s fell 9.3% w/o/w, though still up 158% y/o/y. Purchases were flat w/o/w and up 8.4% y/o/y and we still await a notable response to below 7% mortgage rates.

5)According to World ACD, air cargo rates continued higher w/o/w.

6)The Dallas Fed released its October Banking Conditions Survey and said "Loan volume declined in October despite the drop in loan prices, which retreated for the first time since 2021. Overall, credit tightening continued and loan nonperformance rose but at slower pace for both. Bankers’ outlooks reversed sharply and turned optimistic. They expect a significant improvement in loan demand and business activity six months from now, although they foresee continued deterioration in loan performance in the next six months."

7)From Pepsi: "the cumulative impacts of inflationary pressures and higher borrowing costs over the last few years have continued to impact consumer budgets and spending patterns. After outperforming packaged food categories in previous years, salty and savory snacks have underperformed year-to-date…We expect consumers to remain choiceful and value conscious as the cumulative effects of inflationary pressures continue to impact budgets and spending patterns. Pockets of elevated geopolitical tension and macroeconomic pressure are also expected to persist in certain international markets."

8)From Domino’s Pizza: "We did begin to see macro and competitive pressures impact our results in August and particularly the low income customer…In the quarter, we saw pressure in our Asia, Europe and Middle East markets. In Europe and Asia, we continued to see macro impacts...Softness in the Middle East was driven by an increased impact from geopolitical tensions."

9)From Helen of Troy: "We remain cautious as external headwinds of increased promotional activity, softer and more variable retail replenishment, and macro pressure and uncertainty remain...We also expect a y/o/y headwind from a shorter holiday shopping season between Thanksgiving and Christmas this year."

10)Taiwan said its September exports rose 4.5% y/o/y which was less than half the estimate of up 10.9%. Tech shipments remained solid, up by 50% y/o/y but was offset by weaker exports in industrial related products like chemicals and plastics with most of the world in a manufacturing recession.

11)August German factory orders were weak, falling by 5.8% m/o/m, well more than the estimate of down 2% but partly offset by a 100 bps revision higher to July.

12)I’m going to miss seeing Rafael Nadal play competitive tennis, particularly on the red clay.

I am signing off early as I have a lot of option paper maturing at the close.

Thanks for reading my Diary today and all week.

I hope it was value-added.

Enjoy the weekend.

Be safe.

Wolf Street howls that PPI is not benign. 

No change in my Tesla  (TSLA)  short position today.

There will be no "Things" today as the only trade was the loss on the  (JPM)  short.

Scott Galloway's No Mercy/No Malice... "Origin Story".

Back in the office.

Getting my sealegs back.

- New York Stock Exchange volume is 29% below its one-month average;

- Nasdaq volume is 6% above one-month average;

Out of  (JPM)  short for a loss.

From Peter Boockvar:

The Fed gave us a rate cut but we've seen this since/Earnings comments/BoK rate cut

It's still at a low level so for now the trajectory is what we watch but the 2 yr inflation breakeven jumped another 10 bps yesterday to 2.08%, a 3 month high. It was 1.68% on the day before the Fed cut 50 bps. So, we got a large rate cut and all the Fed did, along with other factors, was stoke higher inflation expectations. The 5 yr view has had a similar move to 2.28%, still low and we'd all be happy with inflation around that averaged over the coming 5 years but it now needs to stop going up. As I believe inflation will average above that in the coming 5 years, we remain long shorter term TIPS.

2 yr Inflation Breakeven

5 yr Inflation Breakeven

Container shipping rates continue lower but air cargo rates continue higher. The Shanghai to Rotterdam route saw the price of a 40 ft container drop by another $224 w/o/w, the 12th week in a row of declines and quite a relief ahead of the holidays. While still about double where they started the year, at $3,591 it is less than the half the July peak of $8,267.

Here were some notable earnings comments.

From Delta:

"Consumers are continuing to prioritize premium experiences, and our core customer base is in a healthy financial position with travel remaining a top spend category. Corporate travel continues to improve and Delta is well positioned as the business carrier of choice. And importantly, domestic supply growth continues to rationalize." I'll add to this last point, notice the jump in air fare prices seen in yesterday's CPI.

Also of note, "As we've seen historically, domestic travel demand is impacted in the weeks surrounding the election, resulting in an expected 1 point impact of system unit revenue for the quarter."

From Domino's Pizza:

If there was a word that I spent a month plus bolding here when all the consumer touching companies, like retailers, were reporting earnings it was VALUE.

"When we introduced our Hungry for More strategy back in December, we knew consumer spending would be pressured in 2024 and that the QSRs that offered the strongest value would win. That proved to be right...As the year has progressed, competitors have followed our lead and we've seen increased intensity around value within QSR pizza. I believe value will continue to be in demand from customers around the world and know that you're hearing the same thing from my peers as macroeconomic and geopolitical issues continue to pressure the industry."

"We did begin to see macro and competitive pressures impact our results in August and particularly the low income customer."

"In the quarter, we saw pressure in our Asia, Europe and Middle East markets. In Europe and Asia, we continued to see macro impacts...Softness in the Middle East was driven by an increased impact from geopolitical tensions."

On the surface it looks like JP Morgan reported a good quarter with most of the upside coming from capital markets as commercial loan growth was flat q/o/q and up just 1% y/o/y. Dimon said this in their press release on the macro and he's always watching his back as every great banker should:

"We have been closely monitoring the geopolitical situation for some time, and recent events show that conditions are treacherous and getting worse. There is significant human suffering, and the outcome of those situations could have far-reaching effects on both short term economic outcomes and more importantly on the course of history."

"Additionally, while inflation is slowing and the US economy remains resilient, several critical issues remain, including large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world. While we hope for the best, these events and the prevailing uncertainty demonstrate why we must be prepared for any environment."

On the credit side, the provision for credit losses was $3.1b with net charge-offs $2.1b of this which was up sharply from a year ago, by $590mm or 39%, "predominantly driven by Card Services...primarily due to the seasoning of newer vintages and continued credit normalization."

Wells Fargo saw a 1% q/o/q drop in loan growth for both consumer and commercial banking. Versus the same quarter last year, the former was down 4% and the latter by 1%.

On the credit side for them, "Provision for credit losses in 3rd quarter 2024 included a modest decrease in the allowance for credit losses, reflecting lower allowances across most loan portfolios, partially offset by a higher allowance for credit card loans driven by an increase in balances."

Moving overseas, the Bank of Korea cut its base rate by 25 bps as fully anticipated to 3.25%. However, they hinted that it will be next year and not next month before we get another one. The Korean won is higher in response to the 'hawkish' cut. Also, their 2 yr yield is at a one month high. The Kospi was flat overnight and down 2.2% ytd with Samsung the main reason.

The UK said its economy grew by .2% m/o/m in August as expected with a rebound in manufacturing production offsetting modest growth in services, but retail was good. Construction was an add-on too to growth. Bottom line, modest growth in the UK but that certainly beats its German and French peers. Nothing market moving data here though.

4:00 a.m.: Fed Bank of Chicago President Goolsbee (Non-Voter) Podcast Appearance - Bloomberg Odd Lots;

9:45 a.m.: Fed Bank of Chicago President Goolsbee (Non-Voter) gives opening remarks before the 18th Annual Community Bankers Symposium, "Community Banking: Navigating a Change Landscape" hosted by the Federal Reserve Bank of Chicago, Chicago, IL (No

embargoed text. Livestream at: https://www.chicagofed.org/events/2024/annual-community-bankers-symposium-18th);

10:45 a.m.: Fed Bank of Dallas President Logan (Non-Voter) participates in panel before the Federal Home Loan Bank of Dallas Women in Financial Services Conference, Dallas, TX (No livestream. No text. Audience Q&A expected. No media Q&A);

1:10 p.m.: Fed Board Governor Bowman (Voter) speaks before the 18th Annual Community Bankers Symposium, "Community Banking: Navigating a Change Landscape” hosted by the Federal Reserve Bank of Chicago, Chicago, IL (Other details TBA. Livestream at:

https://www.chicagofed.org/events/2024/annual-community-bankers-symposium-18th)

Upside:

-AEHR +11% (earnings, guidance)

-ALLK +7.7% (top-line Phase 1 results of Intravenous AK006 in patients with CSU expected in early 1Q25)

-UBER +5.1% (lower following TSLA ‘We Robot’ event)

-FROG +4.0% (said to attract early takeover interest; not in talks with PE or advisors currently)

-WFC +3.2% (earnings, guidance)

-LYFT +2.7% (lower following TSLA ‘We Robot’ event)

-BLK +1.8% (earnings, guidance)

-JPM +1.6% (earnings, guidance)

-TGI +1.6% (strength following report company is reportedly considering strategic options including a sale)

-COHR +1.5% (appoints Sherri R. Luther as CFO, effective immediately)

-SGMT +1.5% (Phase2b FASCINATE-2 Clinical Trial of Denifanstat in Biopsy-Confirmed F2/F3 MASH in The Lancet Gastroenterology & Hepatology)

Downside:

-AOS -7.3% (reports prelim Q3, cuts FY guidance)

-TSLA -6.1% (weakness following ‘We Robot’ event)

-STLA -4.0% (names Doug Ostermann as new CFO; says customers are not absorbing increased demand of EVs)

-PSNY -3.7% (reports Q3 deliveries, guidance)

-ROCK -3.6% (cuts FY guidance)

-LSCC -3.1% (CFO resigns)

-HUM -3.0% (Star Ratings decline)

-PALT -2.7% (announces Judge Enters Final Judgment in Connection with Cisco Jury Verdict in Favor of Paltalk in Amount of Award)

-IDR -1.7% (entered Sales Agreement with Roth Capital to sell up to $15M of stock)

As of 8:28 a.m.:

As of 8:09 a.m. and their mini-graphs:

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

From JPMorgan:

US: Futures are mixed with Tech showing varied performance. TSLA is notably down -5.8% pre-market as the Robotaxi event failed to meet market expectations. Bond yields are higher and USD is lower; 2-, 5-, 10-yr yields are 2bp, 5bp, 10bp higher. Commodities are mixed with Oil lower, Base Metals higher, and Precious Metals mixed. Today’s macro focus will be banks earnings and PPI. Over the weekend, key macro catalysts will be China finance minister’s press conference on stimulus package.

and...

EQUITY AND MACRO NARRATIVE: Yesterday, stocks closed modestly lower amid hawkish CPI and remarks from Bostic: (i) CPI surprised to the upside, with YoY core CPI higher than prior month (Cre CPI: 3.3% YoY vs. 3.2% survey vs. 3.2% prior). While one CPI print cannot change the Fed’s narrative on a 25bp cut at the November FOMC, if we saw another hawkish NFP print (i.e., NFP prints higher MoM), that combination may lead to some discussion around slower Fed cutting cycle. Currently, OIS forwards sees 85% probability of a 25bp cut vs. 14% probability of no cut at the November Fed. (ii) Fed’s Bostic keeps the door open to skip the November meeting. “I am totally comfortable with skipping a meeting if the data suggests that's appropriate.” In addition, AMD AI event and TSLA Robotaxi both fell short of expectations. Overall, there were not many changes to the overall narrative, but recent data points to some hawkish risks from the Fed. Key focus today will be banks earnings and PPI. Below is the preview from Vivek Juneja.

I took a short trading rental in JPMorgan Chase  (JPM)  at $216.55.

Positive results (across the board), in my view, has been discounted in the recent share-price gain.

Goldman Sachs  (GS)  on Tesla  (TSLA) :

Tesla Inc. (TSLA): Initial thoughts on 'We, Robot' 10/10 event

11 October 2024 | 3:00AM EDT

We attended Tesla's 10/10 'We, Robot' event in LA, where Tesla unveiled its Cybercab (robotaxi) and Robovan, and showcased progress with Optimus. We think the company demonstrated very strong progress with the Optimus humanoid robot, and we think the Cybercab looked attractive. However, we believe the lack of data shared on Full Self Driving (FSD) performance, relatively limited details on the robotaxi business plan, and absence of a lower-cost consumer vehicle unveil may be disappointing for some market participants and lead the stock to pull back after the recent run (although Tesla may share more on these topics in the coming months/quarters in other forums). We'd expect Optimus to become a growing part of the investor discussion, and we see potential in the long term for Tesla in ADAS/AVs (with it potentially benefiting from a scale and cost structure advantage). While we believe reaching L4 in wide scale may take some time (e.g. full AV without a narrow geofence), in the next few years we think Tesla can reach highway eyes-off capability (e.g. L3) and we believe this could support growing FSD revenue. Please see our note for details.

* Yeah, it's the "Osborne Effect."

* In reality, the "more affordable" vehicle is not ready for prime time.

“Victory in our industry is spelled survival.”

- Steve Jobs

Bonus — Here are some great links:

Bears Head to Hibernation

It's Mag7 Again 

Gold Stocks Set to Break Out?

Breakout Trades During Earnings Season

Happy Anniversary, Bull Market

* Tesla's presentation last night was long on promises but short on details.

* Delivery of a low-cost prototype was vague, so were some other promises.

* Tesla's shares are trading down by more than -$13/share to $225 in the premarket.

* We put on a Tesla trading short rental two days ago, we remain short.

"I tend to be optimistic about time frames."

- Elon Musk

Tesla (TSLA) stock drops in premarket after Cybercab robotaxi reveal (cnbc.com)

From Musk/Tesla last night:

and

and

and

and

From two days ago:

More Tesla Shorting

I just added to my small Tesla (TSLA) short at $245.50.

Position: Short TSLA S

By Doug Kass Oct 9, 2024 10:39 AM EDT

I covered half of my Tesla  (TSLA)  short at around $232-33 yesterday.

From my friends at Miller Tabak (I am not in agreement with this view):

Thursday, October 10, 2024

Higher Yields Will Not Last

The current spike in yields, with the 10-year Treasury above 4%, is a near carbon-copy of last fall’s surge when the 10-year neared 5%. Then, worries over fiscal factors drove a temporary increase in term premiums, while strong growth raised concerns about the Fed keeping the Fed Funds rate very high indefinitely. Like then, the solid September economic data has raised doubts about upcoming FOMC rate cuts and even concerns that its recent 50 bps rate cut was a mistake. Once again, however, we do not expect higher yields to last. Once weaker data shifts markets’ focus away from renewed inflation concerns back to weaker growth, yields will again fall. We reiterate that the Fed will cut to 275-300 bps by early 2026 and that this will correspond to a 10-year yield around 320 bps.

The key question is whether recent data suggest that the Fed’s stopping point (a.k.a. neutral) has risen. This is far more important for yields than how fast the Fed cuts. Recent strong growth is, however, the result of short-term factors that do not affect where the Fed will end up. Consumption growth (more on this later) remains very strong and is both a response to lower rates and, more importantly, a response to falling inflation. Neither source affects the medium-term course of interest rates.

Figure 1: Core Services (red) versus Core goods (blue) CPI-Inflation

The September CPI-inflation data, with core-inflation at 3.7% (m/m, annualized), is high enough to bolster the concerns of those still worried about inflation. Unlike other hot readings over the past few years, this cannot be explained by shelter inflation, which was 2.7%. Some sectors, including medical and transportation services, saw bounce-backs after slower recent data. There is also the start of a trend that we have warned about with goods prices, ex-food and energy, rising by 2.1% annualized, only their second increase since May 2023. Since then, goods prices have exhibited a deflation while service inflation has run above 2%. These will both move closer to 2%, but we suspect that goods inflation may move up before service inflation comes down. If so, it will create temporarily higher inflation readings, followed by lower ones, not unlike what occurred in early 2024. The bigger picture on inflation remains highly encouraging. Our favorite measure of inflation expectations is the Atlanta Fed’s survey of businesses, because it samples the people who set prices. Businesses’ one-year ahead inflationary expectations were just 2.1% as of September.

Wolf Street howls about the prospects for a sticky inflation rate (I am in agreement with this view).

I was called to go out of town for a meeting last night.

My posts will be brief and less frequent until the early afternoon today.