"Just one more thing."

- Lt Columbo

Boeing  (BA)  has made a new union proposal - BA shares are trading +$4 from the close.

Closing Breadth

S&P 500 Sectors

% Movers

Nasdaq 100 Heat Map

As of 4:33 p.m.:

* Another active trading sardines today, not an eating sardines day.

* Great for opportunistic traders, not so great for the buy-and-hold crowd.

* My gut is that we have a rally late in the day (as it's month end)... but that's just a guess.

At 3 p.m. the S&P Index is -100 handles — equities were down "from flagpole to that's all." (Racing Term!)

Over the last four days I featured the deteriorating breadth — this provided a good tip off to today's weakness: 

But on a more positive note, the ratio of 3-1 (or so) decliners over advancers is a lot better than one would expect considering the schmeissing of the Indices.  (RSP) 's modest decline suggests that the top tier (big-cap tech) is taking the brunt of the damage:

*  (SPY)  -1.60%

*  (QQQ)  -2.32%

*  (IWM)  -1.02%

*  (RSP)  -0.68%

Another positive is the developing oversold as tomorrow we should have a deeper oversold from the Oscillator.

Today's "things":

* I reduced my  (AAPL)  short (for a profit) into the EPS release after the close.

* Back buying  (MSOS)  at $6.61 on the improving reward vs. risk.

* Covered some  (KO)  short after its recent fall at $65.76.

* Added to  (BA)  at an average price of $149.65.

* Covered my short  (DJT)  calls for a profit (the stock is -$17 in the last two trading sessions).

* Covered some  (TSLA)  at an average of $252.50.

Wolf Street howls about sticky inflation (one half of the slugflation equation!)

I have a research call with a company between 2 p.m. and 3 p.m.

Radio silence.

Adding to Boeing  (BA)  at $149.75.

Run, don't walk to watch Guy, Danny, Carter and LY from SoFi on MRKT CALL.

Let's go to the videotapes. 

Tech Earnings Spook Stocks 

Investment short Coca-Cola  (KO)  is down by about $7/share from its high.

I am moving from medium sized to small sized and taking some profits as the reward vs. risk to this short has deteriorated with the lower share price.

Yesterday Jason, Carley, Sarge and myself participated in a StreetPro Quarterly Meeting.

Here you go (with a concise summary and video of the entire meeting)! 

Recapping and Replaying TheStreet Pro's Live Quarterly Meeting - TheStreet Pro

I hope it is value-added for all of you.

* After the recent fall from grace...

Back buying  (MSOS)  at $6.61.

Moved from medium-sized to large-sized.

Both report after the close.

I am taking down my Apple  (AAPL)  short to very small now ($227.55) and hopefully will have an opportunity to build up the short into a good number.

As to Amazon  (AMZN) , I remain small long and I am sitting tight with the name. Though the shares are -$6/share I have not added (as my cost basis is much lower).

As I mentioned this morning, U.K. yields are blowing out. We are having smaller version of same thing here.

It will be be interesting to see if there is follow through.

As I mentioned in yesterday's StreetPro interview, the whole world cannot spend beyond its means and not enough cash to finance could drive yields even higher.

- New York Stock Exchange volume is 23% above its one-month average;

- Nasdaq volume is 10% above its one-month average

A short, homebuilder Green Brick Partners,  (GRBK)  spit the bit after the close yesterday - reporting lower than expected top and bottom line.

The shares are -$7 or -18% and I just covered my short for a nice profit at $69.50.

Here is the webcast: Green Brick Partners, Inc. Third Quarter 2024 Earnings Call - Events Platform - Q4

From Peter Boockvar:

Inflation, income, spending and jobs data, the quick rundown all here

The PCE inflation stats for September were about as expected as it typically is since it comes after CPI and PPI. The headline gain was .2% m/o/m and the core rate was higher by .3% (and August was revised up by one tenth to a .2% gain). The y/o/y increases were 2.1% and 2.7% y/o/y vs 2.3% and 2.7% in the month before. Lower energy prices kept a lid on the top line, partly offset by another gain in food. Also, services inflation continued on, offsetting the deflation in goods prices.

Income growth was as forecasted, up by .3% while spending was up .5% m/o/m, one tenth above expectations. Spending growth was evenly split between goods and services. Combining the two saw the savings rate drop to 4.6% which is the lowest since December 2023. So, we saw an upward lift in the savings rate in the benchmark revisions but it’s falling right back down again.

Digging deeper into the income side was the Q3 Employment Cost Index which rose .8% q/o/q vs the estimate of .9%. It was up 3.9% y/o/y. Specifically private sector wages and salaries rose .8% q/o/q and 3.8% y/o/y which is further moderation but in part due to tougher comps. They rose 4.5% in Q3 2023 to highlight. In Q3 2019, private sector wages and salaries grew by 3% y/o/y, for perspective.

Bottom line on this data, no real surprise as everything was about as expected. Core inflation is remaining persistent, yes in part due to the lag in rent calculation but it never rose as much as it did in reality. The savings rate drop is in part due to challenges for lower income consumers but also records high in stocks which usually leads to less savings for upper income people.

The US 10 yr yield continues to tease around the 4.30% level which I’ve pointed out is key technically.

Core PCE y/o/y

Savings Rate

On the jobs side, initial claims fell to 216k, 14k below expectations and down from 228k in the week before. I’m not sure now what impact the recovery from the hurricanes are having in certain states. Smoothing it out, the 4 week average fell to 237k from 239k. Still elevated, though off the highest level in 3 years, continuing claims fell to 1.862mm from 1.888mm.

No change in trend where the rate of firing’s as measured here is muted but hiring has slowed.

The Challenger Job Cuts data for October came out today too and while they fell 24% sequentially, they were up 51% y/o/y. They said “Job openings have fallen and hiring is pretty flat at the moment. Companies appear to be in a holding pattern as we await election results and the potential regulatory and market environment that follows.”

The tech sector continues to lead the job cuts this year, though less so than last year.

The main reason for the job cuts? “Companies primarily cite ‘Cost Cutting’ “ for the reason for cuts this year.

I have covered my  (DJT)  calls short for a profit just now.

From Peter Boockvar:

Do debts, deficits matter in the UK too?/BoJ preps for another hike/CapEx spend now matters and other good earnings comments

Do debts and deficits matter now we all continue to debate? Looking at the UK gilt market in light of the UK government's new budget and the need for more debt issuance is highlighting that it is not just a question for the US government but one for others too. The 2 yr gilt yield is up for the 9th day in a row to 4.40% which is the highest since June. What is most interesting about that move is that part of the yield curve should be tied to expectations for BoE policy, not as much market driven as the long end is but maybe too much supply finally matters regardless. The 10 yr yield is up for the 8th day in 9, by 6 bps to 4.41% and that is the highest level in one year.

I will argue again, we are in a bond bear market that didn't just end in a few years after a 40 yr bull run. Debts and deficits now matter for those profligate governments, gold clearly reflects that, and we still prefer short duration bonds to longer duration bonds.

2 yr Gilt Yield

10 yr Gilt Yield

Speaking of profligate governments and an easy central bank, the BoJ held policy unchanged as fully expected but it sounded like Governor Ueda was greasing the wheels again for another rate increase. He said, "When we look at the latest Tokyo CPI data, there are signs the pass-through of rising wages on services prices is broadening. We'd like to scrutinize whether such broadening will happen at the nationwide level...Looking at domestic data, wages and prices are moving in line with our forecast. As for downside risks to the US and overseas economies, we're seeing clouds clear a bit."

When will they hike rates again? "As for the timing of the next rate hike, we have no preset idea. We will scrutinize data available at the time at each policy meeting, and update our view on the economy and outlook, in deciding policy." So the economic comments hinted that they are getting ready again while this last comment was more vague.

The market's response? JGB yields are actually little changed but the yen is stronger and the Nikkei fell .50%. Don't stop watching what the BoJ will do because it influences bond markets around the world and they continue to trim QE as other central banks continue to shrink their balance sheets. The liquidity spigot is slowing.

Getting to earnings I will start with tech. Again, we see two things. Firstly, the AI spend is sucking up most of the CapEx and spend on tech elsewhere is still sluggish from customers. Secondly, as first seen with Q2 earnings, all that CapEx is now being questioned as to when it will pay off.

From CDW, a major distributor of everything technology (hardware, software, cloud computing, mobile, network communication, etc...) with about $20b in revenue and 250,000 customers and whose stock fell 11% yesterday:

"While demand for cloud solutions remained strong and we continued to see a pickup in client device growth, hardware solutions remained under pressure and the firmer footing we anticipated for our corporate channel did not materialize."

"the macro and IT spending environment remained challenging. Technology complexity combined with persistent economic and geopolitical uncertainty has led to large project delays and further extension of sales cycles. Laid on top was the uncertainty around the outcome of the US election, which has dampened not only government spending but also other public sector end markets, as well as spend from commercial customers."

Also, "this limited demand environment has heightened competition and increased pricing intensity across all end markets."

So basically, anything related to AI spend and cloud is doing great and everything else not so much.

From Microsoft, their cloud drove most of the growth and their AI business "is on track to surpass an annual revenue run rate of $10 billion next quarter, which will make it the fastest business in our history to reach this milestone."

Their personal computing business saw 2% y/o/y revenue growth not including the Activision acquisition.

"Search and news advertising revenue ex-TAC increased 18% and 19% in constant currency."

"Capital expenditures including finance leases were $20 billion in line with expectations...Roughly half of our cloud and AI related spend continues to be for long lived assets that will support monetization over the next 15 years and beyond. The remaining cloud and AI spend is primarily for servers both CPUs and GPUs to serve customers based on demand signals." As a result of all this spend, free cash flow fell 7% y/o/y and likely why the stock is down.

Meta saw 20% y/o/y revenue growth, an incredible pace off a big base and with 3.2 billion people "using at least one of our family of apps on a daily basis in September."

"Capital expenditures, including principal payments on finance leases were $9.2 billion, driven by investments in servers, data centers, and network infrastructure." And here is their guidance, "We anticipate our full year 2024 capital expenditures will be in the range of $38 billion to $40 billion, updated from our prior range of $37 billion to $40 billion. We continue to expect significant capital expenditure growth in 2025." And also likely why its stock is lower.

Of note with this, "along with the back-end weighted nature of our 2024 CapEx, we expect a significant acceleration in infrastructure expense growth next year, as we recognize higher growth in depreciation and operating expenses of our expanded infrastructure fleet."

"On a user geography basis, ad revenue growth was strongest in Rest of World and Europe at 23% and 21% respectively. Asia-Pacific grew 18% and North America grew 16%. On an advertiser geography basis, total revenue was strongest in North America and Europe at 21%. Rest of World was up 17% while Asia-Pacific was the slowest growing region at 15%, decelerating from our 2nd quarter growth rate of 28% due mainly to lapping a period of stronger demand from China based advertisers." I assume they are referring to Shein and Temu.

From Brinker's, the owner of Chili's and Maggiano's, and whose stock was up 7% yesterday:

Chili's saw a comp gain of 14.1% "driven by price of 6.8%, positive mix of .8% and positive traffic of 6.5% with traffic improving sequentially throughout the quarter." Maggiano's saw a 4.2% comp gain with 10.8% coming from price, a 2.1% positive mix but an 8.7% drop in traffic. So that chain is a drag.

And why robust results from Chili's? Value on the menu. "Our 3 for Me value offer clearly resonates with guests who are looking for high quality and abundance that may not be the lowest price, but it is a very reasonable price...Despite the industry's challenged consumer and our significant traffic lifts being driven by the Big Smasher campaign, we've only seen a 1% increase in 3 for Me mix since last quarter and nearly half of those guests are still choosing the more premium 3 for Me tiers at $14.99 and $16.99. We will continue with the Big Smasher campaign into Q3, a period we know consumers seek out value coming off their holiday spend." https://www.chilis.com/menu/big-mouth-burgers/big-smasher-burger

These good casual dining results follow Texas Roadhouse and Cheesecake Factory as there seems to be a middle ground that's doing ok between quick serve which is challenged by the lower income consumer, and the higher end, as seen from Darden with Capital Grille, Ruth's Chris, etc... that is seeing slowing too as the aspirational customer trims back to the middle. 

Shake Shack too had a good day, rallying by 8%, also falling into that middle ground demographically, as "we delivered 4.4% same Shack sales growth with positive traffic. A direct result of our sales driven strategies on our consistent differentiated premium positioning, which has allowed us to continue to outperform even in an uncertain macro environment."

"Traffic grew 30 bps and check rose approximately 4% with approximately 6% menu price...Items per check was slightly positive in the quarter." Between Brinker and Shake Shack, you can see how high the out of home food prices are rising.

From Starbucks:

With respect to the 6% drop in US comps, it was "driven by a 10% decline in comparable transactions, partially offset by a 4% increase in average ticket, mainly from pricing. Traffic declined across all channels and day parts, with the most pronounced decline in the afternoon day part. In addition to the continued decline of non-Starbucks Rewards member visits, frequency also slowed across all SR member deciles, in comparison to prior year and ultimately impacted spend."

Their China business saw a 14% comp drop, of which 8% was a decline in average ticket and 6% via transactions, "weighed down by intensified competition and a soft macro environment that impacted consumer spending."

From EBAY whose stock is down about 10% this morning:

Gross merchandise volume rose 1% and revenue up by 3%. Their collectibles business is a standout, particularly in sports.

"We continue to face a dynamic macro and consumer spending environment in the quarter. And as we noted on the last earnings call, political news, sporting events and elevated travel in July influenced consumer behavior." They also talked about softness in the UK and Germany.

We know travel has been an economic bright spot, as we saw with Royal Caribbean. From Bookings Holdings:

Revenue grew by 9% y/o/y. "From a regional perspective, we observed an improvement in our room night growth in Europe in the third quarter, which was the primary driver of the sequential increase in our global room night growth. In Asia, we continue to perform well with another quarter of double digit growth...In the US, we see relatively stable levels of growth in our business so far this year, which we think continues to outpace the broader US accommodation industry." They also saw strength in their flights business.

As for guidance, "As we look ahead to the fourth quarter, we expect to continue to see healthy levels of room night growth as demand for travel remains resilient."

Let's talk Vegas, and other casino spots including China. From MGM Resorts whose stock is down likely due to a notable fall in table game drop almost solely due to baccarat:

"we saw record ADRs in Las Vegas and record occupancy at our regional resorts."

"In the 4th quarter here in Las Vegas, we're encouraged by the stability of demand that we're seeing. We're also gearing up for year two of F1, which while not as large as last year's event, still brings significant economics to MGM during what has historically been one of the slowest weekends of the year, no more."

"In Macau, MGM China achieved a record breaking 3rd quarter with net revenues increasing 14% y/o/y."

As for how the current quarter has started out, "For October, our occupancy here in Las Vegas will be 97%. Revenues are steady and still seeing the nice growth and slot handle. And our regional property is actually having a pretty strong October."

From Martin Marietta Materials, a maker of aggregates for the construction industry, like gravel, crushed stone, concrete, cement and asphalt, and who is benefiting from government spending, the Chips Act and the IRA and data center buildout:

"Looking ahead to 2025 and beyond, we expect to benefit from record levels of federal and state investments in highways, streets and bridges. Additionally, reshoring and the build out of artificial intelligence infrastructure should provide steady growth in these aggregates-intensive end markets for years to come."

Global container rates were little changed w/o/w after a run of declines.

China's October manufacturing and non-manufacturing composite index rose a touch to 50.8 from 50.4 in September with manufacturing lifting to 50.1 from 49.9 while the latter rose to 50.2 from 50. It will take a few more months to see the policy initiatives recently announced grab some traction.

If interested in the response to the residential real estate incentives to try to put a floor under housing, this was a short video from CNBC, https://www.cnbc.com/video/2024/10/30/after-years-of-slump-chinas-housing-market-now-shows-signs-of-life.html

Of note in Europe, October CPI rose 2% y/o/y, a touch above the estimate of 1.9% and up from 1.7% last month. The core rate held at 2.7%, also one tenth above expectations. Services inflation is still pretty persistent, rising 3.9% y/o/y while goods prices are muted, rising .5% y/o/y. Lower energy prices continue to keep a lid on the headline, down by 4.6% y/o/y but food/alcohol/tobacco prices were higher by 2.9% y/o/y.

I think the ECB is getting too cute here with the continued rate cuts without really allowing any time to see how things play out. The 5 yr 5 yr euro inflation swap is unchanged in response and European yields are up a touch, with gilt yields up the most.

Lagarde spoke today in an interview and said with regards to inflation, "The objective is in sight, but I am not going to tell you that inflation is under control...We also know that inflation will rise in the coming months, simply because of base effects...I want to see that 2% target achieved in a sustainable way. Absent a major shock, that will be sometime in 2025."

Upside:

-ROOT +90% (earnings; announces Successful Refinancing of Term Loan Facility with BlackRock)

-ATEC +28% (earnings, guidance)

-TNON +24% (initial clinical cases successfully completed with new Catamaran SE SI Joint Fusion System)

-RELY +23% (earnings, guidance)

-CVNA +18% (earnings, guidance)

-JAKK +18% (earnings)

-CFLT +16% (earnings, guidance)

-PLBY +16% (announces Strategic Partnership with Byborg Enterprises SA, which will purchase $22.4M of Playboy shares

-RBLX +15% (earnings, guidance)

-TWLO +15% (earnings, guidance)

-NVST +14% (earnings, guidance)

-NXT +14% (earnings, guidance)

-PALI +14% (announces Data from 2 Ex Vivo Translational Studies of PALI-2108 for the Treatment of Ulcerative Colitis)

-ORN +13% (earnings)

-LMND +12% (earnings, guidance)

-SFM +12% (earnings, guidance)

-TDOC +10% (earnings, guidance)

-DAWN +9.9% (earnings)

-IDCC +8.4% (earnings, guidance)

-MCW +6.8% (earnings, guidance)

-ETSY +6.4% (earnings, guidance)

-IP +6.4% (earnings, guidance; confirms decision to review strategic options for its global cellulose fibers (GCF) business)

-PAYC +6.3% (earnings, guidance)

-BKNG +6.1% (earnings, guidance)

-TK +5.6% (earnings)

-VAL +5.5% (earnings)

-SWI +5.2% (earnings, guidance)

-ITRI +4.9% (earnings, guidance)

-CERS +4.7% (earnings, guidance)

-RIG +4.3% (earnings)

-PHIN +3.9% (earnings, guidance)

-ALL +3.5% (earnings)

-DNB +3.5% (earnings, guidance)

-HLF +3.5% (earnings, guidance)

-AMSC +3.3% (earnings, guidance)

-LAB +3.2% (earnings, guidance)

-BGC +2.4% (earnings, guidance)

-SILC +2.3% (earnings, guidance)

-BDC +2.1% (earnings, guidance)

-MDXG +2.0% (earnings, guidance)

Downside:

-OPI -36% (earnings)

-EL -23% (earnings, guidance)

-CALC -20% (prices 2.72M shares at $3.75/share for gross proceeds $10.2M)

-ROKU -14% (earnings, guidance)

-ACHC -13% (earnings, guidance)

-AUR -13% (earnings)

-BNGO -11% (files to sell 9.88M shares at $0.31/shr in $3M registered direct offering priced ATM)

-CORT -11% (earnings, guidance)

-HOOD -11% (earnings, guidance)

-MPWR -11% (earnings, guidance)

-UBER -9.4% (earnings, guidance)

-ALGT -8.7% (earnings, guidance)

-OLED -8.3% (earnings, guidance)

-CWH -7.7% (prices 14.6M shares at $20.50/share)

-WSC -6.7% (earnings, guidance)

-STEM -6.5% (earnings, guidance)

-EBAY -5.9% (earnings, guidance)

-NOVA -5.4% (earnings, guidance)

-FIP -4.9% (earnings, guidance)

-RIOT -4.6% (earnings)

-MGM -4.4% (earnings)

-NSIT -4.4% (earnings, guidance)

-MET -4.2% (earnings)

-ETN -3.8% (earnings, guidance)

-ALTR -3.6% (confirms to be acquired by Siemens at $113/shr in $10.6B all cash deal; reports earnings)

-APLD -3.5% (announces Upsize and Pricing of $375M of Convertible Notes Offering)

-MSFT -3.2% (earnings, guidance)

-PH -3.2% (earnings, guidance)

-TWI -2.7% (earnings, guidance)

-SIMO -2.6% (earnings, guidance)

-ALNY -2.3% (earnings, guidance)

-COIN -2.3% (earnings, guidance)

-META -2.0% (earnings, guidance)

Cattle prices near an all-time high as slugflation lies ahead:

JeffI

For those that aren’t so short sighted to look quarter to quarter (regarding capex) these mega large caps are building their growth for the future while still maintaining their current profit growth. The potential future returns from these investments may significantly accelerate earnings and share price. After all- It is called investing.

And- The new upstart competitors don’t have the profits to fund their expansion requiring continual capital raises- a major disadvantage.

Dougie Kass

I have written a series (nearly forty columns) on "Tales From Nvidia."

My 40 or so columns on AI in my Diary have have been filled with skepticism and analysis.

I don't believe I have been short sighted:

(1) Kakashii on X: "Super Micro Computer is NVIDIA's third-largest customer. the third-largest customer accounted for 11% of Nvidia overall revenue in Q2. https://t.co/nPVFVYjjoq" / X

Rather, I believe I am being long sighted.

You will agree that I am one of the very few expressing the negatives in such depth and with such frequency.

The fools on FIN TV who have done no serious work on the subject - many of which are options traders, floor traders,TV personalities and asset gatherers are generally seeking to hawk their own services or seeking to improve their personal brand. They give confident, instant, superficial, uninformed and, generally, non valued-added observations which are not worth the paper they are written on nor on the tape they are recorded on and archived on the cnbc websites.

Yesterday's instant analysis of  (META)  and  (MSFT)  were excellent examples where pundits talk out of their ass before listening to the conference calls (which highlighted some of my concerns) and not even reading the entirety of the earnings release.

Stated simply, most are entertainers whose investment recomendations are often brutally wrong - sending retail lemmings off of the investment cliff.

They don't memorialize their recommenations and rarely take ownership of their investment boners - rather preferring to highlight their "winners."

The sell-side analysts provide interesting analysis but are universally bullish and rarely bring up the AI contrary. Some are indentured servants as they seek company management access.

I didn't write the forty odd columns to be contrarian - they are very real. I offer these concerns for the purpose of making interested parties think.

I am always in doubt and often wrong.

I don't, as I repeatedly write, know the timing when my concerns will filter in the income statements and into the stock prices. (However, the near $30 reversal in  (MSFT)  and the weakness in others might be a foreshadowing of the future - which may not be too far away).

I will have another column out this morning.

While the potential future returns from these large cap AI investments may be substantial and EPS may accelerate mightily and share prices might ever rise... they might not as the benefits of AI may be very overstated especially within the context of today's valuations and expectations.

* Represents a core reason for my cautious market view...

Fascinating too.

Big tech all talk a big game re capex, and the brinksmanship around this stuff, but they are not actually spending the money now. I wonder if they are all saying one thing, but starting to do another?

Nobody wants to be the first to fess up, but watch what they do, not what they say:

Yet while user metrics are easy to fudge, one place where  (META)  missed again was capex, which in Q3 rose to $9.2 billion from $8.2 billion in Q2, and $6.8 billion a year ago, far below consensus of $11.0 billion, and another strong hint that spending on all those H100 or whatever Nvidia  (NVDA)  chips is starting to cool despite the company's always cheerful guidance.

Bottom Line

META's capex has missed bigly for the second quarter in a row, and instead of investing in H100s or whatever, the company is instead aggressively buying back stock to push its price higher (and perhaps has little faith in the AI tech which it is supposed to be spending a ton of cash on). Either that, or somehow META will spend a record $13 billion — give or take — on capex in Q4.

Post Script

See Bloomberg article below.

As I write this, META's shares are getting hit on the AI spending and losses it is causing. This is what will stem the tide eventually for all of them, when they are no longer getting away with it. Just like it did for their Meta Verse spending too.

It won't be any different for the other guys. Markets can quickly go from rewarding them to penalizing them, as they should.

From Bloomberg:

Meta Warns of Worsening AI Losses After Sales Narrowly Beat

“Watch your thoughts; they become words. Watch your words; they become actions. Watch your actions; they become habits. Watch your habits; they become character. Watch your character; it becomes your destiny.”

- Lao Tzu

Bonus — Here are some great links:

Best Rolling Three Months

Will Utilities Continue Their Strength?

Gold Reaches a High, What Is Left?

The Market's Future Is Now Uncertain

Wolf Street howls about "drunken sailors."

Yesterday morning I warned that the outsized volume in Trump Media  (DJT)  might mark a panicky top:

During the trading session, DJT's shares fell by -$14.

This morning the shares are down by another -$3.

The S&P Short Range Oscillator moved towards a deeper oversold — at -3.63%

vs. -2.32%.