Boockvar Sums Up the Week
From Peter Boockvar:
Positives
1)The November US manufacturing and services PMI rose to 55.3 from 54.1 and again expansion solely led by the services side of the economy. Services rose to 57 from 55 while manufacturing remains in contraction at 48.8 vs 48.5 in the month before. Much of the increase in confidence was "attributed to the prospect of lower interest rates, improved economic growth, and more supportive business policies from the new administration in 2025."
2)Initial jobless claims fell to 213k from 219k and that was 7k less than expected. The 4 week average fell to 218k from 222k.
3)Even with another uptick in mortgage rates, albeit slightly w/o/w to 6.90% from 6.86%, purchase apps rose 2% w/o/w and refi's were higher by 1.8% w/o/w after 7 weeks of declines.
4)The November NAHB home builder index rose 3 pts m/o/m to 46, better than the estimate of 42, though still below 50. The upside was mostly due to a jump in the Expectations component to 64 from 57. The Present Situation is still below 50, though barely at 49 vs 47 last month. Reflecting still the big challenge of affordability, Prospective Buyers Traffic was just 32 but up 3 pts from October. The NAHB is pointing to the election results as reason for the lift in builder confidence. “With the elections now in the rearview mirror, builders are expressing increasing confidence that Republicans gaining all the levers of power in Washington will result in significant regulatory relief for the industry that will lead to the construction of more homes and apartments.”
5)October existing home sales are still hovering around 30 yr lows but did rise to 3.96mm from 3.83mm. Months' supply was 4.2 from 4.3 in September and 4.2 in August. The median home price rose 4% y/o/y. First time buyers made up just 27% of transactions vs 26% in the two prior months and vs 28% in the same month last year.
6)In the September Treasury International Capital flow data, obviously pre-election, foreigners bought a net $77b of US notes and bonds BUT the breakdown of the buyers is key to differentiate. 'Official' central banks continue to sell and for a 5th straight month led by Japan, China and Hong Kong. The offset was from private foreign buyers but even here could very well be mostly hedge funds and other short term focused buyers, especially ahead of the election.
7)From Walmart: "Transaction counts and unit volumes were positive across each segment, and we continue to gain market share in the US, both in grocery and general merchandise. Households earning more than $100,000 made up 75% of our share gains. In the US, in-store volumes grew, curbside pickup grew faster and delivery sales grew even faster than that...We had almost no like-for-like inflation in the US this quarter. It was nice to see general merchandise grow low single digits in the US even as prices are deflated by over 4%. We currently have about 6,000 rollbacks in Walmart US across all categories. We're feeling some margin pressure from growth in GLP-1 drugs, so we're pleased to see general merchandise sales be positive."
8)From BJ's Wholesale: "Our business was once again fueled by robust traffic, unit volumes, and market share growth inside our clubs and at the gas pumps...Our perishables, grocery, and sundries division delivered over 4% of comp growth in the third quarter with broad based strength across all three divisions. Perishables led the growth, boosted by our strong showing in dairy, meat, and of course, produce. Our general merchandise and services division delivered approximately flat comps in the third quarter."
9)From The Gap: On their consumer, "We see and saw consistent results across our customer income cohorts in the third quarter. Our lowest income customers remain somewhat flat. And given that they're impacted by the warmer weather with less reason to update wardrobes based on seasonal changes. And on the flip side, we continue to see share gains from our middle and higher income cohorts. Those customers are responding to value, relevance of our assortments, certainly our style authority across our portfolio, but we do see strong responses to our value proposition from higher end consumers. When they're offered the right price and right style and right value equation, customers with income over $100k did grow in the quarter."
10)From TJX: They reported a 3% comp sales gain "which is at the high end of our plan and entirely driven by customer transactions. Once again, both our apparel and home categories saw comp sales increases this quarter."
11)From Williams-Sonoma: "Even in difficult environment, our initiatives continue to gain momentum and we are optimistic and confident about our business...From a cadence perspective, our trends across the quarter were choppy, reflecting the uncertain macroeconomic backdrop."
12)Nvidia, notwithstanding guidance and the supply/demand imbalance with new chip.
13)From Snowflake: "Bookings were strong in the quarter and we are seeing large deal volume increase."
14)From Palo Alto: "The market for cybersecurity continues to be robust and continues to grow faster than the overall technology market. Despite the acceleration of technology spend due to AI, cybersecurity continues to outpace technology spend."
15)From Viking Holdings: "We have already sold 70% of the capacity PCDs (Passenger Cruise Days) for our Core Products for 2025, with both volume and rates exceeding those for the 2024 season at the same point in time."
16)UK consumer confidence for November improved by 3 pts m/o/m according to GFK post release of the budget. They said, "There was evidence of nervousness in recent months. But we have moved past those events now."
17)The November CBI industrial orders number for the UK in November remained deeply negative at -19 but that is up 8 pts m/o/m and 6 pts better than expected. CBI said, "Output has underperformed expectations in recent months, with manufacturers pointing to uncertainty around the UK Budget, the US elections and recent political instability in Europe as among the factors leading customers to pause or cancel orders. Many firms still need to work through the implications of the Budget for their own plans for pay, hiring and investment, but it’s an encouraging sign that output volumes are expected to return to growth in the quarter ahead, with order books also showing some improvement this month."
18)In Japan, the November services PMI did tick back above 50 at 50.2 from 49.7 but manufacturing slipped to 49 from 49.2.
19)In Japan, they reported a 3.1% rise y/o/y in October exports which was above the estimate of up 1%. It was a rise in exports to Asia that drove the gain as they rose almost 8%. Exports to the US fell 6.2% and to Europe fell by 11.3%.
20)India's PMI remained strong, rising to 59.5 from 59.1 with services at 59.2 and manufacturing at 57.3.
Negatives
1)Continuing claims rose by 36k w/o/w to 1.908mm, the highest since November 2021.
2)The final read of the UoM November consumer confidence index was 71.8, down from the initial print of 73 but up modestly from the 70.5 seen in October pre-election. The first November survey took place before the election and today obviously after. One yr inflation expectations were 2.6%, holding steady with the preliminary figure but down one tenth from October. That's the least since December 2020. The 5-10 yr guess though ticked up to 3.2% from 3% in October and 3.1% initially early in November. That matches the highest level since June 2008. No surprise based on the outcome, the confidence of Democrats fell to 81.3 from 91.4 while they jumped for Republicans to 69.1 from 53.6.
3)Single family starts dropped by 72k m/o/m to 970k which is around where the 6 month average is of 976k vs the 1.023mm 12 month average. This is below the 2021 levels when starts were consistently above 1mm, averaging 1.13mm just as we need more supply right now. Permits for single family construction was little changed at 968k vs 963k last month and vs 967k in the month before. Multi family starts were 341k, up 30k m/o/m but after falling by 62k in September. This was between 500-600k in 2022. Permits fell to 448k from 462k and that is just a few thousand from the lowest since 2018 not including Covid.
4)Cass Freight's October transportation report said shipments m/o/m were about unchanged but down 2.4% y/o/y. They said, "In a sign that private fleet growth continues to affect for-hire demand, the ongoing softness in shipments comes as Class 8 tractor sales rebounded from supply constraints in Q2. Although goods demand growth is driving broad freight volume growth, as can be seen in intermodal, imports, and freight GDP, it is still not reaching the for-hire market."
5)In stark contrast to the big upside in the NY manufacturing survey, the November Philly index fell to -5.5 from +10.3. The KC region was -2 vs -4.
6)From Target: "we saw healthy growth in traffic throughout the quarter, even as we encountered some macro headwinds that caused our EPS to be lower than expected...This growth in traffic was mostly offset by a decline in average ticket as consumers continue to spend cautiously, most notably in discretionary categories." On the overall consumer, "we're seeing many of the same themes that have defined the environment for some time. Consumers tell us their budgets remain stretched and they're shopping carefully, as they work to overcome the cumulative impact of multiple years of price inflation. They're becoming increasingly resourceful in their shopping behaviors, waiting to buy until the last moment of need, focusing on deals, and then stocking up when they find them. As a result, we're seeing a stronger response to promotions than we've seen in some time. Yet, consumers are still willing to spend when they find the right combination of newness and value, and they're continuing to celebrate important seasonal moments throughout the year."
7)From Ross Stores: "we are disappointed with our third quarter sales results as business slowed from the solid gains we reported in the first half of 2024. Although our low to moderate income customers continue to face persistently high costs on necessities, pressuring the discretionary spending, we believe we should have better executed some of our merchandising initiative." They also blamed the hurricanes and "unseasonably warm temperatures" which impacted winter wear.
8)From Lowe's: "When it comes to the macro environment, this remains a challenging home improvement market. While interest rates are beginning to drop, consumers continue to face affordability challenges as both inflation and interest rates are putting pressures on their wallet. Mortgage rates also remain stubbornly high and there's still a meaningful gap between current mortgage rates to purchase a home and the homeowner's existing rates, with over half of current rates below 4%. Combined with the lack of available homes for sale, housing turnover remains near 30 year lows. Looking ahead, it's unclear when lower rates and improved consumer sentiment will translate into improved home improvement demand."
9)From Jack in the Box: They mentioned that "We battled through a tough environment that brought top line headwinds to the industry." Comps fell 2.1% and "This result included a decrease in transactions and negative mix partially offset by a 4.8% increase in price."
10)From Valvoline: "We're assuming with a more challenging overall environment and some continuing challenges in the consumer environment that we'll likely not be as required to be able to take pricing at the same level that we have in the past, especially given the historical inflation that we've seen in pricing."
11)From La-Z-Boy: "We were pleased to deliver a 2nd consecutive quarter of sales growth across our business despite the continued challenging macroeconomic trends...Furniture and home furnishings related spending continues to be soft, but we are outperforming the industry in a sustainable manner."
12)Old Dominion Freight announced a 4.9% "general rate increase" effective December 2nd. They said, "The general rate increase is based on the Company's economic forecast and expectations for the operating environment. We must continue enhancing our high quality service network and systems to meet and exceed our customers' expectations and deliver on our promises."
13)The Eurozone November manufacturing and services PMI fell to 48.1 from 50 with the services component in particular falling to 49.2 from 51.6 and below the estimate of no change. Manufacturing remained weak at 45.2 vs 46 in October and also vs a forecast of no change. S&P Global was not kind with its words saying "Things could hardly have turned out much worse. The Eurozone's manufacturing sector is sinking deeper into recession and now the services sector is starting to struggle after two months of marginal growth. It is no surprise really, given the political mess in the biggest Eurozone economies lately - France's government is on shaky ground, and Germany's heading for early elections. Throw in the election of Donald Trump as US president, and it is no wonder the economy is facing challenges. Businesses are just navigating by sight."
14)The UK PMI was also below expectations with manufacturing falling to 48.6 from 49.9 and services down to exactly 50 from 52. S&P Global is blaming in part the "thumbs down" to the new government's budget which includes a bunch of tax increases. On the pricing side, "inflation pressures have moderated further, with selling prices rising at the slowest rate seen this side of the pandemic. However, still elevated rates of wage related price and cost growth are being recorded in the service sector, potentially limiting scope for rate cuts among the more hawkish policymakers."
15)UK October retail sales fell .9% m/o/m, about double the estimate of down .4%. The ONS said "The fall was driven by a notably poor month for clothing stores, but retailers across the board reported consumers held back on spending ahead of the Budget."
16)The UK headline CPI gain was 2.3% y/o/y vs 1.7% in the month before and one tenth above the estimate. The core rate was higher by 3.3% y/o/y, two tenths more than estimated and up one tenth m/o/m. Services inflation continues to be the issue, rising by 5% y/o/y. PPI, both for input and output charges, were as expected including the revisions.
17)French business confidence in November fell 1 pt m/o/m to the lowest since July. After dropping by 6 pts last month, manufacturing confidence lifted back by 4 pts. That gain was offset by a 2 pt drop in services and a 1 pt fall in retail confidence and construction. Employment rose 2 pts after falling by a like amount in October.
18)Australia's composite PMI fell back below 50 at 49.4 from 50.2 with both components under 50.
19)In Japan's October CPI the headline rate fell to 2.3% y/o/y from 2.5% as expected due to energy subsidies, though remaining above 2%. The core/core rate was higher by 2.3% y/o/y too, up from 2.1% in September and one tenth above the estimate.
20)Someone paid $6.2mm, including a $1mm auction fee, to buy a banana with duct tape?
BY Doug Kass · Nov 22, 2024, 4:45 PM EST
