As of 4:16 p.m.:

S&P 500 Sector Performance

 NASD Advance-Decline Ratio vs. SPY

Closing Volume

- NYSE volume 10% below its one-month average.

- NASDAQ volume 7% above its one-month average.

Breadth

S&P 500 Sector ETFs

% Movers

Nasdaq 100 Heat Map

Wolf Street howls about rising auto incentives.

* Another day of steady gains.

* But poor breadth for the second day in a row — a continuing divergence.

At 2:15 p.m. S&P cash was +27 handles.

Here are today's "Things"

* I added to my Index short call positions.

* I shorted WMT at $94.01.

* I shorted HOOD at $39.85.

* I shorted AAPL at $243.79.

* I shorted TSLA at $352.02.

I have followed Walmart WMT for decades and I have never been short the name — until now.

Walmart is one of the most efficient retailers extant.

The company's "boxes" are very productive but the retailer's capacity is constrained as expansion opportunities are more limited.

Walmart's stores produce annual sales growth of only about 4%-5%. Profits are projected to expand by +7% to +8%.

Trading at 38x projected fiscal 2025 EPS and at 35x next year's estimate, the shares are quite richly priced.

I recently began to short WMT.

I added at $94 this afternoon.

Boeing BA is up by nearly five dollars, to a multi-week high of $159.44.

Yesterday I updated the pricing of Ligado bonds (they were trading at $34 vs. $15 cost basis of a few months ago) — my potential homerun investment.

Today the bonds are up by another +$3 to over $37!

I have added Robinhood HOOD to my financial services short list at $39.80 just now.

Trading within pennies of its 52-week high (and well off of its $10 low), most investors now fully appreciate the brokerage's successful transformation from a conduit for YOLO (and 0DTE option)trades to a more traditional asset gatherer.

Nonetheless, with an equity capitalization at nearly 1/5 of Goldman Sachs GS (I have been adding to this short) the shares seem overvalued.

More to come.

Tis another day of rising bond yields, narrow market breadth, low volume and weakness in the junior averages (IWM and RSP were down yesterday in a sea of green, RSP again lower today).

Waiting for a correction has been like, well... Waiting for Godot.

Meanwhile in the world of the giants, META and AAPL (been adding to my short today) appear to be rolling over a bit late in the morning session.

XLF

BAC

C

JPM

WFC

GS

MS

SCHW

AXP

BX

APO

KKR

From Peter Boockvar:

The November ISM services index fell to 52.1 from 56 and that was well below the estimate of 55.7. it’s also a 3 month low. New orders declined by 3.7 pts to 53.7 and backlogs were down to 47.1 from 47.7. Inventories plummeted to 45.9 from 57.2. With the jobs data this week, the employment component dropped to 51.5 from 53, and thus a touch above the breakeven of 50. Export orders, which only some service businesses have, fell under 50 for the first time since October at 49.6. Supplier deliveries dropped by almost 7 pts to back below 50 at 49.5 which actually implies shorter lead times which is a good thing. Prices paid were little changed at 58.2 which is just above the 6 month average of 57.7. Of the 18 industries, 14 paid higher prices vs 15 in October and 12 in September.

In terms of industry breadth, 14 of 18 surveyed saw growth, the same pace seen in October. Three had a contraction with ‘real estate, rental & leasing’ one of them, not surprisingly.

Of note on employment, just 5 saw growth, matching the least seen this year. Some respondent comments on the employment side, “Actively filling open positions” and “Hiring freeze in place; not backfilling positions as people retire or leave the company.”

With backlogs, “We are able to fulfill our orders with current warehouse stock” and “ Capacity meeting backlog; slower future demand.”

The bottom line from the ISM, “Generally, respondents’ comments were neutral to positive, and both positive and negative impacts were attributed to seasonality. Not surprisingly, election ramifications and tariffs were mentioned often, with cautionary outlooks related to the potential impact on respondents’ specific industries.”

Tariffs by the way were noted throughout many of the respondent comments and I will say, if the tariffs we eventually get are going to be scattershot due to the desire to raise money, rather than strategic and with an industry purpose, we are just not priced for that, either economically nor market wise:

“Federal Reserve interest rate cuts have not had the desired effect on mortgage rates yet. With election results mostly determined, expansion of residential construction is anticipated, but the unknown effect of tariffs clouds the future.” [Construction]

“We have concern after the presidential election that tariffs will affect prices for electronics and components in 2025.” [Information]

“Domestic lead times still seem very long. We are having to go to China for many electrical equipment requirements. Even after tariffs, the price is half, and so are the lead times.” [Management of Companies & Support Services]

“Election results and the potential tariff changes would impact inventory and lead to higher prices in the hospital supply chain. What we saw during COVID-19 with startup U.S. production is a warning sign again.” [Professional, Scientific & Technical Services]

Treasuries are rallying back post ISM report with the 10 yr yield at 4.22% vs 4.27% right before. The 2 yr was at 4.20% right before the release and is now at 4.15-.16% as of this writing.

ISM Services

New Orders

Employment

Prices Paid

- NYSE volume was 12% below its one-month average;

- Nasdaq volume 5% was above its one-month average

RBC Capital lowered the firm's price target on Walgreens Boots Alliance to $9 from $13 and keeps a Sector Perform rating on the shares. The firm is updating its model to reflect the management's expectation of U.S. Retail Pharmacy headwinds continuing next year, the analyst tells investors in a research note. RBC adds that "it is continuing to value Walgreens at 6-times expected 2025 adjusted EPS estimate, which continues to reflect a discount to the stock's historical average and a discount to retail pharmacy peers, though the company's discount valuation is appropriate to reflect a slower EPS growth trajectory.

I shorted more Apple AAPL at $243.85.

XLF -0.50% (Trade of the Week) and at the low of the day in a sea of market green.

I shorted more TSLA at $151.19.

From Peter Boockvar

ADP jobs report rundown

ADP said a net 146k private sector jobs were created in November, just below the estimate of 150k but more noteworthy was the downward revision of 49k to the October report to a still good figure of 184k. It still remains the case that all of the job gains are coming from medium and large sized companies as those with less than 50 employees shed 17k people. Those with more than 500 people added 120k.

Sector wise, the job gains mostly came from services, as they typically do, with education/health services leading the way with a gain of 50k. Trade/transportation/utilities hired a net 28k with professional/business services adding 18k, ‘other’ 20k and leisure/hospitality hiring 15k. Information added 4k and financial services contributed 5k new jobs.

The drag was a 26k job loss in manufacturing with the recession this area of the economy is still experiencing, offset though by a rise of 30k in construction. Assume most of those construction jobs are being helped by the government, whether infrastructure related, Chips Act and/or IRA. There certainly is less private sector construction going on, particularly in CRE.

On the wage side, there was a pick up in pay for ‘job changers’ as the median gain was 7.2% y/o/y vs 6.2% seen in October. For ‘job stayers’, annual pay went up by 4.8%, up from 4.6% last month. These are still heady figures for the wage earner.

Smoothing out the headline figure puts the 3 month average private sector job gain at 163k vs the 6 month average of 143k and the 12 month average of 155k. This compares with a job gain of 213k in 2023. So, job gains were pretty steady this year but a clear moderation relative to last year.

The 10 yr yield at 4.27% is at the high of the morning post data release and maybe focusing on the wage data and not the large October downward revision in job gains.

As for the Fed, I’ll argue again that I think they absolutely should not be cutting rates next week. While I agree that maybe the economy can use a few more cuts, they should call a timeout right now after already cutting by 75 bps while long rates are higher since their first cut, stock and credit markets are bubbly, inflation is stuck around 3%, inflation expectations have risen notably since the September cut, and overall the economy is hanging in there, notwithstanding how mixed the internals are.

This said, the market is pricing in a likely rate cut pause in January if they do cut next week.

With S&P cash +20 handles I am adding to my short call index positions.

Nothing really matters, anyone can see

Nothing really matters

Nothing really matters to me- 

Queen, Bohemian Rhapsody Queen – Bohemian Rhapsody (Official Video Remastered)

The market, for now, remains immune to any negative influence.

Case in point, another rise bond yields this morning:

* The yield on the 2 year Treasury bill is +4 basis points to 4.21%.

* The yield on the 10 year Treasury note is +6 basis points to 4.28%.

* The yield on the 30 year Treasury bond is +6 basis points to 4.45%.

Upside:

-HRTX +67% (US District Court upholds validity of CINVANTI patents)

-CCRN +63% (to be acquired by Aya Healthcare for $18.61/shr in ~$615M all-cash transaction)

-PSTG +21% (earnings, guidance)

-CRM +13% (earnings, guidance)

-MRVL +13% (earnings, guidance)

-OKTA +13% (earnings, guidance)

-JBLU +5.3% (guidance)

-ROKU +4.2% (pre-market strength attributed to broker note speculating Roku is a takeover candidate)

-DLTR +3.8% (earnings, guidance)

-POET +2.4% (announces $25M Registered Direct Offering)

-STOK +2.1% (receives FDA Breakthrough Therapy Designation for Zorevunersen for treatment of Dravet Syndrome)

Downside:

-RLMD -78% (reports Data Monitoring Committee (DMC) Assessment indicates Phase 3 Reliance II Trial is Futile at Interim Analysis and is Unlikely to Meet the Primary Efficacy Endpoint with Statistical Significance)

-CURV -24% (earnings, guidance)

-LUNR -19% (prices upsized 9.5M shares at $10.50//shr for net proceeds ~$104M)

-FL -14% (earnings, guidance)

-BASE -11% (earnings, guidance)

-TRVI -10% (announces topline results from Human Abuse Potential Study of Oral Nalbuphine)

-GXO -6.3% (CEO Michael Wilson to step down in 2025; will reportedly remain a standalone company after exploring sale)

-CHWY -5.6% (earnings, guidance)

-CRGY -5.2% (prices 21.5M shares at $14/share; files to sell offering of $300M Private Placement of additional 7.625% Senior Notes due 2032)

-HRL -2.6% (earnings, guidance)

Charts from 8:09 a.m. ET:

From Peter Boockvar:

All the news that's fit to email

U.S. vehicle sales in November numbered 16.5mm at a seasonally adjusted annualized rate which was above the estimate of 16.1mm. That compares with 15.32mm in November 2023 and 17.09mm in November 2019. That we are still selling less vehicles than five years ago means there are less used cars available and why used car prices, while well off their highs, remain well off the 2019 lows and will continue to I believe. Wards said "Improved affordability, and possibly relief from the end of contentious national elections, appeared to bring more consumers into dealer showrooms in November, leading sales to post their biggest y/o/y increase in 2024." That 'improved affordability' is more on the pricing side as the average 60 month auto loan rate is still 7.5%, though down from 8% this summer, it was about 4.65% entering 2020 according to Bankrate.

Average 60 month auto loan rate

Manheim Used Vehicle Index

While French president Macron is pushing back on the no-confidence vote today, it will most likely happen and yields across Europe are trading higher and why US yields are likely up too with the 10 yr yield back to 4.25%. The euro though is little changed while stocks are higher. Political drama is more common than not, which of course we're seeing in Germany and now South Korea but unless it directly impacts the economy and the ability to pay creditors, markets usually yawn. That said, Europe as a whole will continue to deal with the challenges of seeing little economic growth. The ECB will cut rates again next week but what they've done so far hasn't helped much yet due to the major structural issues Europe faces that a lower cost of capital can't fix.

French 10 yr yield

One of the big challenges that Europe faces, that the ECB can do nothing about, is the structural cost pressure of higher energy prices. Here is a chart of TTF natural gas prices as we enter the winter. On a US BTU equivalent basis, it's about $14 per BTU vs US gas which is trading at around $3. This is well off the shock price in August 2022 by is 3x where it stood in 2019.

TTF European Natural Gas Price

TTF price going back to 2019

As the BoJ is always seemingly afraid of its own shadow, and why their benchmark rate is still only at .25% in the face of persistent 2% ish inflation, will the political turmoil in South Korea and uncertainty with the new Japanese government in terms of support result in no BoJ rate increase next week? Maybe and JGB yields are slipping and the yen is falling after its recent rally on expectations of a rate hike. Yesterday, there was about a 55% chance of a hike next week but today is down to 30%.

Apartment List released its November new lease data last week and due to the slow seasonal time prices fell .8% m/o/m. The y/o/y drop was .6%. Supply, particularly in the Sunbelt states, continues to rise and the vacancy rate rose to 6.8%, up one tenth and that is the most since Covid began. Because of less supply, new rent growth is still taking place in the Midwest and Northeast. Not discussed in the report, as it focuses only on new leases, is that renewal rates, based on what I heard from the publicly traded REITS, are up about 3%. The blended rate of about 1-2% should eventually show up in CPI but again, CPI never captured the full extent of the rent increases over the past few years.

China's November private sector services PMI from Caixin fell .5 pt m/o/m to 51.5, below the expectation of a slight rise to 52.4. While the headline number fell, Caixin said "Market optimism improved. The indicator of future activity expectations grew for the 2nd straight month to reach a 7 month high. Service providers generally expressed confidence in market improvement amid policy support, although some were concerned about the future trade environment."

Hong Kong's November PMI was 51.2 vs 52.2 in October. Singapore's dipped to 53.9 from 55.5, though remaining an economic bright spot. The same can be said for India whose services PMI was 58.4 but down from 59.2 initially and vs 58.5 in October.

The Eurozone services PMI was revised up a touch but still is below 50 at 49.5 with Germany, France and Italy all under 50. Spain remains the standout with its services index at 53.1. S&P Global was pretty harsh with its words, "Stagflation is a pretty nasty word, especially if you are a central banker, but that is what is hitting the Eurozone right now. In November, the economy started shrinking while the PMI price components went up for the 2nd month in a row. Inflation is mainly driven by services, but with the euro getting weaker, there is a risk that the prices of imported goods might start climbing too in the coming months."

I'll add, Europe is a tough place to do business right now and with the stronger dollar vs the euro, it will be really interesting what Corporate America has to say about their earnings results in that region.

The UK economy is doing a bit better as its services PMI held above 50 at 50.8 though down from 52 in the month before. Some stagflation here too as S&P Global said "Higher salary payments meanwhile contributed to a sharp and accelerated increase in input prices, with the rate of cost inflation the fastest since April." Also, in terms of the overall outlook, "Worries about the impact of policies announced in the Autumn Budget, in particular those pushing up employment costs, were widely reported as leading to a gloomier assessment of business investment prospects and the broader UK economic outlook."

While Microchip lowered guidance Monday night, Marvell Technology saw the benefit of selling chips into the AI ecosystem spend which offset weakness elsewhere.

"In our data center end market for the 3rd quarter, we achieved record revenue of $1.1 billion, growing 98% y/o/y and 25% sequentially...We are seeing strong custom AI demand continue into the fourth quarter and have secured supply chain capacity to support our customers' growth forecasts."

Salesforce talked a lot about AI too and its Agentforce functionality. "For decades, economic growth was dependent on expanding the human workforce, it was all about getting more labor, but with labor and with the labor force stagnating globally, Agentforce is unlocking a new path forward...Agentforce is deflecting service cases and resolving issues, processing, qualifying leads, helping close more deals, creating and optimizing marketing campaigns, all at an unprecedented scale 24/7.

Revenue growth was 8% y/o/y. "We saw strong new business growth in LatAm, Canada, and Australia, while the US and parts of EMEA remained constrained. From an industry perspective, in Q3, health and life sciences, manufacturing, automotive, and energy all performed well, while retail and consumer goods were more measured."

From Okta on the macro:

"Our view on the macro environment is that it remains consistent with what we've experienced for the past few quarters. Organizations are scrutinizing budgets and rationalizing their software spend, resulting in lower assumptions for seats in our workforce identity business and MAUs (monthly active users) in our customer identity business."

On the US consumer from Foot Locker in their earnings release today:

"our third quarter top and bottom line performance fell short of our expectations. Consumer spending trends softened following the peak Back-to-School period in August, and the promotional environment was more elevated than anticipated."

"While our trends in early November landed below our expectations as consumers held back their spending ahead of the holiday season, we saw a meaningful and positive acceleration over the key Thanksgiving week period, especially in stores. Despite that strong performance, we are taking a more cautious view and are lowering our full-year sales and earnings outlook due to a more promotional environment and softer consumer demand outside of key selling periods."

Finally, with the drop in mortgage rates to 6.69% w/o/w from 6.86% for an average 30 yr, that helped to lift purchase applications by 5.6% w/o/w according to the MBA after a 12.4% rise last week. The holidays though are a distortive seasonal influence on these figures so keep that in mind. Refi's were flattish, down .6%.

Trump's Pro-Marijuana Decriminalization DEA Pick Withdraws Amid Pushback From Conservatives - Marijuana Moment

Bonus — Here are some great charts:

Today's Number Is 535 

Why December Will Likely Be Strong

Shopping Deals

Overbought Markets Pull Back

South Korea ETF at New Lows

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

From JPMorgan:

US: Futs are higher following yesterday’s geopolitical events (France & S. Korea) with Tech outperforming following positive earnings from CRM (+13.4% pre-mkt) and MRVL (+13.1% pre-mkt). All of Mag7 are higher pre-mkt with Semis seeing a bid. The yield curve is twisting steeper with 10Y yield +3bps to 4.25%; USD is reacting positively. The cmdty complex is under pressure with crude the outperformer. Today’s macro data focus is on ISM-Srvcs, ADP, and Mtge Applications.

and... 

EQUITY AND MACRO NARRATIVE: Aside from the early session volatility, there were no data points that altered the bullish market narrative. Today, should help shape growth expectations with ISM-Srvcs but the real catalyst is Friday’s NFP, which many are pointing to as the sole factor for determining whether the Fed cuts in December.

The S&P Short Range Oscillator slipped from 5.9% to 4.93%.

So, slightly less overbought.

Goldman Sachs GS on Tesla TSLA:

Tesla Inc. (TSLA): 4Q24 deliveries update, and recent US consumer survey data for Tesla

3 December 2024 | 8:00PM EST

We believe that datapoints intraquarter on deliveries for key regions (the US, Europe, and China) show mixed demand trends by region, and that Tesla is not currently tracking to meet its objective to grow vehicle deliveries in 2024 (which would require ~515K or more units in 4Q). However, we'd expect Tesla to increasingly use incentives to try to achieve this volume target (and part of Tesla's motivation for using incentives to try to grow could be an effort to reduce Model Y inventory ahead of the launch of a refreshed version that media reports suggest could occur in early 2025).

We also examine in this note how Tesla's brand sentiment and net purchase intention scores have trended per surveys of US consumers from HundredX (which conducts surveys on brands for a wide set of the US population across demographics including age, income, gender, and geography).

Overall, we modestly lower our 4Q24 EPS estimate. Please see our note for details.