With S&P cash -93 handles I am adding to my index trading longs:

* SPY $728.22

* QQQ $606.17

Position: Long SPY (S), QQQ (S)

I added to my trading long rental in the indices with S&P cash cash -73 handles, moving up from very small to small-sized:

* SPY $730.04
* &QQQ $697.76

Position: Long SPY (S), QQQ (S)

I’m back buying the indices with S&P cash -89 handles:

* SPY $729.11
* QQQ $696.44

Position: Long SPY (VS), QQQ (VS)

All I can write is that please reread my opener on the market’s instability.

Positions: None.

– NYSE volume 16% below its one-month average;  
– Nasdaq volume 8% below its one-month average;  
– VIX index: up 3.77% to 20.62

Positions: None.

From Peter Boockvar:

CPI rundown/Are we now in a time where dissents are the new normal?

The May headline CPI rose .5% m/o/m as expected and by .2% at the core level which was one tenth below the forecast. The y/o/y figures of 4.2% and 2.9% were as estimated due to rounding and up from 3.8% and 2.8% respectively in April. Energy prices jumped by 3.9% in the month led by a 7% rise in gasoline prices and now higher by 23.5% y/o/y. Electricity prices in particular rose by .6% m/o/m and 5.9% y/o/y. Food prices were up by .2% m/o/m and 3.1% y/o/y with ‘food away from home’ seeing a price gain of .3% m/o/m and 3.5% y/o/y, still exceeding ‘food at home’ where prices grew by .1% m/o/m and 2.7% y/o/y. The price of beef in particular fell back in May after the recent spike but still up 13% y/o/y.

Services inflation ex energy saw prices higher by .3% m/o/m and 3.4% y/o/y led again by rents. Owners’ Equivalent Rent rose .3% m/o/m after a .5% rise in the month before which was due to a calculation quirk. They are up by 3.3% y/o/y which is getting closer to reality for blended rents nationally. Rent of Primary Residence (which should replace OER) saw a price gain of .4% m/o/m and 2.9% y/o/y. Medical care prices rose by .3% m/o/m after two prior months of declines and up by 2.6% y/o/y. A statistical illusion continues to be how the BLS calculates health insurance as they tell us prices fell one tenth m/o/m and by 6.4% y/o/y. Obviously not real. Rather than measuring reality, they are measuring profit margins of health insurers.

Airline fares remain on fire, jumping by another 2.7% m/o/m and by 27% y/o/y. Hotel prices rose .5% m/o/m after a 2.8% spike in April and up by 5.1% y/o/y. Vehicle maintenance prices continued higher, up by .8% m/o/m and 6.1% y/o/y. We are getting some relief on auto insurance as prices here fell by 1.7% m/o/m and by 2% y/o/y.

Core goods prices were little changed again m/o/m, down one tenth and up by 1.1% y/o/y. Muted changes in car prices is the main factor. New car prices fell by .3% m/o/m and flattish y/o/y, up .2%. Used car prices were up by one tenth m/o/m and down 2% y/o/y. Apparel prices grew by another .3% m/o/m and by 4.8% y/o/y. I still think tariffs (as retailers stagger price increases) and now petrochemical and freight costs are flowing through. The prices of ‘household furnishings & supplies’ fell for a 3rd month, by .2% m/o/m but still up 2.4% y/o/y.

Watching out for the impact of higher computer memory prices, the price for ‘personal computers & peripheral equipment’ rose .2% m/o/m after a .9% spike last month and now up 1.3% y/o/y. These prices usually decline but depending on the hedonic adjustments with regards to the BLS. The price for ‘computer software & accessories’ were flat but after skyrocketing by 5% in April and 4% in March and up 14.5% y/o/y.

Bottom line, the data was about as expected but as mentioned earlier this morning, the full inflation story will only be complete after we see PPI tomorrow in light of the widespread cost pressures. Inflation remains the major economic pain point regardless of who has to absorb it. With the core rate miss relative to expectations, Treasury yields across the curve are down by 1 bp from where they were at 8:29am est. Inflation breakevens in the TIPS market are unchanged.

The fed funds futures market is pricing in a 96% chance of one rate hike by year end but we know so much depends on hearing where Kevin Warsh stands. While we all debate on what he wants to do, I think for the first time since Volcker, we are going to see more internal dissents in the coming years than we’ve seen over the prior decades since Greenspan when broad consensus was the goal.

Positions: None.

From the Wall Street Journal.

Positions: None.

My only individual equity purchase this morning was adding to MSOS (MSOS) at $5.43.

Positions: Long MSOS VL

Anyone who has observed the market’s spectacular intraday volatility over the last four trading sessions should realize that something is amiss. The market is not behaving normally — it seems destabilized.

* Is it simply an overvalued market that is in the process of correcting?

* Is it an overvalued and concentrated market led by large-cap technology that is rotating into new leadership?

* Is it a signal that the AI revolution might face growing fundamental headwinds?

* Is the proliferation of leveraged ETFs and the growing acceptance of the market as a casino (with the ubiquitous presence of 0DTE options) undermining market stability, acting like an infant splashing around in a bathtub (violently moving from side to side)?   

* Is it the consequences of the evolution of market structure (the tail wagging the dog), in which passive products and strategies dominate the investment landscape?

* Or, have the machines and algos “gone wild” (in dealing with a potential inflection point or price momentum change)?

To me, its all of the above — some of each.

We are likely entering a slippery slope — great for opportunistic traders, lousy for the buy-and-hold crowd.

Position: None

Upside:

-CBRL +12% (earnings, guidance)

-LAKE +8.0% (earnings, color)

-BORR +4.2% (insider purchased ~$5M in common shares)

-OSCR +3.6% (Barclays Raised OSCR to Overweight from Equal Weight, price target: $35)

-ILMN +3.1% (JPMorgan Chase and Co Raised ILMN to Overweight from Neutral, price target: $185)

-CHWY +2.9% (earnings, guidance)

Downside:

-DNTH -21% (Sanofi halts trial for peer autoimmune drug)

-SMCI -12% (announces $7B in equity and equity-linked financings)

-ARCB -8.2% (transport names lower follow Amazon launch of less-than-truckload freight offering for businesses)

-ODFL -5.6% (truckers lower lower follow Amazon launch of less-than-truckload freight offering for businesses)

-MU -4.8% (profit taking in sector)

-INTC -3.5% (sector weakness)

-BABA -2.8% (lower following report China prepping to spend ~2T yuan over 5-years building data centers to advance domestic AI industry, potentially threatening private cloud operators)

-CCL -1.7% (leisure names under pressure from geopolitical concerns)

Positions: None.

From Peter Boockvar:

Looking at full inflation picture/Financing issues?/Pizza and Uncrustables are crushing it/Gold

While the markets mostly care about consumer price inflation, I don’t believe the inflation picture is complete by just looking at today’s CPI. Tomorrow’s PPI will be just as important with the difference being who is eating the widespread cost pressures and who is not. To print here again what the Beige Book said last week, “The ability to pass on higher costs remained mixed across sectors, particularly among consumer-facing firms.” Today’s headline CPI is expected to rise 4.2% y/o/y while PPI is expected to be up 6.4%. At the core level, consensus today is for a gain of 2.9% for CPI and by 5.4% for PPI.

China is seeing quite the spread between CPI and PPI. In May, CPI rose 1.2% y/o/y while PPI jumped by 6.3% y/o/y. Someone only looking at the former will tell me there is no inflation and then I offer the latter and say there certainly is plenty, just falling out on different parts of the economic chain in differing degrees.

On the heels of the massive equity raise done by Google and chatter about one coming from Meta, I thought the Bloomberg story today on Softbank was really interesting and maybe for the first time I can recall reflecting some questions being asked on valuations, or maybe just for Open AI. Not sure yet. The article said, “Softbank Group Corp.’s talks with potential creditors to raise at least $6 billion from a margin loan backed by its OpenAI stake have stalled, people familiar with the matter said, just weeks after the Japanese conglomerate cut its initial target from $10 billion.”

“It’s unclear why the margin loan discussions stalled. Borrowers and creditors can pause and revisit fundraising discussions for various reasons, and Softbank hasn’t elaborated on its plans, the people said.” The stock fell 8.3% overnight in Tokyo.

Casey’s General Store is one of my favorite earnings results and conference calls to go through because they touch consumers of all income levels with their convenience and gasoline station business. Over the years they have morphed from a business focused on the latter to one more on the former, and they have actually turned the company into a pizza shop in part. While a pizza fan, I have yet to try it. Let me know how it is if you have.

The earnings call is this morning and I will write about what they said tomorrow while this is from the earnings press release:

“Inside same store sales were up 5.5%, or 7.4% on a two year stack basis, driven by strong performance in whole pizzas as well as appetizers and sides in the prepared food and dispensed beverage category in addition to non-alcoholic beverages in the grocery and general merchandise category.

I’ve expressed my bullish stance on the stocks of some consumer staples names, particularly in food and was encouraged to see the Hormel earnings report a few weeks ago, Campbell’s the other day which was about as expected and now followed by JM Smucker yesterday and whose stock jumped by 10.4%.

Understand that a bombed out stock/sector can do better by having its fundamental picture be less bad. And when valuations are cheap, dividends, that are sustainable, are high, sentiment is awful, and the stock charts look ugly, it becomes I believe a fertile ground for opportunity.

They said of note:

“Total company net sales increased 6%, driven by growth in the Coffee, Away From Home, Pet Foods, and Frozen Handheld and Spreads segments.”

In their Coffee business, “We have demonstrated our ability to recover increased commodity costs through responsible pricing. Due to higher costs and the pass-through nature of the coffee category, we implemented price increases in May and August of calendar year 2025. Since then, price elasticity trends have been favorable relative to our initial expectations.” They are now seeing some pullback in green coffee commodity prices and they could reverse some of the price increases if sustained.

Uncrustables continues to do very well for them, with sales up 8% in the quarter and it is now a $1 billion brand.

In Pet Foods, I’m hearing again (from Petco, Colgate, and Chewy) how the cat business is doing better than dog, “net sales increased 2%, driven by continued momentum in cat food, partially offset by a decline in dog snacks.”

With respect to overall inflation, ex green coffee deflation and tariffs, “we do anticipate cost inflation of low single digits across the balance of our portfolio, and that’s largely coming through packaging, ingredients and transportation.”

Also yesterday were a few conferences where companies I follow spoke at. I’ve been highlighting here for months the ever rising cost of truck transportation and both JB Hunt and Schneider National talked about it yesterday.

From JB Hunt:

“Since 2022, we’ve been in an oversupplied overcapacity what would be called a freight recession.” That is so yesterday though with some pricing at “all time highs as indicators of capacity challenges as well as overall potential demand.” They see “industrial demand is solid. Customers are resilient.” I still think some of the demand strength is the pull forward of ordering and we’ll see at some point the extent.

“this industry is behind. It’s been four years in a cost inflationary environment and a rate deflationary environment. The industry is not healthy. It hasn’t generated the returns it’s needed to reinvest, and that has a catch-up aspect that’s going on right now. So the magnitude of what could happen from a catch-up perspective, but also going forward on what we need to execute is still in flight and in motion. So it could be significant as we said.”

From Schneider National:

“Well, I’d say demand, while there’s some pockets of strength, certainly, especially in what we’re seeing with production picking up a little bit, generally, it’s been stable is the way I would characterize it.” On some weakness, “home building, everything that goes into a home being created as well as automotive, perhaps not as strong as what it could be had we seen an interest rate decrease.”

“But, what we’ve seen the most activity is capacity exiting the market.”

I’ve mentioned my belief that US Treasuries and sovereign bond markets in Europe too that are heavily foreign owned have been a source of funds for those countries seeing ever rising spending needs to cushion the blow of higher energy prices. I think gold has been a source of funds too and the pullback off the early year high continues. But, we’re now stretching it on a technical perspective.

If not aware, there is a technical gauge called the Gold Miners Bullish Percent Index which is a breadth indicator that vacillates between 0 and 100 with 30-70 being a normal range. Yesterday it closed at zero, and thus cannot get any worse. Also, the 14 day Relative Strength Index is down to 26, the lowest since October 2023.

Gold (generic contract)

Not with help from lower mortgage rates as they were little changed from last week at 6.60%, purchase applications rebounded by 7.3% w/o/w after three weeks of declines. Refi’s rose 15.3% w/o/w after six weeks of declines 

Positions: None.

Positions: None.

From Knowledge@Wharton:  

How Sports Are a Local Growth Engine – Knowledge at Wharton

Position: None

With S&P futures rallying to -56 handles I have sold my Index trading long rentals ahead of the inflation data for a very small profit:

 * SPY (SPY) $731.68
* QQQ (QQQ) $699.18

Positions: none.

Positions: None.

Treasury Auctions

11:00 a.m.: Treasury buyback announcement (cash mgmt); 

11:30 a.m.: Treasury hosts a $69B 17-Week Bill Auction; 

1:00 p.m.: Treasury hosts a $39B 10-Year Note Auction; 

Economic Calendar

Positions: None.

With S&P futures -84 handles and Nasdaq futures -480 handles, I am adding to my trading long rentals:

* SPY $728.88
* QQQ $695.71

Position: Long SPY (VS), QQQ (VS)

For a clear explanation to why I am so actively trading the indices (long and short), please see my opening missive, which is coming up!

Position: None  

Taking a trading long rental in the indices with S&P futures -70 handles:

* SPY $730.42

* QQQ $698.06

Position: Long SPY (VS), QQQ (VS)

This Is Your Captain Speaking – Buckle Up – The Intellectual Investor – Value Investing by Vitaliy Katsenelson 

An excerpt:

This brings me to the next future casualty of today’s hysteria, Nvidia, the most valuable company in the world, trading at 30 times 2026 earnings. That is not an insane valuation for a company growing very fast. But in the case of Nvidia, the E in the P/E will likely decline a lot in the future. Today, if you are building a data center, Nvidia is mostly the only game in town. Several things are likely to happen. There will be more competition. We are approaching peak demand. And capital markets won’t keep financing the customers who buy its chips. I could write a very long essay just about Nvidia.

Three of the biggies are going public: SpaceX (which owns xAI), Anthropic, and OpenAI. All of them are losing money. Together they spend hundreds of billions on data centers, the bulk of which went to Nvidia for AI chips. Meta and Google, cash cows in their own right, were subsidizing their AI spending from their core business. When that was not enough, they levered mildly and now, for the first time, they are actually issuing stock. Yes, they went from net buyers of their own stock to sellers.

You have two scenarios. In the first, these investments lead to such high returns that these companies end up swimming in cash and fund their future Nvidia chip purchases out of future cash flows. But please think about it. All of these companies collectively are throwing close to a trillion dollars, yes, a trillion, at AI. They feel like they are fighting for their survival, and that is exactly what creates a race to the bottom, where their future profitability gets competed away fiercely. And if these companies don’t spend a trillion dollars on data centers next year, Nvidia’s earnings will be a lot, lot less.

Nvidia and the semiconductor sector are a classic capital-cycle story: demand creates too much supply, and a boom leads to a bust. I have written about it many times before, from the railroads in Great Britain in the 1800s to telecom in 1999. I don’t know if it will be next week or next year, but this will predictably end in tears. Nvidia is unlikely to remain the most valuable company in the world, unless all the others become a lot less valuable. The signs of a bubble are everywhere. I am experiencing 1999 déjà vu.

Over the next few weeks the capital markets will be hit by three IPOs and two secondary offerings from Google and Meta, totaling multiple hundreds of billions of dollars. This alone will likely suck liquidity out of the capital markets and put a nice bow on the AI rally that drove the S&P 500 higher this year.

Position: None

The S&P Short Range Oscillator is in neutral territory at 0.24% vs. 0.56%.

Position: None