With S&P cash +41 handles I am shorting September monthly calls short.

Positions: Short SPY common S and calls VS 

Shorted more (SPY) at $764.01 – moved to small sized.

Reduced further (GLD) at $403.12 (too much of a move, too soon).  Will add $398-$400.

Positions: Long GLD S; Short SPY S 

With S&P cash +18 handles I have reshorted (SPY) (vvs) at $763.23

Positions: Short SPY VS

The following is from Peter Boockvar:

Just a few things but certainly notable

I will be taking Thursday and Friday off but will still deliver my Succinct Summation on Friday.

The bond yield momentum continues higher, most notably today in Europe with 5-7 bps moves up. The UK 10 yr gilt yield is now up 22 bps in two days to 5.28%. The French 10 yr yield is up by the same 22 bps over the past 6 days to 4.28%. Similar moves too throughout the region. This is not because European growth is strong, it’s about 1%. I believe it’s due to worries about their large financing needs and inflation concerns that the ECB will confront with another rate increase next week all at the same time investors want to hold less long duration bonds. With the BoE, the swaps market has about a 2/3rds chance of one hike this year.

With respect to the US 10 yr yield, clearing the 4.81% would leave us with no technical resistance until we retest 5% which we touched for a day in October 2023 and something I find inevitable at this point.

The yen is getting a bid to back below 160 as BoJ board member Hajime Takata, who happens to be hawkish so maybe speaking his viewpoint rather than the committee, alluded to the possibility of hiking rates even more than 25 bps in a few weeks, maybe even 50 bps. “I can’t say at this stage whether it is .5 percentage point of 75, but as I have been repeating, the environment has changed.” I’d be quite shocked if they raised more than 25 bps but I do believe the 25 bps rate increase will be followed with further hawkish talk from Governor Ueda and that 2% is their ultimate destination with the overnight rate vs 1% today.

The 2 yr JGB yield jumped 7 bps to 1.87% on those comments, a fresh 31 yr high.

The Reserve Bank of New Zealand by the way hiked rates by 25 bps to 2.75% but as expected. Governor Breman said “It’s likely that there will be a further increase in the OCR. But the timing is highly uncertain because we will consider the effects of the two hikes that we’ve done now, and also all the new information that’s happening and how that is affecting the medium-term inflation outlook.”

Finally here, keep your eye on commodity prices as the Bloomberg Commodity Index (BCOM) closed yesterday at a 14 yr high. We remain long oil and gas stocks, precious metals including platinum, fertilizer stocks as well as those producing uranium as our plays on this bull market that I believe has a ways to go.

10 yr Gilt Yield

US 10 yr Yield intraday

2 yr JGB Yield

Yen

Bloomberg Commodity Index

As the cost of capital is rising along the yield curve, I do want to highlight again the spread widening that is going on at the CCC level of high yield as it now approaches the level it touched in August 2024. The spread is now 947 bps. It touched 1200 bps at the height of the tightening cycle in 2022.

CCC Yield Spread

The MBA said purchase applications rose 2.2% w/o/w after slight declines over the prior two weeks and are flat y/o/y. Refi’s fell 1.1% w/o/w and down 19% y/o/y. The average 30 yr mortgage rate was 6.79% as of 8/28, up 1 bp w/o/w but the US 10 yr yield has risen by almost 10 bps since.

Dell had a blowout quarter with big upside in its guidance as they are center stage, along with the semi companies, receiving a chunk of that massive GenAI CapEx spend and selling the boxes in which those chips are going into. From them:

“Customers no longer see IT environments simply as cost centers, but as value drivers that enable growth, productivity, and competitive advantages. As a result, they are expanding and reallocating budgets to support continued investment.”

“Over the past 12 months, we have booked more than $130 billion in AI server orders…We booked $60.9 billion of AI orders in this quarter, the most in our history. We are also seeing AI-related tailwinds in traditional servers and networking, along with early signs of increased storage demand as customers prepare, manage, and protect growing volumes of data.”

Palo Alto Networks had a great quarter too but down pre-market as some don’t believe they can accelerate growth from current levels. They said of note:

“This performance is a direct result of record-breaking platformization adoption and the growing urgency among customers to fortify their defenses as AI fundamentally redefines the security landscape.”

“As I have said before, AI is a long-term tailwind for cybersecurity. While these models are becoming increasingly proficient at uncovering vulnerabilities, detection is merely the opening act. Truly validating, interpreting context, and resolving these issues requires broad cybersecurity platforms working alongside frontier AI. This synergy is essential to stress-test environments, manage agentic actions, and trigger machine-speed remediation during an active threat.”

Positions: None.

Sold a portion of my (GLD) (+$3.55 after being lower earlier, where we added two hours ago) at $400.40.

Back to small sized but I will add back on weakness.

Position: Long GLD small.

Upside:

-GTLB +25% (earnings, guidance)
-EOSE +14% (partners with Google, Eos on 86 MW West Virginia solar and 380 MWh storage project for PJM)
-SPWH +10% (earnings, guidance)
-DAKT +9.5% (earnings, color)
-DELL +9.2% (earnings, guidance)
-NVMI +5.2% (authorizes $200M share repurchase program)
-SIRI +4.4% (Deutsche Bank Raised SIRI to Buy from Hold, price target: $45)
-HPE +4.3% (higher in sympathy with DELL)
-TEVA +2.7% (reports Phase 2a TEV ‘408 data in celiac disease; primary endpoint met)
-QURE +2.5% (submits FDA BLA and UK MAA for ifezuntirgene inilparvovec in Huntington’s disease)
-BF.B +2.2% (earnings, guidance)
-OLLI +2.0% (earnings, guidance)

Downside:

-FCEL -12% (earnings, guidance)
-GIII -11% (earnings, guidance)
-CRDO -10% (earnings, guidance)
-CXM -4.6% (earnings, guidance)

Treasury Actions

11:00AM: Treasury Buyback Announcement (cash mgmt);

11:30AM: Treasury hosts a $72B 17-Week Bill Auction; 

Today’s Economic Calendar

(SOURCE: TipRanks)

Positions: None

I added to GLD at $395.11.

Position: Long GLD (M)

Rising global interest rates (a function of inflation, debts and deficits), a continuation of the Iranian conflict (and its impact on producing higher oil prices), sticky inflation and slowing global economic growth (“slugflation“) have recently become a toxic cocktail for U.S. stocks — leading to (as I have noted) a deterioration in market breadth and a rolling over of several leading market sectors’ prices.

With the equity risk premium continuing a year-long contraction and valuations still above the 90%-tile , the outlook for equities remains problematic. (See opener on valuation models coming up.)

Many individual stocks are no longer responding well to better-than-expected profits. which are being buoyed, in general, by non-recurring equity gains and double and triple ordering (in AI-related companies who are “overearning”) — giving credence to “second-level thinking” over “first-level thinking.” 

Finally, with the Democratic party leaning left and the Republican party leaning right,  politics might begin to weigh negatively on our markets over the next few months. Significantly, with the rising probability that a “left-leaning” Democratic party might make congressional inroads in November’s midterm elections — market unfriendly higher taxes and other anti-corporation policies could be forthcoming. 

Position: None  

From yesterday:

Bco

Doug can you please explain why you like gold.

Dougie Kass

Given the obvious risks associated with fiat currencies, geopolitics, inflation and the general instability of market structure there seems to be a place in most portfolios for some gold.

While I admit to the problem of valuing the intrinsic value of precious metals, the recent price decline may have improved the “margin for safety” and the upside reward v downside risk of this “hedge.”

I have long thought that (as Howard Marks has stated) — gold is like religion, you either believe in god/gold or not.

That about sums up my view – I am not tied to the hip with precious metals but I can see getting some exposure. 

Position: Long GLD (M)

The S&P Short Range Oscillator moved to a greater oversold at -1.68% vs. -1.27%.

Position: None