Cash, Cryptos, and Keywords

U.S. equity indexes have stabilized overnight into Tuesday morning after suffering what on the surface might have appeared to be a convincing selloff on Monday. 

Was it though? Maybe. I'm not convinced. At least not until I get hit with a cross or an uppercut after that jab. After five consecutive green candle sessions for the S&P 500, Nasdaq Composite and Russell 2000, a little algorithmic profit-taking would not have been something out of the blue.

There was some good reason for some risk-off behavior. Bitcoin gave up more than 5% on Monday as the entire crypto-sphere reacted to what could be a new environment for the asset class. At the same time, from the belly of the U.S. Treasury yield curve on out to the long end, bond traders reduced exposure as Japanese sovereign debt saw yields rise to levels not seen since 2008. Here in the U.S., by day's end the Ten-Year Note paid as much as 4.10%, up 8 basis points from where that yield went out last week.

Interestingly enough, when one thinks about things... pulling cash out of cryptos and pulling cash out of perceived safe-haven assets such as U.S. and Japanese government-issued debt, creates more cash and more available cash is not a negative for equities, especially when there is not an overt negative catalyst in the offing.

Battles and Keywords...

You're correct. The advent of kinetic military operations in the southern Caribbean by the U.S. military could be taken by high-speed keyword reading algorithms as a risk-off trigger. For the short-term. Should that action result in a more stable Venezuelan economy and a more responsible Venezuelan government, that would be a regional and perhaps global positive. Should, due to both a lack of Russian fiat and a lack of Ukrainian soldiers, the war in eastern Europe finally wither, that too would be a net global positive. Remember the "peace dividend" of the post-Cold War 1990s? Not quite that, but something along those lines would be nice.

While there will be a continued military build-up of sorts, and that would be a natural reaction for nations bordering or close to Russia, Russia has put itself in a position where it cannot even think about sustaining, from a financial perspective, a cold war situation close to what existed from the post-world war period into the late 1980s.

I am not promising anyone candy canes and ice cream for breakfast. I am, however, telling you that despair is not inevitable and that there are possible, if not likely, short- to medium-term outcomes. There are clear and visible pathways toward something better. As the late, great NYSE floor trader Art Cashin used to tell us "young" guys, 'Stay nimble out there." 

From Russia, With ...

U.S. envoy Steve Witkoff is traveling to Moscow early Tuesday to meet with Russian Pres. Vladimir Putin to discuss the potential end to the war in Ukraine. While Witkoff travels, Putin has claimed that Russian forces have taken the strategic Donetsk region city of Porovsk. If true, this would be seen as the most significant battlefield advance by the Russian army since 2023.

That said, Ukrainian military spokesperson Bohdan Senyk has publicly denied that Ukrainian forces have lost that city. While at this time, we have no way of verifying just who speaks the truth, I think we have learned over the years that in every statement made on both sides, there may be some truth and that truth is often either exaggerated intentionally or just as intentionally diminished for propagandic purposes.

Bad News From ISM

On Monday, the Institute for Supply Management released its survey of manufacturing sector purchasing managers for November. The headline print crossed the tape at 48.2 (50 is the line between expansion and contraction), down from October's 48.7 and reflected a ninth consecutive month of industry contraction.

Within that headline number, the most important component, "New Orders" hit the tape at 47.4, down fairly sharply from October's 49.4 and a third-straight month of contraction. The employment component, was unfortunately, quite ugly as well. That number landed at 44, down from 46 for a tenth straight month of contraction. Backlog of Orders, at 44, printed in contraction for a grotesque 38th consecutive month. Yikes. Didn't anything land in a state of expansion? You bet something did. Manufacturing sector prices grew for a 14th straight month. Oh. joy.

Marketplace

It was small caps that really took it on the chin on Monday and that did a number on breath as well. The S&P 500 and Nasdaq Composite gave back 0.53% and 0.38% respectively as the Russell 2000 was roasted for a loss of 1.25%. On a bright note on a down day, both cyclical and growth sectors outperform defensive sectors on Monday.

Just three of the eight S&P sector SPDR ETFs closed on the green on Monday. Energy  (XLE)  easily led the winners as the Discretionaries  (XLY)  and Technology  (XLK)  also avoided losses. Energy and the Discretionaries are two groups that do better when the public starts to feel better about the economy. Likewise, the losers were led to the downside by the Utilities  (XLU) , and Health Care  (XLV) . These are also two groups that do less well when the public is feeling better. These are positives. Was it meaningful?

Breadth was fairly nasty. Ever wake up with your dog breathing on your face and wonder what the heck she ate before she fell asleep? Not exactly minty-fresh. Losers beat winners by a 9-to-4 margin at the Nasdaq and by a rough 7 to 4 at the NYSE. Advancing volume took a 36.9% share of composite Nasdaq-listed trade and a 36.5% share of composite NYSE-listed activity.

Aggregate trading volume was up huge on a day-over-day basis across the listings of both exchanges and across the membership of the S&P 500. Friday, however, was a half day so that does not count, at least not in my book. Trading volumes on Monday were in line with trading volumes on Wednesday, which was somewhat holiday-suppressed. In other words, trading volume was light on Monday and not something that I would make decisions based off of.

Jingle Jingle

On Black Friday, Mastercard's  (MA)  SpendingPulse report, which tracks both in-person and on-line shopping totals, showed an increase in spending (ex-autos) of 4.1%. from Black Friday 2024. On-line shopping specifically, according to Adobe  (ADBE)  analytics was up 10.4% year over year to a record $11.8 billion. That was a deceleration from the 14.6% growth seen last year from the year prior. In my book, on-line shopping is starting to suffer from the law of large numbers, which was inevitable. The malls near me were close to empty. Ten percent growth is nothing to sneeze at.

Then came Monday. Adobe Analytics is reporting sales growth for Cyber Monday at 6:30 p.m. ET of 4.5% to $9.1 billion. Projections for the day were for something close to $14 billion, but that was for sales through 22:00 ET (that's 10 p.m. on the East Coast for you civilians), so we still have to see a final score for the day. Cyber Week, starting with Thanksgiving, sales are projected to reach $43B. Overall, the National Retail Federation is projecting 2025 holiday season sales to increase between 3.7% to 4.2%, which would be a deceleration from the 4.3% year over-year-growth experienced last year. Total holiday sales are expected to surpass $1 trillion in 2025 for the first time in history.

Get Ready

- Amazon  (AMZN)  AWS CEO Matt Gorman will deliver an opening keynote address this morning from the AWS re:Invent conference from Las Vegas. This can be a stock moving event based on what we have seen at times during past years.

- There is some potential for a quick resolution for a decision to be made for the assets of Warner Bros. Discovery  (WBD) . Netflix  (NFLX) , Paramount Skydance  (PSKY)  and Comcast  (CMCSA)  are all said to still be very much in the hunt. Fox Business and New York Post investigative reporter Charlie Gasparino has reported that the Warner Bros. board has been warming up to the offer made by Netflix, but for regulatory reasons, that may not be the best fit. It appears that Netflix and Comcast may only be interested in the studios and the streaming services, while Paramount may be interested in the linear (cable, broadcast) TV services as well.

Economics 

(All Times Eastern) 

08:55 - Redbook (Weekly): Last 5.9% y/y.

4:30 p.m. - API Oil Inventories (Weekly): Last -1.9M.

The Fed 

(All Times Eastern)

Fed Blackout Period.

Today's Earnings Highlights

(Consensus EPS Expectations)

Before the Open:  (SIG)  (.29)

After the Close:  (AEO)  (.44),  (BOX)  (.31),  (CRWD)  (.94),  (MRVL)  (.74),  (OKTA)  (.76)

At the time of publication, Guilfoyle was long CRWD equity.