As of 4:34 p.m.:

Closing Breadth

S&P Sectors

Nasdaq 100 Heat Map

Wth S&P cash +72 handles I am adding to my short Index calls.

Just returned to the office.

From Peter Boockvar:

ISM mfr'g nearing 50, new orders get lift from maybe Zyn and AI?

US manufacturing in December remained in contraction according to the ISM but a bit less so at 49.3, just below the 50 breakeven. That is up from 48.4 in November and above the estimate of 48.2.

New orders rose for a 4th straight month to 52.4 and above 50 for a 2nd month. Just six of 18 sectors asked saw a pick up but that is up from 5 in November, 3 in October and 2 in September. Backlogs also improved to 45.9 which is the highest since March. Inventories were little changed at 48.4 but fell to a 5 month low for customer inventories at 46.7. Employment remained weak at 45.3 and under 50 for the 7th consecutive month. Export orders got back to exactly 50, up 1.3 pts m/o/m. Supplier deliveries were also about dead on 50 at 50.1. Prices paid was up 2.2 pts m/o/m to 52.5.

On the rise in new orders, it all came from the food/beverage & tobacco products and the computer/electronic products group. I’m guessing Zyn is helping the former and AI the latter.

With employment in particular, ISM said “Respondents’ companies are continuing to reduce head counts through layoffs, attrition, and hiring freezes.”

With inventories and maybe this flowed into the rebound in new orders, “This month’s index reading indicating a slowing rate of contraction suggests that companies are willing to invest more for the future, to 1)better perform to their customers’ delivery demands or 2)advance material deliveries to avoid potential tariffs, or a combination of both.”

With prices paid, 7 of 18 industries paid more vs 5 in November, 11 in October and 7 in September.

On exports, “New export orders stabilized this month as international trading partners are showing signs of demand recovery as we enter 2025.”

There was improvement in the breadth of confidence as 7 of 18 industries surveyed saw growth vs 3 in November and that was the most since June.

The bottom line from the ISM, “US manufacturing activity contracted again in December, but at a slower rate compared to November. Demand showed signs of improving, while output stabilized and inputs stayed accommodative.”

My bottom line, after more than two years of a manufacturing recession, we are due for some recovery but it’s very possible that the one we’re maybe seeing could just be the result of the year end pull forward of orders ahead of possible tariffs. In order to sustain any rebound we need a sustainable pick up in end demand and that remains to be seen.

The comments from some industries were mixed:

“Slightly lower due to seasonality and end-of-year destocking.” [Chemical Products]

“Automotive and powersport volume decreases.” [Transportation Equipment]

“We are seeing a softening in sales. This is concerning as it’s our peak season.” [Food, Beverage & Tobacco Products]

“We are constrained by technical labor, despite higher-than-normal backlog.” [Computer & Electronic Products]

“Significant slowdown in production requirements in the last two months of the year.” [Machinery]

“Order levels well below forecast projections.” [Fabricated Metal Products]

“The increase in new orders has our plant at full capacity.” [Electrical Equipment, Appliances & Components]

“Combo of seasonal factors plus increased demand outlook for 2025.” [Miscellaneous Manufacturing]

“There is definitely an uptick this month, though not a stable one.” [Primary Metals]

“The orders have increased slightly due to seasonal restocking.” [Plastics & Rubber Products]

ISM Mfr’g

New Orders

Employment

Prices Paid

The OLD Way: earnings/cash flow ----> valuation ----> stock price

The NEW Way: The "story" ------>>> stock price

This is the equivalent in markets of moving on from the old Judaeo Christian system to: Ketamine, mushrooms and acid as a way to structure your life ....

RevShark

STAFF

4 minutes ago

In this market, if you focus too much on the indices, then you are missing the fact that there is unusual strength in single-digit stocks. There is very positive speculative action but if you listen to big picture pundits, you won't see it. There is always a good trade for those who are looking for the positives.

DK

Dougie Kass

STAFF

Just Now

For what it is worth I don't view single digit stocks as an "asset class."

They are not homogenous.

The fact is that the market is made of thousands of companies with differing characteristics, attributes and negatives.

Its all about bottom up analysis, imho.

Reply

A heads up.

I have a late lunch (1:00 p.m. - 2:30 p.m. today).

Radio silence.

Added to ELAN at $11.92 and bidding for JOE.

And old way: economy drive stocks.

New way: stocks (and asset inflation) drive economy.

More pearls coming at noon!

VIX on intraday and daily basis is masking "true" volatility as reverts on a dime:

With S&P cash +47 handles I am shorting some more index calls.

Oppenheimer lowers Citi, Goldman, Band of America and U.S. Bancorp

For banks, the trend lines in 2025 "seem well established," and Oppenheimer made only minor tweaks to its earnings models and estimates, the analyst tells investors in a research note. As such, the firm explored what banks will look like in 2028. The companies will likely manage themselves to grow as fast as they possibly can, subject to managing a low-to-mid-teens return on tangible common equity, contends the firm. It is "generally skeptical" of the idea that the banks will face a significantly "lighter touch" when it comes to regulatory and capital requirements. Opco finds the group "reasonably valued," but says opportunities remain. Its favorite name is Citi (C), followed by Goldman Sachs (GS) and Jefferies (JEF), followed by Bank of America (BAC) and U.S. Bancorp (USB).

With S&P cash +38 handles I have shorted a very small position in Index calls.

* I've had my fill, my share of losing

* Staying real... my way!

I've loved, I've laughed and cried

I've had my fill, my share of losing

And now, as tears subside

I find it all so amusing

To think I did all that

And may I say, not in a shy way

Oh, no, oh, no, not me

I did it my way

- Frank Sinatra, My Way (2008 Remastered)

Two recent investment boners and regrets (I have had a few!) that I want to mention this morning:

* I had a large short in Apple AAPL and covered after only a couple of point drop from the 52-week high. I should have stuck with the short as the shares have dropped by -$15 in recent days.

* I planned to short BA in the high $170s after last weekend's BA airplane tragedy/accidents. I didn't and the shares are nearly -$10 lower in the last few days.

And now, as tears subside

I find it all so amusing

To think I did all that

And may I say, not in a shy way

Oh, no, oh, no, not me

I did it my way

From Peter Boockvar:

Always trying to take the investing road less traveled

I didn't write on yesterday's jobless claims data because year end seasonal adjustment issues always tar the figures. And, I'll resume with the weekly Friday summaries next Friday.

When it comes to investing client money I prefer to look off the beaten path down the road less traveled by investors on hopes of course that eventually it is more traveled. As we enter 2025, here are a few investments of ours of note that I will mention. We remain long oil and gas stocks with gas finally getting some love, via the European majors like Shell and BP, along with one in Canada, Canadian Natural Resources. In the US, our go to gas name is EQT along with some pipeline names like Williams and TC Energy. We remain long the beaten up fertilizer stocks like Nutrien and Mosaic on expectations of a lift in corn, soybean and wheat prices that have badly lagged some of their other soft commodity peers like cocoa, coffee and orange juice. Gold mining stocks have terribly underperformed the rally in gold and silver prices and we are long some of them. The new commodity I'm bullish and long of is platinum as it seems that hybrid vehicles are winning the VHS/Betamax battle over full EVs. Hybrids use as much and sometimes more platinum in the catalytic converters than an ICE vehicle. Uranium remains attractive and we are still long but the trade is much further along in its maturation.

Outside of the commodity space, the food stocks have gotten pummeled as volumes slow, pricing power wanes and we don't know what comes of the RFK food initiatives. That though has left some of them very attractive and cheap like Nestle (about half their business is coffee and pet food) and Conagra (the largest US frozen food maker along with a nice snack business), and each paying generous dividends, something you don't find often now in the S&P 500 having a dividend yield approaching 1%. I'll finish up some other holdings we own and like on a sports/live entertainment theme, Under Armour, the turnaround story we believe in, Manchester United and Madison Square Garden Sports each trading at about half the value of the iconic teams they own and Madison Square Garden Entertainment, the owner of that iconic building, along with others.

Internationally, I just spent a week in Vietnam and am pretty bullish on their economy and long stocks there with the Ho Chi Minh index trading at just 10x 2025 earnings estimates. We continue to like stocks in Singapore and love the theme of the growing middle class in Asia generally via AIA Group, one of the largest life insurance companies in the region and still bullish on travel/leisure via the Macau casino stocks where visitation levels in 2024 got to almost 90% of its 2019 peak.

Speaking of natural gas, here's a chart of European gas prices as measured by TTF (Title Transfer Facility, trading spot for nat gas) that is risen post the end of Russian gas flowing thru the Ukrainian pipeline even though Europe will just get their gas elsewhere via LNG, especially from the US.

TTF

In case you didn't see the negative earnings preannouncement from H.B. Fuller yesterday that sent the stock down 7.5% and whose products go into a bunch of different things. They say they are "the largest pureplay adhesives company in the world that "enhance the quality, safety and performance of products people use every day." The company also goes back to 1887, quite a bit ago.

"Fourth quarter net revenue and earnings were adversely impacted by weaker than expected conditions and delayed orders, particularly in consumer product goods and packaging end markets as well as durable goods distribution. In addition, delayed customer order patterns shifted price increase realization into fiscal 2025 while higher raw material costs, primarily in Hygiene, Health and Consumable (HHC) Adhesives, negatively impacted adjusted EBITDA."

Some more, "Late in the fourth quarter there was a negative inflection point on volume whereby a number of market segments exhibited topline deceleration vs the previous quarter, and this adversely impacted our operating results and led to a disappointing shortfall relative to our expectations."

As we enter earnings time, I'm pretty interested in seeing what the multinational companies are saying about their European business, in light of the economic softness there and also with the ever weakening euro which is getting close to par with the dollar.

HB Fuller

With a very choppy last few weeks in the stock market, the extreme bullishness we saw in mid-December has cooled off. According to Investors Intelligence, Bulls fell to 54.1 from 59 while Bears rose to 18 from 16.4. The 36.1 pt spread is off the about 47 we saw a few weeks ago and vs the 40 that I find extreme. The less reliable and much more fickle AAII data saw Bulls fall to 35.4 from 37.8 and Bears little changed, up by .1 pts to 34.2. The Nat'l Assoc of Active Investment Managers Exposure Index fell to 64.1 after nearly touching 100 a few weeks ago. The CNN Fear/Greed index has fallen to just 26, approaching the 'Extreme Fear' category with one of the big reasons being the faltering stock market breadth which is included in it, so it isn't the same measurement as the other sentiment surveys which tend to focus on the big indices mood and exposure wise.

Charts from 8:09 a.m. ET:

Chart from 8:26 a.m. ET:

Upside:

-LFCR +5% Q2 -$0.25 v $0.39 y/y, Rev $32.6M v $30.2M y/y; Affirms EBITDA guidance

-RGP +6% Q2 $0.18 v $0.28 y/y, Rev $146M v $163.1M y/y

-NUS +16% unit Rhyz sold its Mavely affiliate marketing technology platform to Later for $250M in cash and minority equity stake

-CRNC expands collaboration with NVIDIA to advance its CaLLM family of language models

Downside:

-X -9% Pres Biden said to report decision Nippon Steel takeover bid as early as Friday

-RCI -2% cuts FY service rev outlook

-CTSO -10% s prelim Q4 Rev $9.0-9.2M v $9.0Me (2 est)

-STZ/BF.B -2% (US) US Surgeon General calls for cancer warnings on alcohol labels

You've got to ac-cent-tchu-ate the positive

E-lim-i-nate the negative

Latch on to the affirmative

Don't mess with Mr. In-Between

You've got to spread joy up to the maximum

Bring gloom down to the minimum

Have faith, or pandemonium

Liable to walk upon the scene

To illustrate his last remark

Jonah in the whale, Noah in the ark

What did they do

Just when everything looked so dark?

Man, they said we better

Ac-cent-tchu-ate the positive

E-lim-i-nate the negative

Latch on to the affirmative

Don't mess with Mr. In-Between

No, do not mess with Mr. In-Between

Do you hear me?

- Harold Arlen and Johnny Mercer, Ac-Cent-Tchu-Ate The Positive

* I call BS to those that observers that emphasize the positives and deemphasize the negatives...

* There is a lengthy pattern of this sort of behavior on Wall Street!

Bah humbug! (With apologies to Ebenezer Scrooge in A Christmas Carol by Charles Dickens).

Throughout December, technical analysts and investment strategists were praising the accuracy of Yale Hirsch's Christmas Rally Theory as a future determinant of stock prices:

Well, equities did poorly in late December (and for all of the month) — there was no Christmas rally. But, I haven't heard nary a negative word.

I suppose those observers will now move on to "as January goes so goes the year."

I call B.S.

Again.

Yank them all off the air as we settle into a wonderful song written by Harold Arlen and Johnny Mercer ACCENTUATE THE POSITIVE ~ Johnny Mercer & The Pied Pipers (1945).

Bonus — Here are some great links:

Best Performers in 2024

Let the Consumer Decide

Wall Street Forecasts for This Year Are Green (What Else Is New?)

2024 Key Takeaways

Was That the Top in Bitcoin?

Doomberg on "Freighthopping."

Wolf Street howls about the Fed's balance sheet.

The S&P Short Range Oscillator got less oversold at -2.65% vs. -3.79%.

* I remain in a trading sardine and not in an eating sardine mode....

* Accordingly, while I continue to hold nearly 30 long-term investments (long and short) — I plan to actively trade over the near term in order to generate attractive investment returns.

* This is not for everyone!

I have taken a small profit in my TLT long at $87.97 (from yesterday) in premarket trading.

From yesterday:

I'll Take That in a Medium

Moved to medium-sized (TLT) at $87.28.

Position: Long TLT (M)

By Doug Kass Jan 2, 2025 12:20 PM EST