At 4:26 p.m.:

Breadth

S&P 500 Sectors

Nasdaq 100 Heat Map

I have a 3 p.m. research call that will take about an hour.

Radio silence.

Sold more SPY at $604.71 and QQQ at $521.41.

From Peter Boockvar: 

Consumer confidence still on edge/Richmond mfr'g

The January Conference Board’s Consumer Confidence index was 104.1, down from 109.5 in December and just below the estimate of 105.7. Of note is that figure is less than the pre election figure of 109.6 in October and the 112.8 print seen for November. So, whatever election bump we got has given it back for reasons seen below.

Internally, the Present Situation component fell about 10 pts m/o/m to a 4 month low and Expectations were lower by 2.6 pts m/o/m to 83.9 after touching 93.7 in November. That is also a 4 month low. Maybe one of the reasons, one year inflation expectations rose 2 tenths m/o/m to 5.3%, matching the highest since June 2024. The Conference Board said “references to inflation and prices continue to dominate write-in response.”

We Wall Streeters and financial followers get excited about a slowdown in the rate of change in inflation but consumers still have a financial headache from its absolute level.

Also a drag were the answers to the labor market questions. Those that said jobs were Plentiful fell 4.1 pts to a 4 month low and those that said jobs were Hard To Get rose almost 2 pts to a 3 month high. Also, those expecting ‘more jobs’ in the coming 6 months fell .4 pts m/o/m to 19.4 after printing 22.8 in November. Expectations for an increase in income dropped by .7 pts to 18.3, the lowest since July.

The Conference Board said this on the above, “The return of pessimism about future employment prospects seen in December was confirmed in January.”

Spending intentions mostly fell. Plans to buy a vehicle dropped to a 5 month low and plans to buy a home declined to a 6 month low. For major home related items, they were mixed.

In terms of the confidence demographic/income breakdown, the drop was led by those under the age of 55 while those above “saw a small uptick in confidence. By income group, the sharpest decline in confidence was seen in households earning above $125k, while consumers at the bottom of the income range reported the strongest gains.”

The positive within the data was gains in the Current Financial Situation and Expectations for it.

Finally, while off its peak, 52.9% of respondents expect higher stock prices over the year ahead which as seen in the chart below, is the 3rd highest dating back to 1987 when the question was first asked.

Bottom line, US consumers still feel on edge with this index still almost 30 pts below its level of February 2020. Though expectations for the stock market remain enthusiastic.

Conference Board

One yr Inflation Expectations

Percentage of those who expect higher stock prices in the coming year

While the Dallas manufacturing index jumped again and is positive for a 2nd straight month, the January Richmond manufacturing index was -4, below zero for the 15th straight month. That though is the least negative since last May.

Richmond Mfr’g Index

- NYSE volume is flat to its one-month average;

- Nasdaq volume is 24% below its one-month average

Adding across-the-board to cannabis.

Boeing is trading +$12.50 on a release that was generally expected.

I just sold my remaining position at $186.32 - as it is nearly +$40 from my cost basis of a few months ago, substantially reducing the previously favorable reward v risk.

Adding to SPY and QQQ shorts on a scale - last tranches done at $602.32 and $518.91

From Peter Boockvar:

Core durable goods orders gets data center lift

Core durable goods orders in December rose .5% m/o/m, above the estimate of up .3% and noteworthy was the 5 tenths upward revision to November to a .9% gain.

A key driver of the upside over the past few months was the gains seen in electrical equipment orders which were up by .3% m/o/m after a 1.7% rise in November and 1.6% in October and are up 6.6% y/o/y. You can assume where that is coming from, particularly data center construction, electrical grid buildout and other government incentivized production. It was mixed elsewhere as computer/electronics orders rose .1% after falling in the two prior quarters. Machinery orders rose .2% after no change in November. Metals orders, both primary and fabricated, were mixed.

Outside of the core figure, auto production orders fell for a 3rd straight month and are flattish y/o/y, up .4%. As heard from Texas Instruments last week, as they sell into the auto end market, this should not be a surprise as US, and in Europe too, auto production has slowed.

With regards to the shipments of durable goods (as an order eventually becomes a shipment), they grew by .6% m/o/m vs the estimate of up .2% and this gets plugged into GDP and should lead to a slight upward revision to Q4 estimates.

Bottom line, after flat lining since mid 2022, core durable goods orders have finally broken higher but as read above, a lot has to do with ‘electrical equipment’ due to data center buildouts, power hook ups and I’m sure too helped by IRA and Chips Act spend.

Treasury yields are backing up again after yesterday’s drop but not much change since this figure was released.

Core Durable Goods Orders in dollars

Back shorting SPY $600.95 and QQQ $516.93.

* Looking at the widening wealth gap...

JOE is running and I am not selling.

From JPMorgan:

· US: Futs are higher as part of a relief rally from the AI-induced sell-off. Pre-mkt, NVDA +5%, AVGO +4% as Mag7 and Semis are poised to recoup some of yesterday’s losses. Keep an eye on USD and bond yields, which appear to be moving higher as Trump looks to add a blanket tariff ~Feb 1 which could start with a 2.5% blanket tariff and ramp from there. The cmdty complex is seeing strength in Energy, weakness in Ags, and Metals are mixed. Today’s macro focus is on Durable/Cap Goods, Housing Pricing, Consumer Confidence, and regional activity indicators ahead of tmrw’s Fed decision.  

and....

EQUITY AND MACRO NARRATIVE: I am sure everyone was inundated with articles, calls, podcasts, etc regarding NVDA and AI; so, I will avoid rehashing (fully) yesterday’s session. One quote from my colleague, Borja Rodriguez-Cano, may capture the sentiment of many, “until NVDA starts cancelling orders, then I am buying the dip”. This sentiment was seemingly personified by retail investors. Through midday, Emma Wu tells us that Retail investors were buying the dip in NVDA, even as it fell below its 200dma. 88% of orders placed were BUY orders, +10.0z vs. 1-month average. Keep an eye on levered ETFs, which could have as much as $20mm to sell with 90% of that TMT. Where else are folks looking to buy dips?

For the second time in a few hours I have traded the Indices well.

I just covered SPY $598.89 and QQQ $513.36.

From earlier:

My Comment of the Day

Dougie Kass

STAFF

6 minutes ago

Back short SPY $601.39 and QQQ $516.38:25AM

Position: Short SPY common VS QQQ common VS

By Doug KassJan 28, 2025 8:45 AM EST

Boeing BA +$8 on good news.

More later.

Upside:

-BACK +93% (launches subsidiary Ignite Proteomics which is dedicated to helping doctors select the most effective cancer treatments based on protein-level insights)

-LTBR +6.5% (MOU signed with Oklo for feasibility study on co-locating Lightbridge's Commercial-scale Fuel Fabrication Facility at Oklo's proposed site, exploring nuclear waste recycling collaboration)

-ATRA +5.6% (to cut workforce by ~50%; expects to recognize ~$7.5M in severance costs)

-BWXT +5.0% (awarded manufacturing contracts totaling C$1B to support Pickering Life Extension and Darlington New Build Projects)

-RCL +5.0% (earnings, guidance)

-NBIX +4.6% (announces Initiation of Phase 3 Registrational Program for Osavampator as an Adjunctive Therapy for the Treatment of Major Depressive Disorder in Adults)

-MULN +4.3% (regains compliance with NASDAQ listing rule 5250)

-UAVS +4.0% (completes successful exhibition of eBee VISION for Key U.S. Department of Defense Officials)

-OKLO +3.8% (MOU signed with Oklo for feasibility study on co-locating Lightbridge's Commercial-scale Fuel Fabrication Facility at Oklo's proposed site, exploring nuclear waste recycling collaboration; Craig-Hallum Initiates OKLO with Buy, price target: $44)

-IVZ +3.7% (earnings)

-TRAK +3.7% (adds 40 New Specialty Food Suppliers to the Queue for the Rapidly Expanding Food Traceability Network; partners with Upshop to Level Up Traceability Capabilities across America’s Grocery Stores)

-RTX +3.6% (earnings, guidance)

-MIST +3.5% (plans to initiate Phase 3 Study in AFib-RVR in 1H25 with CARDAMYST (etripamil) nasal spray PDUFA date of March 27, 2025)

-TLN +3.3% (Talen Energy, Other Parties Reach Reliability Must Run Settlement Agreement for Brandon Shores and H.A. Wagner Power Plants)

-ADSK +2.9% (Mizuho Securities Raised ADSK to Outperform from Neutral, price target: $400)

-QUBT +2.7% (secures Fifth Purchase Order for TFLN Foundry and Previews PDK on a Commercial Platform)

-DHR +2.3% (unit Beckman Coulter Receives FDA Breakthrough Device Designation for Alzheimer's Disease Blood Test)

-TMO +2.1% (Lyndra Therapeutics pivotal safety study for lead asset oral weekly risperidone (LYN-005) is slated to begin in 1H25; announces Adam Sayer Appointed President and CEO)

Downside:

-PII -6.9% (earnings, guidance)

-GGG -6.8% (earnings, guidance)

-SYF -5.5% (earnings, guidance)

-SOUN -4.8% (files $500M mixed shelf)

-LMT -3.5% (earnings, guidance)

-SYY -3.4% (earnings, guidance)

-WAL -3.2% (earnings, guidance)

-PCAR -3.1% (earnings, guidance)

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

Most active premarket ETFs as of 8:24 a.m. ET.

Premarket percentage movers at 8:41 a.m. ET:

Dougie Kass

STAFF

6 minutes ago

Back short SPY $601.39 and QQQ $516.38:25AM

* As our "Tales" series approaches its 60th issue (!)...

* Best case, DeepSeek is to AI as Huaweii was to Ericsson, Cisco, and Nokia

* With apologies to Mad Magazine's Phil Interlandi, Harvey Kurtzman and Joe Orlando: A Scene We Expect To See...

Here is Nvidia's NVDA statement on DeepSeek's challenge. 

https://www.cnbc.com/2025/01/27/nvidia-calls-chinas-deepseek-r1-model-an-excellent-ai-advancement.html

Not even Nvidia is denying that the threat is true.

I suppose since "the man in black," Jensen Huang, just took people for another ride and added tens of billions of dollars to his bank account he doesn't care about trying to defend the stock price.

In some ways he is probably glad, because when it blows up bigly again (and boy do they have a history of blowing up), it gives him an easy excuse and kind of lets him off the hook for everything else like the accounting issues, sending parts everywhere including indirectly where they are not supposed to go, the fact that Blackwell has all sorts of issues, and for grossly over hyping the whole sector and its prospects.

Here is my "preview" of the commentary I expect when they blow up:

"In light of new developments in the LLM space our customers are taking a pause with regard to how they will deploy their rollouts and technological architectures."

And I expect this kind of statement from them to be a preview of the many misses and guide downs to come. Operating leverage works both ways too, and boy have they bloated expenses recently too.

As the wise woman, Grandma Koufax, used to say, "Dougie, we shall see what we shall see."

And, to follow up, here is a recent one from Miscrosoft's MSFT CEO, Satya Nadella, after the DeepSeek news went public yesterday. (Expect to hear a lot of this baloney, the basic spin being now that it is cheaper, it will be used more, and more than make up for the degradation in price): 

Except it is obvious BS in my view:

* If this was so good, why didn't we hear a peep of this before the underlying technology structure of DeepSeek went public? Seems really hard for me to believe none of NVDA, MSFT, Sam Altman (who of course wanted the taxpayers money) and all the others levered to AI in its current incarnation, were not saying a word about this?

*If it was such a positive development for the space, the AI oligarchs would have been well out in front of this and touting it to everyone, as opposed to keeping this information buried. They have touted every single thing on the come, no matter how fantastical, and even stuff theoretically years away, and not a peep about this?

* For a giant hunk of the user base, it is already free. The price cannot come down anymore, there is no elasticity to demand based on price. Unless they are going to pay you to start using it. The problem is the lack of utility due to the hallucinations. DeepSeek is no different than anything else in this regard. That problem has not come close to being solved. 25% of zero is still zero, and 100x zero is still zero. This is the biggest issue. Sure, DeepSeek doing it cheaper is a major problem for the incumbents and Nvidia, but it does not solve the real problem with AI in its current incarnation. If someone could produce an exploding version of the original Ford Pinto at 25% of the price, it still would not be a good or compelling product: https://www.motortrend.com/features/ford-pinto/

* For the corporate user, they have been investing in it regardless of price, because they feel like they had to, out of fear of being left behind. The problems corporations are having are similar to the consumer, the results are not good because the technology does not work well. That is the issue corporates were having. It went well beyond price, it was also the results and utility of the product. DeepSeek does it cheaper, but it still produces the same bad results. Per prior "More Tales From Nvidia," even heavyweights that are throwing massive dollars at this cannot make it work. Apple AAPL shutting down parts of Apple intelligence, Amazon AMZN can't get the Alexa AI to work right, and Microsoft is already started pushing out DC spend (I actually wonder if this is because they knew DeepSeek was doing things cheaper and wanted to figure that out too or they are figuring out the underlying tech is not as advertised regardless of cost).

* It is beyond me how this is good for Nvidia when you think about their pricing, and the operating leverage inherent in their model that is both a function of price and units.

* If this was so positive, where was everyone telling us about DeepSeek and others ahead of time?

* Best case, DeepSeek is to AI as Huaweii was to Ericsson ERIC, Cisco CSCO, and Nokia NOK. That is the best case. As noted yesterday, my baseline case is it works about as well as solar or wind power compared to already existing alternatives that are much lower cost and much more effective.

Finally, here is a chart showing how sizeable drawdowns have been in NVDA shares over history:

Note: Mad Magazine's Scenes We'd Like to See was written and illustrated by various cartoonists like Kurtzman and Orlando. The Scenes were generally one-page vignettes which inverted the common conventions of moviemaking, advertising, or the culture at large, ending with a clichéd character in a clichéd setting, acting cowardly or saying something atypically honest.

I just covered my SPY $699.63 and QQQ $514.58 shorts.

From earlier:

Tuesday Premarket Trading

* At around 4:20 a.m...

Reestablished shorts in the Indices:

* (SPY) $601.34

* (QQQ) $516.96

Position: Short SPY common (VS), QQQ common (VS)

By Doug Kass Jan 28, 2025 5:45 AM EST

Bonus — Here are some great links:

AI Infrastructure's Worst Day 

Today's Number Is 22 

Phil D Gap

Turning the TV Off

The AI Show

What you won't hear from the shows this morning was the intensity of the rotation yesterday:

The S&P Short Range Oscillator is now deeply overbought — at 7.7% from Friday's 5.6%.

I am back shorting the Indices.

* At around 4:20 a.m...

Reestablished shorts in the Indices:

* SPY $601.34

* QQQ $516.96