Closing Breadth

S&P 500 Sectors

Nasdaq 100 Heat Map

At 4:13 p.m.:

I won’t be back to the office today.

I continue to build short exposure.

Advancers

Decliners

I will be out of the office most of the afternoon - I have a 1:30 p.m. research meeting with a company management I have been seeking out with for a while.

Low Volume

- NYSE volume 2% above its one-month average

- NASDAQ volume 25% below its one-month average

Breadth

S&P Sectors

Nasdaq 100 Heat Map

Large-Cap % Gainers

Large-Cap % Decliners

I pressed my shorts on every uptick this morning.

Added to SBUX short at $111.94.

Added to VRNOF and GTBIF.

Bidding for others.

Back buying individual cannabis equities and bidding for more MSOS.

With S&P cash +16 handles I am adding to my Index call shorts now.

From Peter Boockvar:

Claims and productivity data

Initial jobless claims rose to 219k from 208k and that was 6k more than anticipated. The 4 week average moves to 217k from 213k, a 5 week high but still remains low. Continuing claims though continues to be a focus as it holds near the highest since November 2021 at 1.886mm from 1.850mm in the week before.

No change to the bottom line when it comes to claims that I’ve given for a while now with respect to hiring’s and firing’s.

4 week avg in Initial Claims

Continuing Claims

Productivity in Q4 was as expected up 1.2% q/o/q annualized. Versus Q4 of 2023 it was higher by 1.6%. To put into context that 1.6% gain, after a 2.1% rise in Q3, the 30 yr average increase in productivity is exactly 2% and that covers the wonders of the internet, the iphone and all the apps that came with it and now GenAI and the productivity enhancing efficiencies it can bring, though we’re still early with this new AI iteration.

Unit labor costs were up by 2.7% y/o/y which matches the quickest since Q2 2023 but was a hair below expectations.

Bottom line, in order to get to the 3% REAL GDP growth that we all root for, and with the size of the labor force rising by less than 1%, we need a further pickup in productivity growth.

From Peter Boockvar:

It's the long end that matters now/BoE cuts/Earnings rundown

There is one thing to harass and jawbone Jay Powell to lower short term rates and another completely different thing trying to tame the long end of the yield curve which of course can only be influenced indirectly (outside of the Fed itself directly getting involved via asset purchases). Treasury Secretary Scott Bessent said on Fox Business yesterday that he and Trump are "focused on the 10 year Treasury. He is not calling for the Fed to lower rates." Their goal in keeping long rates low is reliant on calming inflation and mostly via lower energy prices but as we know, something that is tough to control in terms of convincing oil companies to drill more when the price is not necessarily right. Also helping will be lower government spending and cutting its size. If so, Bessent says "we're going to go into a good interest rate cycle." On the spending, efficiency side, that is something directly in their purview, let's hope it succeeds.

Similar to the ECB, the Bank of England's sole mandate is supposed to be inflation but they are also more focused on slow economic growth and cut their bank rate by 25 bps to 4.50% as expected with two members wanting to cut 50 bps including the usual hawk Katherine Mann which was not expected. The other 7 agreed to cut 25 bps. "In support of returning inflation sustainably to the 2% target, the Committee judges that there has been sufficient progress on disinflation in domestic prices and wages." They finished up their statement by saying again, "Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further."

With two members wanting a 50 bps cut today, the 2 yr yield is down by 6 bps on the day to 4.09% and the pound is down 1%.

Intraday 2 yr gilt move

Intraday pound move

On the flip side, the yen is rallying again as BoJ member Naoki Tamura gave us his game plan for getting Japanese short term rates to 1% from the current .50%. He said this should take place by the end half of fiscal 2025. "I think the bank needs to raise this rate in a timely and gradual manner, in response to the increase in the likelihood of achieving the price stability target...Now is the time for the Bank to ease off slightly from pressing hard on the accelerator of monetary easing."

In response too, the JGB 2 yr yield was up for the 7th straight day to .77%, a fresh 16 ½ year high.

One of my go to earnings calls for a tell on the tech sector is CDW as they are a major distributor of hardware, software, mobile devices, cloud computing, networking equipment, security stuff and computer peripherals with more than 250,000 customers and about $21.5 billion of revenue.

From them:

"During the quarter, as we have seen all year, customer priorities remained laser-focused on operating efficiency and expense elasticity and continuing that with a service and ratable solutions like Cloud and SaaS and consultative services in order to optimize spend and minimize capital expenditures."

"At the same time, customer focus on mission critical and must-do priorities drove interest in resuming projects with clear short-term returns on investment. This led to an uptick in demand across several hardware categories."

"While customer behavior remained cautious and we did not experience traditional year-end budget flush, we did see greater willingness by some customers to spend the remaining budgets. Corporate and small business increased their top line, both up by 4%. International or other increased by 5% and Public increased 6%, driven by healthcare's standout performance, up 30%...Government's decline was driven by federal end-market uncertainty where we saw spending pauses as agencies awaited clarity around priorities from the incoming administration, clearly a quarter of varied end-market performance."

Their bottom line on IT spend for 2025, "We currently look for the US IT market to grow by low single digits in 2025 on a customer spend basis." They said this estimate also includes what happens on the public side. "As always, we base our view of IT growth on what we are seeing in the market and what our customers are telling us about their plans and priorities for 2025. Right now, our commercial and public customers' decisions remain deliberate with ongoing project scrutiny, pursuit of short-term ROIs, and continued large project buying hesitancy."

From Old Dominion Freight on the transportation side of the economy:

"Old Dominion's fourth quarter financial results reflect continued softness in the domestic economy...The past few years have been full of challenges with our industry, especially given the sluggish macroeconomic environment that has continued far longer than most of us would have anticipated."

"I'm cautiously optimistic as we start the fiscal new year. While we cannot predict what we will see in the inflection and demand, we're well positioned to respond to an improving operating environment when it materializes."

From Uber, whose stock fell because of a guide on gross bookings that was slightly below the range of expectations:

"So the theme of this quarter is acceleration. We accelerated growth in audience, trips and the top line."

Dara also chimed in on the autonomous vehicle trends he's seeing. "The key takeaway is that while AV technology is advancing, commercialization will take significantly longer, and we have conviction that Uber will be the indispensable go to market partner for AV players."

One reason for the bookings miss, "we are expecting FX to be a larger top line headwind in Q1. Think 5.5 percentage points of headwind, and that compares to closer to 3 points in Q4."

On the cost of auto insurance increases expected, it "is likely to be high single digits on a per-trip basis in 2025" but "that is meaningfully lower than we've seen for the last two years." That we know was well into the double digits in terms of increases.

From Capri, the owner of Versace, Jimmy Choo and Michael Kors:

"Overall, our business remained challenged during the quarter. And we are disappointed with our results."

"Revenue decreased 12% as our results were impacted by softening demand for fashion luxury goods globally with an outsized decline in China. Our performance was further impacted by our store optimization program as well as our ongoing reductions in the wholesale channel."

From Ford:

"The EV market, we continue to see new models launch, increased competition with increased pricing pressure. On hybrids, we continue to see the market grow aggressively, but now in diverse markets like truck customers who are learning that a hybrid can also mean uncompromised towing and torque and payload and other performance advantages, including fuel economy. In the ICE market, the industry's inventories and pricing have normalized. We also see the Chinese OEMs continue to expand and be a major force in our industry. Their operational fitness is incredible. Their supply chains are now expending globally and they're increasing their exports around the world."

From Harley Davidson:

"we saw our performance being significantly impacted by continued headwinds for discretionary products, including the high interest rate environment affecting consumer confidence and creating affordability issues for our customers."

From Hilton:

"All segments drove RevPAR outperformance, with strong trends in leisure occupancy, as well as continue growth in business transient and group results, and we expect favorable trends to continue into 2025."

Upside:

-APPS +22% (earnings, guidance)

-SONO +18% (earnings)

-RANI +17% (announces Preclinical Data Demonstrating Successful Oral Delivery of Semaglutide via RaniPill HC)

-TTMI +17% (earnings, guidance)

-TPR +16% (earnings, guidance)

-AMSC +14% (earnings, guidance)

-COHR +13% (earnings, guidance)

-PTON +11% (earnings, guidance)

-RL +11% (earnings, guidance)

-COYA +10% (reports Statistically Significant Improvement of Inflammatory Blood Markers in Patients with Alzheimer’s Disease Following Monthly Dosing with Low-Dose IL-2, Further Supporting Clinical Development)

-PM +8.0% (earnings, guidance)

-GEOS +7.4% (earnings)

-APTV +7.3% (earnings, guidance)

-UA +7.1% (earnings, guidance)

-EZPW +3.9% (earnings)

-HSY +3.7% (earnings, guidance)

-IDCC +3.6% (earnings, guidance)

-YUMC +3.5% (earnings, guidance)

-PBH +2.9% (earnings, guidance)

-MDU +2.5% (earnings, guidance)

-LNC +2.2% (earnings)

Downside:

-SWKS -29% (earnings, guidance)

-FORM -22% (earnings, guidance)

-PI -22% (earnings, guidance)

-LFVN -21% (earnings, guidance)

-RBLX -21% (earnings, guidance)

-MTRX -18% (earnings, guidance)

-SRTS -17% (earnings)

-SYM -17% (earnings, guidance; discloses subpoena from the SEC relating to November 2024 restatement of FY24 revenues)

-GAIA -13% (prices 1.6M shares at $5.00/shr through Roth Capital and Lake Street Capital)

-AOSL -12% (earnings, guidance)

-HII -11% (earnings, guidance)

-KURA -11% (Kura Oncology and Kyowa Kirin announce Ziftomenib Monotherapy Registrational Trial and FDA Feedback for upcoming Frontline Combination Trial Designs)

-BLCO -9.9% (provides update on potential sale (originally disclosed in December 2024); will not result in a transaction at this time, but full separation remains the goal)

-CNMD -9.5% (earnings, guidance)

-MNR -8.8% (files stock offering of 12.0M common units)

-MOH -8.5% (earnings, guidance)

-VKTX -6.5% (earnings)

-HOLX -5.9% (earnings, guidance)

-F -5.6% (earnings, guidance)

-HP -4.8% (earnings)

-HAE -4.6% (earnings, guidance)

-BMY -4.5% (earnings, guidance)

-QCOM -4.1% (earnings, guidance; Arm notified it that it was withdrawing its October 22, 2024 notice of breach and indicated that it has no current plan to terminate the Qualcomm ALA)

-ENTG -3.8% (earnings, guidance)

-ARM -3.7% (earnings, guidance; Arm notified it that it was withdrawing its October 22, 2024 notice of breach and indicated that it has no current plan to terminate the Qualcomm ALA)

-LH -3.2% (earnings, guidance)

-LIN -2.7% (earnings, guidance)

-BARK -2.6% (earnings, guidance)

-ETON -2.6% (US FDA extends ET-400 PDUFA date to May 28, 2025; do not expect this standard extension to significantly affect our internal 2025 revenue projections)

-SONO -2.2% (earnings; discloses reorganization and reduction in force involving ~12% of its employees)

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

Premarket percentage movers at 8:42 A.M.:

I remain short a small position in Roblox RBLX.

Shares -$19 or -25%.

I have reduced the short (covered some at $56.79) and moved to very small.

The company spit the bit this morning. Roblox - Roblox Reports Fourth Quarter and Full Year 2024 Financial Results

From October:

The Roblox Report

I have been short Roblox (RBLX) for a while.

This morning, 97 years after the airship accident (!), Hindenburg Research issued a sell/short analysis: "Roblox: Inflated Key Metrics For Wall Street And A Pedophile Hellscape For Kids – Hindenburg Research"

Position: Short RBLX (S)

By Doug KassOct 8, 2024 9:01 AM EDT

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

From JPMorgan:

US: Futs are higher with Tech underperforming on mixed Mag7/Semis pre-mkt price action. Bond yields and USD are stronger this morning while cmdtys are stronger across all of Ags, Energy, and Metals ex-Precious. Bessent says that the Administration is focused on lowering the 10Y yield rather than the Fed Funds rates; the best way to decrease yields is through a lower budget deficit. HON splitting into 3 co’s. Today’s macro focus is on Jobless data and the BOE decision.

and...

EQUITY AND MACRO NARRATIVE: Yesterday, stocks finished higher as investors digested a slew of catalysts: (i) GOOG/L and AMD earnings from Tuesday night disappointed with stocks falling 7.6% and 6.8%, respectively. However, GOOG/L huge AI CapEx spending drove the rally in data centers (VRT +7% yesterday); (ii) there has been multiple headlines from Washington (Gaza, DOGE, Iran), but stocks have not been reacting to most of these yesterday; (iii) yields declined further as we approached NFP this Friday; 2y and 10y are 4pts and 9pts lower, respectively, amid dovish macro data so far this week (ISM-Srvcs and JOLTS).

Valvoline VVV beats top and bottom line.

More to come.

Here is the complete report.

Q1 2025 Earnings Release

* The Dales Report provides an objective, important and potentially positive regulatory update on cannabis.

* The emerging traction of potential cannabis regulatory reform is being ignored by investors as cannabis equities struggle near all-time lows in price.

* I see a potential "generational" opportunity — just at a time in which investors in cannabis have essentially given up on any incremental legislative progress.

My take, similar to The Dales Report below — is that yesterday's conversation in the Senate Banking hearing was clearly a net positive for possible federal reform in the cannabis space:

Here is a fairly comprehensive banking hearing summary, including numerous comments from The Brookings Institute's Aaron Klein, which appear to be in favor of cannabis reform. Senate Banking Committee Witness Urges Members to Improve, Pass SAFE Banking Act | Cannabis Business Times

Add Ohio gubernatorial candidate Vivek Ramaswamy's comments about the need to legalize cannabis nationally (and align with state cannabis laws) with Bill Maher suggests further that the scales might finally be tipping positively for weed.

As well, add the potential that (a pro-cannabis leaning) RFK Jr.'s appointment at HHS might be approved shortly. Cannabis stocks climb on RFK Jr. committee vote and Senate banking hearing - MarketWatch

These collective and potentially important inflection points of opinions are incurring at a time in which cannabis stock prices have hit a multi-year low and investors' sentiment (as reflected in the lowly price of MSOS) have never been worse.

While challenges continue (not the least of which is industry price compression (especially in the state of Florida)) and the retail community of investors/traders in cannabis have been eviscerated — I now see the possibility of a classic (and generational) bottom for the cannabis space and I have purchased more MSOS and individual cannabis equities daily for two weeks.

Post Script

One last point before I close this column. If you look at the sharp climb in Aurora Cannabis' share price ACB, which rose by +46% yesterday on very heavy volume of 68 million shares (vs. 800k average daily volume) in an apparent short squeeze you can understand why I wrote this back last year:

* It is not far fetched to view cannabis stocks as (potentially) the next set of new compounders in the face of imminent legislative reform (and tax relief) as well as resolution of custody and institutional buyer issues.

* Cannabis equities might even get some "meme" play as a cherry on top!

- Kass Diary, TheStreetPro: The Next Big Thing? Believe It or Not It Could Be Cannabis Stocks! 

Finally, now look at the strong performance of selected (pure) psychedelic equities this week... Holy moly!

This is an important cannabis tweet.

Note that the MSOS has gone from nearly $10 million of borrowings and into a cash position because of a 600,000-share creation.

Moreover, over 1 million shares of GTBIF were sold (its largest holding) yesterday — and it was easily absorbed in the market (rising by two percent on the day):

After I have written 63 "Tales from Nvidia"... it's starting:

Bonus — Here are some great links:

Why Volatility Is Good for Stocks 

US Dollar - Sell The News

Big Support Level in BTC

CAD/USD At a Tipping Point

Welcome to the Worst Period of the Year

* Higher stock prices on lower volume...

The S&P Short Range Oscillator has moved up from 1.04% to 2.82% overnight — more overbought.