As of 4:20 p.m.:

Closing Volume

- NYSE volume 9% below its one-month average;

- NASDAQ volume 10% above its one-month average;

- VIX index: down 5.59% to 15.87

Breadth

Sectors

% Movers

Nasdaq 100 Heat Map

From Peter Boockvar:

Good 10 yr auction and quick point from the FOMC minutes

On the heels of a good 10 yr Treasury auction with a yield that was slightly below the when issued level and a bid to cover of 2.61 that was above the one year average of 2.56 though with a dealer take that was just above the past few months, the Fed’s minutes from their meeting three weeks ago was a non-event. It typically is because we hear from so many members since each meeting and Powell in particular spoke both at this presser and also spent two days in front of Congress telling us what he thinks.

The desire of Governor’s Chris Waller and Michelle Bowman was reflected in this line, “A couple of participants noted that, if the data evolve in line with their expectations, they would be open to considering a reduction in the target range for the policy rate as soon as at the next meeting.” Though their names weren’t specifically mentioned we assume who ‘a couple of participants’ are.

On the other hand, “Some participants saw the most likely appropriate path of monetary policy as involving no reductions in the target range for the federal funds rate this year, noting that recent inflation readings had continued to exceed the Committee's 2 percent goal, that upside risks to inflation remained meaningful in light of factors such as elevated short-term inflation expectations of businesses and households, or that they expected that the economy would remain resilient.”

Maybe most importantly was this line, “Several participants commented that the current target range for the federal funds rate may not be far above its neutral level.” If the case, we will see what I’ve mentioned before that rate cuts from here, after the 100 bps already seen, will be more tweaks lower rather than anything else.

Right now, the fed funds futures market is pricing in about a 100% chance of exactly two cuts this year, no more, no less with the first one most likely in September.

At $184, RSP is now a medium-sized short.

RSP goes negative.

- NYSE volume 8% below its one-month average;

- Nasdaq volume 15% below its one-month average;

- VIX index: down 2.91% to 16.32

* Seeing narrowing market leadership...

I have moved to large-sized in my Index short now.

Some observations, away from sensational tech stock action:

* Financials seem to have already begun to reverse back toward unchanged.

* Consumer stocks lower on the day (e.g. we shorted COST (-$8 today) yesterday at $989.50, now $979).

* RSP (equal weighted S&P Index) is up by only +0.13%.

* Some of the clear market leaders (NFLX, PLTR) plus/minus on the day, small

From Peter Boockvar:

It is mind boggling that people are not doing the math on tariffs. If the blended rate ends up being 15% on $3.3T of imported goods, we essentially just raised the corporate income tax by $500b, thus doubling the corporate tax rate (as we currently take in about $525b in corporate taxes).

From Peter Boockvar:

CSCO peaked at 5.3% of US GDP. NVDA right now is about 13% of US GDP. So NVDA is 2.5x what CSCO was valued at in March 2000 relative to GLOBAL GDP.

With S&P cash +42 handles I am adding to my Index shorts:

* SPY $624.40

* QQQ $557.20

Chart from 8:39 a.m. ET:

Charts from 8:19 a.m. ET:

Upside:

-PROK +55% (momentum)

-ARTL +31% (announces Positive Preclinical Efficacy Data for ART26.12 in Osteoarthritis Pain at the 35th Annual International Cannabinoid Research Society Symposium)

-VRNA +21% (Merck confirms to acquire Verona Pharma for $107/ADS in $10B transaction)

-AES +14% (reportedly evaluating options amid takeover interest)

-GROV +11% (HumanCo Investments sends letter to the Board calling on them to pursue strategic alternatives including full sale of business)

-RYTM +9.8% (announces Oral MC4R Agonist Bivamelagon Achieved Statistically Significant, Clinically Meaningful BMI Reductions in Placebo-controlled Phase 2 Trial in Acquired Hypothalamic Obesity)

-BE +7.4% (JPMorgan Chase and Co Raised BE to Overweight from Neutral, price target: $33)

-ALVO +6.8% (acquires Ivers-Lee Group, a Swiss family-owned pharma assembly and packaging company)

-ICON +6.8% (Atlantis Holding Corp disclosed 77.9% stake)

-RUN +3.4% (Jefferies Raised RUN to Hold from Underperform, price target: $11)

-GILT +3.3% (awarded over $22M in orders from Tier One satellite operators)

-KALA +2.7% (completes enrollment in CHASE Clinical Trial evaluating KPI-012 for treatment of Persistent Corneal Epithelial Defect (PCED))

-SBUX +2.4% (reportedly drawing interest for controlling stake in China unit)

Downside:

-RXST -44% (earnings, guidance)

-EVTL -26% (files to sell $60M shares)

-AEHR -22% (earnings)

-WPP -19% (earnings, guidance)

-JSPR -7.3% (cuts workforce ~50% and halts non-urticaria programs to extend cash runway)

-TNDM -4.9% (CitiGroup Cuts TNDM to Sell from Neutral, price target: $14)

-ENPH -3.9% (Goldman Sachs Cuts ENPH to Sell from Buy, price target: $32)

-ILMN -3.2% (CitiGroup Cuts ILMN to Sell from Neutral, price target: $80)

From Peter Boockvar:

Some copper info/What CFO's are thinking/Used car prices/You like sushi?

As copper is now the subject of substantial tariffs, it's important to understand that this is probably the most important industrial metal in the world in terms of its breadth of use. According to the US Geological Survey, "Electrical uses of copper, including power transmission and generation, building wiring, telecommunication, and electrical and electronic products, account for about three quarters of total copper use. Building construction is the single largest market, followed by electronics and electronic products, transportation, industrial machinery, and consumer and general products." 

The US produces about half of the refined copper it needs every year with about 2/3rds made in Arizona. Most of the balance of copper that we import comes from Chile (just over 600k metric tons) with much smaller amounts from Canada (about 175k) and Peru (less than 100k). These countries make up around 90% of refined copper imports to the US.

My worry, again, is while it is laudable to want the US to build more manufacturing plants in the US, the cost of physically building these factories and filling them with machinery and electrical equipment is getting more and more expensive because of the tariffs on all the crucial things that is needed for construction and build out.

The copper rally yesterday sent the CRB raw industrials index up by almost 1% to just 2 pts from the highest level since February 2023. I'm no technician but that's a good looking chart below in terms of a bottoming process. We remain bullish and long commodity stocks.

Shifting to crude oil for a second, you've heard me make the bull case and the move higher this week in the face of a bigger than expected OPEC quota increase is further evidence of what is a tight inventory market. And, there hasn't been much of an inventory boost in response to the OPEC quota rise. The long time experience with markets is that something that doesn't go down on perceived bad news means that it's most likely bottoming just as a stock that doesn't rally on good news is most likely at a top.

CRB Raw Industrials Index

I still think it's way too early for some to be spiking the football on the impact of tariffs, believing there is no inflation, little economic impact and thus no big deal. Thanks to my friends at Grant's Interest Rate Observer for pointing out this CFO survey from Duke University released a few weeks ago. It's titled "Record Concern About Tariffs Expected to Increase Costs and Prices, Reduce Hiring and Investment." https://www.fuqua.duke.edu/duke-fuqua-insights/record-concern-tariffs-increase-prices-reduce-hiring-and-investment

"In the survey, which closed on June 6, CFO's revised higher their own firm unit cost and price growth projections for 2025, while reducing their revenue growth expectations. Financial executives also lowered their expectations for real GDP growth over the next four quarters to 1.4%, from 1.9% in the prior survey. Moreover, the probability respondents assigned to negative year ahead economic growth jumped to 23% from 15% last quarter."

For the 40% of respondents that indicated tariffs and trade policy were "a pressing concern", they expect "input cost pressures building this year" to 6.6% vs 3.9% that don't see tariffs as a "pressing concern." This 40% also "expect to raise prices significantly higher (6.6% vs 3.2% for the rest).

Also of note from the survey, "More than four in 10 financial executives report having postponed, scaled down, delayed indefinitely, or outright canceled investment plans in response to trade concerns during the first half of 2025."

And finally this, "In a separate question regarding additional impacts of tariffs, about 40 percent of CFOs noted that they have or will pass tariff-related cost increases through to customers. Among the firms that reported they were passing along tariff-related costs, the median firm indicated that they plan to pass through 100 percent of tariff-related cost increases."

I'll add, maybe the price increases are one time in nature but tell that to the businesses/consumers that have to eat it, especially after what they just experienced over the past four years.

A key part of the goods side of CPI are car prices, both new and used. Manheim yesterday said wholesale used vehicle prices rose 6.3% y/o/y and 1.6% m/o/m in June seasonally adjusted. They said, "Wholesale appreciation trends have been more volatile over Q2 as tariffs really impacted new sales and supply, which impacted the used marketplace as well. The Manheim index has generally been rising since last June, and we typically see the strongest changes for the year in the 2nd quarter as the 'spring bounce' comes to an end. As we move through the 2nd half of 2025, it's likely that some of the reported strength in the market tapers, as the y/o/y comparisons are tougher in the back half of the year. Even so, retail sales continue to run a bit hotter than prior years, and off-lease supply into the market is still on a downward path, two factors which should be fairly supportive of higher values as we move onward."

In the NY Fed's Consumer Expectations Survey for June seen yesterday, this was positive commentary on the consumer, in a bottom line from it:

"Perceptions about households’ current financial situations compared to a year ago improved markedly with a smaller share of households reporting a worse financial situation and a larger share of households reporting a better financial situation. Year-ahead expectations about households’ financial situations also improved, with a smaller share of households expecting a worse financial situation and a larger share of households expecting a better financial situation in one year from now."

I'm sure the rally in the stock market has helped the mood.

From Kura Sushi's earnings call, a company you likely never heard of but runs a chain of 78 US based sushi restaurants:

They reported comps down 2.1% y/o/y with price/mix up .8% "offset by negative traffic of 2.9%." They did though see sequential improvement in comp gains as the quarter progressed.

"Labor as a percentage of sales increased by 50 bps due to high single digit wage inflation." In their fresh quarter they are in now, "we'll see mid to low single digit labor inflation which would be an improvement from what we've seen in Q2 and Q3."

"Effective pricing for the quarter was 4.3%. On June 1, we took a 1% menu price increase and after lapping prior year increases, our effective price for the fourth quarter will be 3.5%." They are currently now in their fiscal Q4.

As the company sources almost half of their restaurant cost needs from Japan, Korea and Vietnam, tariffs matter for them. "As I mentioned in previous calls, our Japanese suppliers have been very eager to sit with us and say, look, we'll share some of this impact. We don't know if that's 50-50, 60-40. We don't know those numbers yet...We also are hopeful that 25% is not the final number."

Distorted by the July 4th holiday in terms of timing, the MBA said purchase applications rose 9.4% w/o/w and refi's were higher by 9.2%. We'll wait until next week's data to smooth out the behavior around the holiday.

China said its PPI for June fell 3.6% y/o/y which was more than the estimate of down 3.2% highlighting the intense competition that many of their manufacturers in key sectors are facing, along with over capacity but also the global manufacturing recession that we're all experiencing.

Consumer prices in China in June continue to see true price stability as they rose .1% y/o/y vs the estimate of down one tenth. Prices ex food and energy rose .7% y/o/y vs .6% in the month before. Nothing market moving here but the Hang Seng index has had another great year so far, up 19% ytd, though down 1% overnight. That market remains dirt cheap trading at 11x earnings with a 3.3% dividend yield. We continue to own the Macau casino stocks and AIA Group as a play on the consumer.

"Used Car & Truck Wholesale Prices Been Rising for a Year, in Part Driven by Surging Prices of Used EVs"

Knowledge@Wharton on "The Hiring Trade-off Behind Startup Growth."

From JPMorgan:

US: Futs are higher as the SPX tries to regain losses from Monday’s tariff letters but seeing a stronger risk-on tone in EMEA. Pre-mkt, Mag7 names are higher while Semis are mixed. Banks, Industrials are boosting Cyclicals. Bond yields are flat to up 1bp as the USD is indicated higher. Cmdtys are higher in both Ags/Energy as metals are generally weaker post-copper tariff announcement. Today’s macro data focus is on Fed Minutes, mtge applications, and inventories.

and...

TRADE UPDATES – Yesterday, Trump indicated (i) a deal with the EU may come within 48 hours; i(i) 15 – 20 new tariff letters are coming out this week; (iii) introduced a 50% tariff on copper imports [US imports ~45% of its refined copper consumption]; (iv) pharma tariffs of up to 200% but not for another 12 – 24 months; (v) Aug 1 represents the last extension.

o 90% of US refined copper imports come from Chile (51% of US imports), Canada (31%), Mexico (7%), Peru (5%), and Congo 92%). Copper futures closed +10.4% (was up 12.3% at its highs) on the news. FCX added 2.5% (was up 8.8% at its highs) on the day.

o Pharma ETFs fell significantly before recovering, trading in a 200bp range around the announcement.

o Bessent will travel to Japan next week and is expected to hold the next round of China talks in early August ahead of the Aug 12 expiration of China’s 90-day tariff delay.

Bonus — Here are some great links:

The Sweet Spot

Same News, Better Reaction

Profit Taking and Discount Shopping

When Price and Policy Agree - Don't Argue

Chart of the Day

chrisideker

Dougie, may I ask why the retail short? Stretched consumer? Tariffs? Valuations?

Dougie Kass

consensus is consumer is strong.

i disagree.

1. student loan repayments
2. housing contraction has just begun
3. if equities fall (as i expect) negative wealth impact/multiplier
4. interest rates will remain higher for longer
5. so will inflation remain stubbornly high
6. jobs market study to wither
7. etc etc

chrisideker

Ok, fair enough. I look at WMT's ROS and see +-4.7%. They typically spend about 25% of sales on labor in a store. I am super impressed with their automated checkout technology combined with AI scanning at the exit at the newer Sams Clubs. Let's say that reduces shrinkage by 50% and cuts labor by 20%. That could double ROS. They have a terrific opportunity to roll this out to all their stores. Competition will forces COST to do the same as they have a major pinch point a checkout and exit.

I'm long both, but with small positions- hoping for a pullback.

sbickleyinreno

Dougie, I agree, and this is spot on. Anyone who knows regular people trying to make it in today's society at the middle class level would vigorously nod their heads in agreement. I have two sons. One is 24 and has been in the working world for two years —he is a hard worker and doing OK. He may be getting an apartment with a roommate, and he can expect to pay $1k/month for his share—that is insane. Many of our discussions are around how he can generate enough income to eventually buy a home without leaving the area. Thank goodness for your sage wisdom here and for TN's guidance on the crypto front...he may just make it!

The S&P Short Range Oscillator stands at 6.57% vs. 6.89% — remaining in deep overbought.

* Demand destruction has set in

* It could fuel a consumer-led domestic economic slowdown...

Wolf Street howls about growing unsold housing inventory.

I added to my index shorts with S&P futures +10 handles:

* SPY $621.39

* QQQ $553.27