Closing Volume

- NYSE volume 8% below its one-month average

- NASDAQ volume 3% below its one-month average

- VIX index: up 6.40% to 15.80

Breadth

Sectors

% Movers

Nasdaq 100 Heat Map

From Peter Boockvar:

Positives,

1) The Fed cut interest rates to address the worries about the slowing pace of hiring’s. The coming expansion of their balance sheet will help alleviate year end funding issues and also any liquidity constraints ahead of April tax day.

2) There was a big drop in continuing claims for the week ended 11/29 to 1.838mm, 100k less than expected and down from 1.937mm in the week before. Your guess is as good as mine as to why, outside of the holiday influence.

3) Job openings in October at 7.67mm was little changed with the 7.66mm seen in September.

4) The November NFIB Small Business Optimism index rose to 99 from 98.2 in October, vs 98.8 in September and 100.8 in August.

5) Refi’s rebounded by 14.3% w/o/w after 5 weeks of declines.

6) In the November Consumer Expectations survey from the NY Fed, the one year inflation guess held at 3.2% and for the time frame past this, was unchanged at 3%. The labor market components as well as income both improved a touch but delinquency expectations rose. Spending expectations also rose slightly.

7) The US September trade deficit narrowed to $52.8 b from $59.3b led by a 3% increase in exports but it was almost all gold and whose export is not included in the GDP calculation.

8) From Costco: “Traffic or shopping frequency increased 3.1% worldwide, and our average transaction or ticket was up 3.2% worldwide, both with and without the impacts of gas price deflation and FX.”

9) From AutoZone: “At the end of the day, I would kind of characterize it as the lower end consumer has been under pressure for frankly quite some time. I’d say more than two years. And what I would say is they’ve been relatively stable. So there hasn’t been a significant wobble in that lower end consumer. The higher end consumer, we think, is still doing okay, and we think that’s been relatively stable over the last couple of quarters.”

10) From Ollie’s Bargain Outlets: “Our comp trends since early October have been strong, and we feel great about our momentum heading into the final weeks of the holiday season…Both the younger and higher income groups were the fastest growing cohorts in the quarter, which we think is in part driven by the continued reallocation of marketing dollars to digital, consumers seeking value, and customers trading down.”

11) From JP Morgan: “the consumer and small businesses both continue to be resilient. They continue to be healthy. The metrics continue to demonstrate that whether it’s cash buffers which have normalized but are also stable, whether it’s credit metrics, really across asset classes, spend trends, payment rates, the metrics themselves are underlying really quite healthy.” On credit quality, “credit trends in the card business look pretty good right now. And I always want to touch on wood, but I won’t do that. And then auto is another one where there is a lot of anxiety about auto delinquencies, subprime auto delinquencies. And there were across the industry a couple of pretty negatively selected vintages in ‘22 and ‘23...And so as we look at the vintage performance, you’re seeing the ‘22 and ‘23 vintages now normalized. The ‘24 and ‘25 vintages are looking much more normal.”

12) The Bank of Canada held rates unchanged at 2.25% as expected. Governor Macklem of the Bank of Canada said “It’s been a difficult year for Canadians and Canadian businesses. But as the year is closing, it’s looking better than it looked in the spring, in the summer.” And, “Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy.”

13) The Swiss National Bank held its interest rate at zero, thankfully not going back to the dark side and back to NIRP.

14) The Reserve Bank of Australia held rates unchanged as expected at 3.6% and explicitly told us that they are done cutting and might even hike rates next year. Governor Bullock said “I don’t think there are interest rate cuts on the horizon for the foreseeable future. The question is, is it just an extended hold for here or is it the possibility of a rate rise. I couldn’t put a probability on those but I think they’re the two things that the board will be looking closely at coming into the new year.”

15) Reflecting still robust tech shipments, Taiwan’s November exports popped by 56% y/o/y, above the estimate of 42%. Imports, much of which makes its way into eventual exports, jumped 45% y/o/y, well more than the estimate of 17%.

16) China continues to rely less on selling stuff to the US (though they still sell things to use indirectly via Vietnam and others) . Overall exports for them in November rose 5.9% y/o/y, above the estimate of 4%. Exports to the US fell a large 29% y/o/y but more than offset by a 15% increase in exports to the EU, a 27% jump to Africa, an 8.2% rise to Southeast Asia and a 36% spike to Australia. Their overall trade surplus is now over $1 trillion this year year-to-date thru November.

Negatives,

1) The Fed cut interest rates even with inflation still well above 2%, both absolutely and on a sustainable basis. Inflation is the disease, the slowing pace of hiring is the symptom. QE, not QE!? Isn’t there another way of managing liquidity issues than having the Fed step in AGAIN to grease the wheels? Long term interest rates rise in response to the cut and go up around the world too.

2) Initial jobless claims for the week ended 12/6 totaled 236k, 16k more than expected and now we can smooth out all the holiday distortions which seasonal adjustments have a hard time with around Thanksgiving. The 4 week average is 217k vs 215k last week but down from 224k in the week before that.

3) In the JOLTS report, the hiring rate remained subdued at just 3.2% which matches the lowest level since January 2011 not including Covid. As part of this, the number of layoffs touched its most since January 2023. Also of note, the quit rate slipped to 1.8% from 2%, and that is the lowest since January 2014, also not including Covid as less people are willing to jump ship to another job.

4) In the November NFIB Small Business Optimism index there was a 13 pt spike in ‘Higher Selling Prices’ to 34%, the highest since March 2023 and the biggest one month percentage increase on record. The Quality of Labor still remains the biggest business problem at 21% but down 6 pts and the Inflation worry rose 3 pts to 15%.

5) The CRB raw industrials index touches the highest level since August 2022.

6) Coming out of the holiday, the MBA said purchase applications fell 2.4% w/o/w after rising by a like amount last week.

7) From the NY Fed’s Consumer Expectations survey, “Perceptions about households’ current financial situations compared to a year ago deteriorated notably with a larger share of respondents reporting that their households were worse off compared to a year ago, and a smaller share reporting they were better off. Expectations about year-ahead financial situations also deteriorated slightly with a smaller share of respondents reporting that their households are expecting to be better off a year from now.”

8) From RH: While certainly positive long term about his business, “there is no denying what an unusual time it is in our industry. And we also believe it’s not a time to underestimate risk. We’re in the third year of the worst housing market in almost 50 years. In 1978, there were 4.09 million existing homes sold in the US when the US had a population of 223 million people. We are on track to average 4.07 million existing homes sold over the three years from 2023 to 2025 with a population of 341 million or 53% higher than 1978. This is a market we’ve never seen before…Not a time to underestimate risk. Tariffs are disrupting supply chains and driving higher prices. There have been 16 different tariff announcements over the past 10 months that have resulted in significant resourcing, product delays, out of stocks and driven multiple rounds of price negotiations and increases.”

9) From Lululemon: “in terms of trading down, we’ve seen a bit of that behavior throughout the year. I’ve talked about the uncertain behavior of the consumer we’re seeing. We’re seeing a little bit in terms of how they’re responding to the promotional activity in the marketplace today and they’re definitely looking for ways in which they can save and value. And it’s behavior we’ve seen throughout the year and continued into Q3.”

10) From Broadcom: Another sign that the GenAI tech trade is tiring out. With respect to AI revenue guidance for next year, it’s a “moving target” and “It’s hard for me to pinpoint what ‘26 is going to look like precisely. So I’d rather not give you guys any guidance.”

11) From Toll Brothers: “Given soft demand across many markets, we remain focused on running our business in a disciplined manner and consistent with our long-term strategic objective of maximizing returns for stockholders.”

12) From JP Morgan: “But it is also true that retailers and restaurants are seeing people be more discerning, trading down a little, being more promotion aware, because they have to be in order to bring those things back into balance. And so the good news is that so far, even our lower income customers are continuing to tread water and stability is more of the narrative than sort of deterioration or anything else.” And this, “there’s less capacity to weather an incremental stress, because cash buffers have normalized. And price levels absolutely are high, even as inflation has come down at least. So I would just say that I would characterize the environment as being a little bit more fragile. And as the labor market goes, typically, so will consumers. Our outlook for next year would be for unemployment to grind a little higher, and therefore, that to be reflected in consumption. And from there, it will depend.”

13) For their balance sheet and exposure, Oracle raised their fiscal year ’26 CapEx forecast to $50 billion which is a whopping 75% of expected revenue.

14) The UK economy unexpectedly contracted in October by one tenth m/o/m vs the estimate of up one tenth. Weakness in construction, services and manufacturing were the main factors.

15) The December Sentix Investor Confidence index was -6.2, though up from -7.4 in November. Sentix said “The Eurozone economy remains in a phase of stagnation.” They said the German economy in particular “remains firmly in the grip of recession.”

16) China CPI in November ex food and energy rose 1.2% y/o/y, holding at its quickest pace since last year, though quite stable and low. PPI fell 2.2% y/o/y, with continued pressure due to the ‘involution’ issues they are facing.

PepsiCo  (PEP)  is making another bold move higher today.

I am selling more calls against my long common position.

(MSOS)  is trading at the day's high — at $5.75 (+53%) based on reports in various outlets that President Trump will likely reschedule cannabis shortly.

I have just sold my MSOS calls.

Here is what I wrote in October:

Cannabis Composition

I have been changing the composition of my cannabis position.

Given my expectation of a mid-November to mid-December rescheduling announcement, I have been exchanging my common position with out-of-the-money call options.

I expect to be entirely out of (MSOS) common and entirely into MSOS calls sometime soon.

Position: Long MSOS common (M) and calls (VS)

By Doug Kass Oct 20, 2025 11:35 AM EDT

Here are Friday's "things":

* I shorted  (SPY)  and  (QQQ)  early in the morning (5:55 AM) when futures were higher. Then into the whoosh lower (-50 handles) I covered all of my index shorts. 

* I established a new short position in  (GS)  at $914.65.

* I added to my  (MS)  short at $181.30.

Scott Galloway's "No Mercy No Malice" on The Streaming Wars and Affordability

I'm back in the office.

Getting my sea legs back.

As of 1:36 PM:

% Gainers

% Decliners

From Peter Boockvar:

The day after

Jay Powell tried to thread the needle of acknowledging the tough spot they are in with a softening jobs market and still above target inflation but also saying they are “well positioned” with an interest rate that is now ‘neutral’ based on the latest inflation stat we have and they are reliant on the incoming data in guiding them as to what to do next. That said, he still couldn’t help himself with the dovish thoughts that were expressed thus leaving him with an easing bias and with a dot plot that expects one more cut in 2026 but of course will change with his replacement.

The 2 yr yield for sure responded accordingly to his obvious dovish slant as did the stock market. Now with the stock market, its sickness continues of being so heavily dependent on every single dovish utter of anything Powell said but the Oracle news after the bell reminded us that fundamentals can still matter when making an investment decision and it shouldn’t all be based on what the Federal Reserve will do and where the fed funds rate is.

With respect to the balance sheet, gobs of QE over the past 15+ years has us also trained in believing that every single increase in the Fed’s balance sheet is another form of QE. But, what they announced yesterday, and I recommend we listen to when Dallas Fed president Lorie Logan gives her next speech for some color, was NOT QE and the size of the Fed’s balance sheet won’t be much changed relative to GDP when done. That said, it would be nice to hear why they picked $40b a month of T-bill buying and isn’t there another way of dealing with these year end, reserve based funding issues? I thought the Standing Repo Facility was meant to manage this stuff?

With a clear dovish bias as we head into 2026, I still feel pretty comfortable owning precious metals and other commodity stocks, particularly energy, along with non-dollar denominated stocks and emerging market local currency bonds, among others.

By the way, the CRB raw industrials index yesterday closed in the green for the 11thday in the past 13 and is at the highest level since January 2023 and less than ½ point from a level previously seen in September 2022. That chart looks like quite a bottom is being formed.

CRB Raw Industrials Index

After holding rates steady at 2.25% yesterday as expected, Governor Macklem of the Bank of Canada said “It’s been a difficult year for Canadians and Canadian businesses. But as the year is closing, it’s looking better than it looked in the spring, in the summer.” And, “Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy.”

The Swiss National Bank held its interest rate at zero, thankfully not going back to the dark side and back to NIRP. As inflation is forecasted by them to be just .3%, they stood still. “Our monetary policy is helping to ensure that inflation is likely to rise slowly in the coming quarters” said SNB President Schlegel.

With respect to Oracle, this is what they said about how to finance their massive funding needs:

“there are a variety of sources available to us throughout our debt structure in public bond, bank, and private debt markets. In addition, there are other financing options through customers that may bring their own chips to be installed in our data centers and suppliers who may lease their chips rather than sell them. Both of these options enable Oracle to synchronize our payments with our receipts and borrow substantially less than most people are modeling. As a foundational principle, we expect and are committed to maintaining our investment grade debt rating.”

And for now “We continue to see strong demand for AI infrastructure across training and inferencing.”

Also, “given the added RPO (remaining performance obligations) this quarter, that can be monetized quickly starting next year, we now expect fiscal 2026 CapEx will be about $15 billion higher than we forecasted after Q1.” That would take their fiscal ‘26 CapEx to $50 billion. That is an astonishing 75% of fiscal ‘26 expected full year revenue of $67 billion. It was 10% before this data center buildout began. No wonder why investors are now worried about the level of spend and obligations committed to.

Casey’s General Store fell 5.3% yesterday and said this of note:

“what I would say more broadly is that I think guests in general are just being a little more discerning about where they spend their money because there’s a lot of other cost pressures outside of our stores that folks are dealing with right now. And so what we’re seeing is people are appreciating the value proposition that they experience at Casey’s, and we see it in a couple of different areas.”

“When you look at our whole pie business, as an example, when we run promotions, we see great uptake on the promotions, which would speak to the value, but we also see that people are trending more towards higher priced items. So specialty pizzas as opposed to single topping pizzas. So those are more expensive, but they’re getting the right value equation, the quality of the product and the price. Same with our bakery category, where people are trading up to multi-pack versus single items. Those cost more, but on a per unit basis, those are less.”

“So we think that people are really picking and choosing where they’re going to spend their money and where the best intersection of quality and value come together is where people are really spending their money.”

From Chewy:

“So as of this point, we’re looking at ‘26 more or less like 2025...So, industry growing at low single digits, perhaps the low end of mid single digit, net household formation kind of remaining flattish. If you look at the shelter and adoption numbers, we’re running at about 100,000, 150,000 surplus between adoption and return. And returns we would like to see this number, probably 5x to 6x higher to be able to call it a normalized industry. Pricing, if you look at pricing growth in the industry, typically you’d see a one and a half, one to 2% pricing improvements on a y/o/y basis.”

Australian bond yields are falling after a weaker jobs number with an unexpected decline in full time employment. Remember that Governor Bullock a few days ago said they are done cutting rates.

JGB yields are down a touch after a good 20 yr bond auction with a solid bid to cover of 4.10. The 20 yr yield fell 3 bps to 2.92%.

I’ll finish with stock market sentiment. As sentiment follows price, Investors Intelligence said Bulls rose to 53.6 from 50.9 while Bears slipped to 17.8 from 18.2. Today’s AAII saw Bulls rise a touch to 44.6, the most since October while Bears fell to the least since January at 30.6, down for a 4th week. The Citi Panic/Euphoria index at .62 is still well above the .41 Euphoria threshold but off its highs above .70. Bottom line, nothing extreme with II and AAII but obviously chasing price with the more bullish shift while Citi Euphoria remains.

Still out of the office, back later. Shorting all morning.

With S&P cash -49 handles I have covered my index shorts for a nice profit, will resort on strength.

* We stare just a little too long

* Nothing to worry here?

People are talking, talkin' 'bout people

I hear them whisper you won't believe it

They think we're lovers kept under cover

I'll just ignore it, but they keep sayin' we

Laugh just a little too loud (a little too loud)

Stand just a little too close (too close)

We stare just a little too long

Maybe they're seeing something we don't darling

Let's give 'em something to talk about (something to talk about)

Let's give 'em something to talk about (something to talk about)

Let's give 'em something to talk about

How about love

- Bonnie Raitt, Something to Talk About

I have long argued that the low/negative equity risk premium when coupled with elevated (98%-tile) valuations augur poorly as a launching pad for future investment returns.

Based on the above metrics (source Torsten at Apollo), investors should expect zero return over the next decade: 

Upside:

-NX +27% (earnings, color)

-MITK +22% (earnings, guidance)

-ZDGE +22% (earnings)

-KPLT +19% (to combine with CCF Holdings in all-stock transaction)

-RENT +12% (earnings, guidance)

-LULU +10% (earnings, guidance)

-BYSI +5.0% (announces ESMO Asia Presentation on Plinabulin + Docetaxel Improving Survival in Large Phase 3 DUBLIN-3 Asian Subset for EGFR WT NSCLC Compared to Docetaxel)

-SCVL +4.3% (announces new $50M share repurchase program)

-KMTS +4.2% (earnings, guidance)

-ACMR +4.0% (INTC reportedly tested chipmaking tools this year from toolmaker ACM Research with deep roots in China and two overseas units that were targeted by U.S. sanctions)

-JOUT +4.0% (earnings)

-RH +3.8% (earnings, guidance)

-BCRX +2.9% (US FDA Approves ORLADEYO (berotralstat) Oral Pellets, First and Only Oral Prophylactic Treatment for Patients with HAE Aged 2 to <12 Years)

-NTES +2.7% (constructive comments from JPM)

Downside:

-FRMI -44% (started discussions with several other potential tenants for power delivery at the Project Matador Site in 2026 following loss of commitment for $150M funding)

-APLT -37% (to be acquired by Cycle Pharmaceuticals for $0.088/shr)

-RCUS -13% (STAR-221 and Phase 2 EDGE-Gastric studies will be discontinued)

-LPTH -7.0% (prices 7.75M underwritten offering at $7.75/shr)

-NTSK -6.8% (earnings, guidance)

-AVGO -6.1% (earnings, guidance)

-VEEV -3.3% (Keybanc/Pacific Crest Cuts VEEV to Sector Weight from Overweight)

-RBLX -3.1% (JPMorgan Chase and Co Cuts RBLX to Neutral from Overweight, price target: $100)

-CMTL -2.8% (earnings, color)

Fed Speakers

8:00AM: Fed Bank of Philadelphia President Paulson (Non-Voter) speaks on the economic outlook before the Delaware State Chamber of Commerce, Wilmington, DE (Text available. Audience Q&A expected. No media Q&A)

8:30AM: Fed Bank of Cleveland President Hammack (Non-Voter) speaks before the University of Cincinnati Real Estate Center Roundtable Series Program, Cincinnati, OH (No text. Q&A expected. Livestream available)

10:35AM: Fe Bank of Chicago President Goolsbee (Voter) participates in moderated conversation before hybrid 39th Annual Economic Outlook Symposium at the Federal Reserve Bank of Chicago, Chicago, IL (Livestream available. Embargoed text TBD)

Economic Calendar for Friday

8:450AM: National Retail Federation releases November Retail Sales

I suspect all the AI semi biz Broadcom  (AVGO)  has is profitless (or maybe money-losing) revenue.

That is why they showed revenue growth but had accounting gimmicks that added to the bottom line:

From my perch, as noted in the past 164 issues of "More Tales," the whole AI industry is a money-losing joke. 

* Disney does AI.... (It's got to be near the end!)

Large-cap technology may have a long way down if they fall.

Oracle's  (ORCL)  share price is now well below where it was prior to putting up their silly vaporware slide on the prior conference call that sent the stock up 25%.

Now Disney  (DIS)  does OpenAI. This reminds me of Walgreens  (WBA)  doing Theranos. Two drunks leaning on each other trying to stand up.

https://time.com/7339685/person-of-the-year-2025-ai-architects/

Bonus — Here are some great links:

The Market Is Widening

25 Years of S&P 500 Forecasts

Strategas' Verrone

Best 25 Stocks to Own in Second Half of December 

I will be out of the office for research meetings between 9 AM and noon.

I am back shorting the indices:

* (SPY)  $685.51

* (QQQ)  $624.58

The S&P Short Range Oscillator remains overbought at 2.83% vs. 2.87%.