Boockvar Watches for Follow-Through in Treasury Market, Buck
The following is from Peter Boockvar:
The day after/Commodity inflation spreads to ag/Earnings and other
I expressed my thoughts on what Scott Bessent & Co announced yesterday so don’t have much to add here but of course watching to see what the follow through is both in the US Treasury market and the US dollar. As I see the buyback as nothing more than what FX intervention brings, a temporary respite, I don’t think it works without a coincident fundamental change in the situation, which there currently isn’t. I wonder what bazooka gets pulled out next if I’m right. The next problem for Treasury would be caused by another rise in inflation expectations in the TIPS market as that would be tough to contain without Fed rate hikes which would now be even more expensive for the Treasury with the increase in T-bill issuance. As for the US dollar today, it’s down again to a 3 month low and gold is at the highest level since early June. We stay positive and long on gold. The 10 yr Treasury yield is basically back to where it was yesterday morning before the news hit at 4.69%.
I’ll say again, what a box we are in.
DXY
I repeat my belief that with respect to inflation, we’re in a commodity bull market that will be followed by ag prices soon. The Bloomberg agriculture index yesterday broke out to the highest level since May 2024. Included in this index is coffee, corn, wheat, soybeans, soybean oil/meal, cotton, and sugar.
We’re long some fertilizer stocks as a play on this. Corn in particular is back above $5 per bushel and wheat is back to $7.
Bloomberg Agriculture Index
Corn
Here were some notable comments I pulled out of some of the earnings calls yesterday.
From Target, 4% yesterday:
“Comparable sales increased 3.8%, driven by a 3.6% increase in traffic, with average ticket about flat. Store comparable sales grew 2.7%, while digital comparable sales increased 8.7%, led by growth of more than 25% in same-day delivery.”
“I think broad based strength is the headline I would leave with on a bunch of fronts. We saw that across guest demographics. We saw that across categories and we saw strength throughout the quarter.”
They saw particular strength in food and beverage and also beauty. Estee Lauder by the way had a good quarter yesterday, a stock we own.
“I think traffic is actually a great place to start because when we see the strong traffic response like we did in Q2 and we’ve seen so far this year, it’s just a reinforcement to us that guests are responding to the change that we’re making and that we’re earning more and more trust that’s translating to more and more trips to Target.”
“we’re encouraged with what we see in back-to-school and back-to-college so far.”
From TJX, down 4% yesterday:
Comps rose 4%, “which was above our plan.”
Their Marmaxx division (which includes TJ Max and Marshalls) was “below our expectations” but “our three other divisions delivered comp sales increases of 6% to 7%.”
“We are seeing improvement at Marmaxx to start the 3rd quarter and are confident that we will see greater improvement by the holiday selling season.”
“Our 2nd quarter comp was driven by a higher average basket and an increase in customer transactions. Further, our home categories outperformed our apparel categories.”
“we are confident that consumers will continue to look for value in the current environment.”
This was from Walmart’s earnings release just out where US comps missed expectations and the stock is down as a result:
On their US stores, “Sales reflected continued strong momentum in eCommerce and broad-based share gains, partially offset by 125 bps headwind to comp sales from pharmacy deflation related to new maximum fair price regulation.”
From Advanced Auto Parts, who missed comp estimates and is trading down sharply pre-market:
“Our 2nd quarter comparable sales results reflected low single digit growth in the Pro channel, which performed in line with expectations along with Main Street Pro trends outpacing overall Pro trends. However, total enterprise sales performance was impacted by the DIY channel as tighter household budgets constrained spending more than we anticipated, especially during the last four weeks of the quarter.”
From Viking Holdings, the upper end cruise line operator and down 8% yesterday as low water levels in some regions is impacting the business:
Revenue rose 16.5% and the “results reflect the continued strong demand for our destination focused travel experiences and the great execution of our teams across the organization.”
“From an advanced booking perspective, our 2026 season is effectively sold out with 96% of the capacity for our core products already booked…As of August 9, 53% of the capacity for our core products for 2027 was booked, and this includes a 15% y/o/y increase in capacity.”
And why the stock traded down, “the historically low water levels this year, combined with conditions that have deteriorated week-by-week, have impacted guests on some of our itineraries this season.”
And in response, they are “issuing future cruise vouchers to certain affected guests. While we believe this is the right approach from both a guest satisfaction and loyalty perspective, these vouchers will have a financial impact extending beyond 2026 and into 2027 and 2028 as they are redeemed.”
Shifting to semis, this was from Analog Devices, which was little changed yesterday:
“Demand for our solutions continues to grow, supported by robust AI and defense spending, cyclical momentum, and underlying secular content growth across our diversified end markets.”
Overseas, the Swedish Riksbank left its policy rate unchanged at 1.75% as expected but left open the door for a hike this year as they access “that the probability of a rate increase later this year remains. If the unexpectedly high inflation during the summer were to be the start of a larger and more lasting upturn in inflation, the Riksbank would adjust its monetary policy in a tighter direction.”
The UK CBI industrial orders index improved by 20 pts to -25 and well better than the estimate of -40. The global recovery in manufacturing is helping. The CBI said “Stronger global demand is providing some welcome relief for manufacturers, with export order books improving sharply and lifting overall orders. Firms also expect output to fall at a much slower pace over the next three months.”
The caveat, “However, it is too soon to know whether this marks the beginning of a sustained shift in conditions, particularly given ongoing cost pressures reported by manufacturers, with selling price expectations in our survey picking up again and remaining well above historical norms.”Pound sterling is higher, the 10 yr gilt yield is up 1 bp and the FTSE is lower by about 1/3 of a percent in response.
Positions: None.
