Category: Daily Diary

Breadth

S&P 500 Sectors

% Movers

Position: None

I believe Nvidia’s share price is down every day since its earnings release.

The stock is down another five beaners this morning.

More Tales From Nvidia: A Lesson on Valuations of Cyclical Equities (Issue #197!)

Position: None  

Adding to MSOS at $4.51.

Position: Long MSOS L

Dougie Kass

28m ago

Who is crazier:the long buyers of sndk, amd and mu the short sellers of the above

1ReplyShare

DDaveInKenya

27m ago

yes.

5ReplyShare

Positions: Short SNDK VS MU VS AMD VS

 

From Peter Boockvar:

One more thing

The further rise in the average 30 yr mortgage rate to 6.65%, up 20 bps over the past two weeks and to the highest since last August, had an immediate impact on refi’s which fell 18% w/o/w to the lowest since last August. Purchase applications though were little changed but after falling by 4.1% in the week before.

In order to jump start housing transactions I believe we need lower prices and/or further increases in wage growth that exceed home price increases.

Average 30 yr Mortgage Rate

Refi Applications

Purchase Applications

Positions: None.

From Peter Boockvar:

Just a few things

There is not much new of substance this morning news wise but the drop in oil prices reflect continued optimism that we’re on the cusp of a deal and a full reopening of the Strait. The 10 yr US Treasury yield is down another 2 bps after dropping by 7 bps yesterday back below 4.50% and the 30 yr yield is back to 5%. While just round numbers, those seem to be the levels that many are currently focusing on.

Some relief was seen on the long end of the yield curve in Australia and Japan. Australia’s April trimmed mean CPI rose .3% m/o/m and 3.4% y/o/y as expected but no upside surprise. The 10 yr Aussie yield fell 5.5 bps overnight. Also in that region, the Reserve Bank of New Zealand kept its cash rate unchanged as forecasted at 2.25% but it was a 4-3 vote to do so with 3 wanting a rate increase. In Japan, they sold 40 yr government paper and the auction was pretty good with a bid to cover that was above the 12 month average. The 40 yr JGB yield fell for a 6th day, down another 3 bps and lower by 30 bps since last Tuesday.

In Europe, consumer confidence in France fell to the weakest since March 2023 so the sour consumer mood is not just seen in the US as inflation bites everywhere.

French Consumer Confidence

While all of the focus continues to be on memory chip producers such as Micron and the big ones in South Korea, and maybe this time is different with the structural changes in that business, maybe, another retailer expressed the consumer challenges in their business. AutoZone was down 9% yesterday and said this of note:

US comps grew 4.1% y/o/y with DIY up 2.2% “while our domestic commercial sales grew plus 10.4%” y/o/y. But, a lot of the growth was price and not traffic.

“With regards to inflation’s impact on DIY sales, we saw like-for-like same SKU inflation just north of plus 7% for the quarter, which contributed to our DIY average ticket being up plus 5.6%. The difference between the like-for-like inflation and ticket growth was attributable to product mix.” Traffic count for DIY was down 3.6%.” Commercial SKU inflation was up 7% too.

For the quarter they are in now, they expect SKU inflation around 4%. Tariffs are still apart of this.

“Coming into the quarter we were optimistic that our domestic store execution would drive sales growth for both retail and commercial. Regarding our plus 4.1% quarterly domestic same store sales, the cadence was plus 5% in our first four weeks, plus 4.5% in our second four weeks, and plus 2.9% over the last four week period of the quarter.”

“Now, let me address the last two weeks a little more specifically. Those two weeks were softer than the rest of the quarter with comps of plus 1.3%. This slowdown in sales was caused by unseasonably cool weather impacting our heat related categories which normally begin to ramp this time of year as summer heat begins to take hold. This affected both DIY and commercial.” Heat related would be AC for example.

“For the quarter, we felt we benefited marginally from higher than usual income tax refund season along with share gains and solid execution.”

They also have an international business and said “we remain cautious for this upcoming fourth quarter as the consumers in our international markets remain under pressure.”

The May Dallas manufacturing index was around the flat line, seen yesterday, at .4 vs -2.3 in April. These were some of the respondent comments that stood out:

Chemical manufacturing

Conflict in the Middle East, the closure of the Strait [of Hormuz] and elevated oil prices have reduced supply of polyolefins and raised the cost of oil-based feedstocks for polyolefins in Europe and Asia, causing sharp increases in export prices, which are being matched domestically. Shipments of polyolefins have increased from the U.S., but exports from China of coal-based feedstock for PVC (polyvinyl chloride), which doesn’t use oil-based feedstocks, has flooded the global market, so PVC prices rose in March and April but are now declining.

Computer and electronic product manufacturing

I keep waiting for the other shoe to drop as increased fuel prices filter through the economy, but we haven’t seen a major impact yet.

The change in government spending has hurt our chances of keeping the doors open.

Fabricated metal product manufacturing

Peak demand cycle [is] midyear. [Demand will] still be strong later in the year but will ease back to more normal levels.

[We] have received new orders that have improved our immediate outlook. More importantly, [there is] indication of an improved business environment.

Machinery manufacturing

[With] possible signs of a slowdown, [our] main concern is inflation.

Uncertainty continues to play a big role in capital expenditure decisions. We are not investing in fixed assets but are focusing all resources on reserves and ongoing operations, outsourcing more and establishing new alliances. The climate for oil and gas, despite higher prices at the pump, is by no means favorable for the industry. There is constant pressure to lower prices for the U.S. market as external factors increase to capture a very competitive, but not surprisingly shrinking, market.

What a blessed time we are in presently! Orders are up, output is steady and growth is full throttle. These periods are infrequent, when everything is forward-facing, rowing in tandem and prosperous. We’re very grateful and pray that the good times keep on rolling for an extended period.

Tariffs were a disaster! Everyone paid them, but only a few received refunds.

Business remains strong; however, we are experiencing many price increases for raw materials that we are having to pass on to customers.

Miscellaneous manufacturing

Business volume continues to grow, driven by increased market share and strong internal sales efforts. However, we are navigating several margin pressures. Slow pay is being observed across customer segments, and while price increases have met some customer resistance, we have been successful in implementing them through continued engagement efforts. On the cost side, supplier price increases and fuel surcharges are mounting, compounded by uncertainty around tariff changes and a sharp uptick in fuel prices. Keeping pace with these escalating input costs and passing them through to customers in a timely manner remains a key concern.

Positions: none.