Read how the Contrarian Investment Portfolio produced a positive return for the third straight month and how it is being positioned.

State of Play

After a tumultuous last week, the first couple of trading days of this week have been relatively quiet. Last night saw disappointing earnings from AMD and SMCI but this morning’s results were more positive. As we eye or board of indicators for signs of direction at 0830 ET, a little bit of ‘risk on’ is emerging:

* Stock index futures are up a bit. Nasdaq and S&P 500 +0.3% each;

* Commodities are rebounding:

* WTI crude oil +1.5% to trade around $66/barrel

* Copper +0.7%

* Gold and silver -0.5% each

* Bonds are seeing a little bit of selling, consistent with ‘risk on’ as the 10-year yield is +3 basis points to 4.23% (yields move inversely to prices);

* Cryptos are not going along with this, or not yet. Bitcoin -0.5% to trade around $114,200.

Today’s Known Events

It’s all about earnings. Already reporting this morning were:

* Uber (UBER ) beat estimates and announced a share buyback but doesn’t appear to have impressed investors as the stock is down a bit in the pre-market;

* Shopify (SHOP ) beat analyst estimates and that report is being treated much more enthusiastically as the stock is +16% this morning;

* Oscar Health (OSCR ), briefly a meme stock, reported disappointing results and the stock is down by ~2%;

* Disney (DIS ) results were mixed and the stock is dropping a bit;

* McDonald’s (MCD ) beat estimates and is rising (+3%).

After the close at 1600 we’ll hear from:

* AppLovin (APP ), probably a pretty good reflection of the tech industry and also the gig economy;

* Airbnb (ABNB ), a solid indicator of the travel sector;

* DoorDash (DASH ), always a good gauge of discretionary spending (if people are willing to pay ridiculous fees to indulge their own laziness…)

* Lyft (LYFT ), which according to the reaction to Uber earnings has quite a high bar…

The Bottom Line

Earnings this morning were mostly positive. Shopify was particularly encouraging as this speaks to continued growth from small retailers, which reflects positively on the economy. The fact that AI applications are helping its bottom line (or at least its outlook) is even better. We’ve said for some time that AI spending can lift many boats. If it is actually producing results then that’s even better. This should offset the earnings miss from AMD, but it’s worth pointing out that AMD actually raised guidance.

Crucially, from a big-picture perspective there was nothing in this latest round of earnings that speak to weakness in the economy: McDonald’s is opening restaurants, Disney theme parks are booked solid, and even the New York Times (NYT ) is growing subscriptions revenue.

Sure, there is the tariff overhang and ample unpredictability from the White House. Those were a major concern last week. Now, not so much. Just like you were reminded, these fears often fade away as quickly as they surface.

Stocks On The Contrarian Radar©️

The Contrarian has maintained a list, going back more than a year, of ‘undiscovered’ AI chip stocks. The ‘undiscovered’ in ‘air quotes’ because these are, of course, not really undiscovered at all — they just haven’t attracted much (or any) of the hype associated with the Nvidias of the world.

Yesterday’s trading session saw the dramatic drop of one of these names, Ichor Holdings (ICHR ), which manufactures fluid delivery subsystems for the semiconductor industry. This sounds like a crucial part of the whole semiconductor supply chain even if it does not make ICHR a chip manufacturer itself. Well, the stock fell by 30% yesterday after reporting earnings that disappointed investors on a number of fronts.

At issue was not so much earnings. EPS did fall short of analyst estimates but revenues surpassed what was anticipated. That’s not what caused the drop. The concerns were elsewhere:

* Margins and revenue guidance came in at the lower end of expectations

* The company is experiencing hiring pressures, limiting its ability to expand margins

* Management’s tone on the call was at times quite conservative. The dreaded ‘plateauing’ phrase was used, referring to its crucial advanced packaging business

* Finally, executive leadership is in transition with the company actively searching for a new CEO

Add it all up and investors took the opportunity to punish the stock, sending it to its lowest level in almost a decade:

It’s interesting to hold this thing up against Nvidia (NVDA ), which is very much the bellwether for the AI chip industry. As you can see there has been a clear divergence since April:

Shouldn’t ICHR track NVDA over time and therefore wouldn’t it revert to this pattern at some point, hopefully soon?

That aside, the kind of selloff we witnessed yesterday is the type of thing that gets The Contrarian to take notice. It leaves ICHR trading at a compelling 0.9x forward sales, which is almost unheard of for a technology company especially one servicing the AI chip sector. The balance sheet appears healthy, with $92 million of cash versus total debt of $126m.

There is undoubtedly some uncertainty facing this company. GAAP earnings-per-share was negative last quarter. Margin pressures are real. The customer base is concentrated with three OEMs — Applied Materials, Lam Research, and ASML Holding — making up 73% of sales. The leadership transition is also a very real concern.

The Opportunity

Still, one can’t help but think that this was a classic — and violent — overreaction. One figures ICHR’s products are crucial to semiconductor manufacturing and demand for semiconductors — as we have seen from tech earnings — is not going anywhere but up. The company’s issues are in large part due to not being able to keep up with this demand. That is not a bad problem to have.

The turnaround may take some time. There’s no guarantee it will even happen. The notoriously cyclical semiconductor industry could turn before management is able to get its ducks in a row. These are all risks. But with risks come opportunity.

The Verdict

For these reasons The Contrarian took a tiny starter position in ICHR yesterday, buying in at $14.25. He will look to add to this if it drops more.

Housekeeping

* PSA: The scheduling of this briefing is being reshuffled a bit due to the success of the live video.

* This will air closer to the market open, typically between 0800 and 0900 ET.

* Free subscribers can join live. The recording will be available to premium subscribers.

* You should receive this briefing in your email and on the app — also Spotify — as previous. There are some reports that this is not happening consistently. Substack has been notified of this.

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks the portfolio’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Hot off the press: Read how the Contrarian Investment Portfolio produced a positive return for the third straight month and how (and why) it is being positioned a bit more defensively...

State of Play

Stocks dropped precipitously on Friday, capping a volatile week and starting the month off on a sudden risk-averse setting. New tariffs were to blame along with President Trump firing the Bureau of Labor Statistics commissioner, apparently for rigging non-farm payrolls.

As we eye or board of indicators for signs of direction at 2015 ET:

* Cryptos are moving higher, shrugging off reports that China is (again) banning digital currencies. Bitcoin +1%. Ethereum +3%. XRP +6%

* Stock index futures are not moving at all. S&P, Nasdaq, and Russell are all hogging the break-even point;

* Not much to report in commodities land yet either. WTI crude oil is down 0.5% to trade around $67/barrel. No movement elsewhere;

* Bonds are seeing a few bids at the short end of the curve. The 2-year yield, the most sensitive to Fed interest rates, is down 4 basis points to 3.68% (yields move inversely to prices).

Today’s briefing is free. To receive this briefings regularly, subscribe here:

Known Events

Earnings are the main story of the week, ex-tariffs and anything else that comes out of the White House of course.

First up tomorrow morning:

* Furniture supplier Wayfair (W )

* Tyson Foods (TSN ), a substantial portfolio holding

* Semiconductor manufacturer onsemi (ON )

After the close at 1600 we will hear from:

* Palantir Technologies (PLTR )

* Hims & Hers Health (HIMS )

* MercadoLibre (MELI )

Other highlights this week include AMD (AMD ) on Tuesday, Shopify (SHOP ) on Wednesday, and D-Wave Quantum (QBTS ) on Thursday.

* We’ll also get a look into the US travel sector with Marriott (MAR ), Wynn (WYNN ), Hilton (H ), and TripAdvisor (TRIP ).

* Uber (UBER ) and Lyft (LYFT ) report Wednesday

* Fast-food chains McDonald’s (MCD ), Burger King owner QSR (QSR ) and Wendy’s (WEN ) are scattered through the week

So much for the look ahead. These events might move markets a bit but investors’ concerns now are clearly elsewhere…

The Bottom Line

We got a stark reminder last week that President Trump can still upend the prevailing mood on Wall Street. Some of the tariff announcements, like the 30% levy on Switzerland, seemed to come completely out of left field. Investors by now are used to some unpredictability from the White House when it comes to tariffs, but not when the moves are this nonsensical.

Then there was the jobs report. As discussed Friday, the headline numbers were not terrible but along with downward revisions to previous months bad enough to increase the likelihood of interest rate cuts. That “happy medium” would normally be a good thing. Except then the reaction from the White House was anything but normal.

According to the Wall Street Journal editorial board, the move to fire the BLS head means “Trump seems to understand that the jobs report signals trouble.” That may not even be true. It may be more due to Trump’s impetuous nature than real concerns about the labor market. But it doesn’t matter because the impression that Trump and the White House are suddenly concerned about the labor market — rather than crowing about its achievements — is now absolutely real. Judging by Friday’s market activity, it’s not just the WSJ editorial board drawing this conclusion.

Silver Lining?

One thing we’ve learned about Trump is he can reverse course on crazier policies as quickly as he decides on them — especially if the market sends him a clear signal that it doesn’t like the policy. According to that pattern, we may be a day or two (tops) away from saner messaging from the White House.

The fact that previous months of non-farm data was revised lower (and that quite dramatically) does speak to a slowing labor market. This has yet to affect jobless claims however as these have actually been dropping in recent weeks. Job openings are mostly holding up, according to the latest JOLTS report.

Retail sales data continues to show growth despite higher prices. And let’s not forget that earnings have been pretty stellar across the board — including cruise line companies that capture discretionary spending by middle class consumers. None of the ‘big three’ public cruise lines — RCL , CCL , NCLH — lowered guidance in their latest quarterly earnings.

In Conclusion

There are indications that hiring is slowing, but there is also data to support continued growth in the labor market, Importantly, there is little indication that layoffs are increasing.

Countering that is strong retail data and healthy outlook for discretionary spending, judging by what the cruise lines have been telling us at least.

Finally, perhaps as a tie-breaker, we point you to the M&A market. Corporate dealmaking is suddenly quite hot. That actually says a lot about two very important risk metrics: corporate risk appetite and capital markets. The first speaks to the underlying demand for expansion and investment. The second to the financing that makes the whole thing possible. When both are healthy, as they are now, it is hard to see how public equity markets will remain down for very long. That, at least has been the pattern.

It’s true that the underlying setup for markets just doesn’t feel very good right now. But we have seen — just a few months ago — how misguided these feelings can be. That’s not to say the whole thing will turn around right away. Indeed, we may need to see a little more selling before investors pile back in for the next leg of the bull market. Ultimately, however, the long-term picture remains constructive.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks the portfolio’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Last night saw the announcement of a trade deal between the US and Europe. That is not having much of an impact as we eye or board of indicators for signs of direction at 0745 ET:

* Stock index futures are pointing a bit higher, led by tech. The Nasdaq is +0.4% with S&P 500 +0.2%;

* Cryptos are gaining a bit of ground with Bitcoin +0.5% to trade around $118,700;

* Commodities aren’t doing much. WTI crude oil is +1.3% to trade around $66/barrel. Copper is unchanged. Gold and silver also unchanged;

* Bonds aren’t doing anything. The 10-year yields 4.40%.

Known Events

It’s a massive week of earnings, Fed, and economic data but most of that doesn’t come until later in the week. For today, there isn’t much going on. A couple of earnings after the close is about it:

Waste Management (WM ), Whirlpool (WHR ) and Tilray (TLRY ) are the main names there.

Tomorrow the earnings party gets started for real, with UnitedHealth (UNH ), SoFi (SOFI ), PayPal (PYPL ), Boeing (BA ), Spotify (SPOT ), UPS (UPS ), Procter & Gamble (PG ), Royal Caribbean (RCL ) and JetBlue (JBLU ) — and that’s all before the open!

Other earnings highlights this week include Meta (META ) and Microsoft (MSFT ) after Wednesday’s close and Apple (AAPL ) and Amazon (AMZN ) on Thursday evening.

The Fed concludes its interest rate meeting on Wednesday. The Fed is not expected to move its key policy rate from its 4.25-4.5% target. Friday brings non-farm payrolls.

The Bottom Line

The trade deal with Europe is nice and should provide a boost to risk assets today. But upside may be limited just because of all the data we’re getting later in the week. Those figures will need to play along with the bullish mantra for this to be sustainable. Payrolls on Friday are obviously the big one but earnings and the Fed also have the potential to upend things.

When it comes to the Fed, investors will be looking for indications that there will be interest rate cuts at the next meeting on Sept. 17. Right now Fed fund futures are pricing in a 60% chance of a cut. We’ll discuss the Fed more in Wednesday’s episode.

Anything companies say in their earnings that speaks to slowing consumer spending in the US would surely also trip up all the good cheer. On that note…

Stocks On The Contrarian Radar©️

You may want to keep an eye on Whirlpool (WHR ) earnings this afternoon. This company makes not just jacuzzis but washers, dryers, kitchen appliances, and more. For many families, washers and dryers are the biggest purchase they will make outside of cars and houses. So what management says about the outlook for these big-ticket items is well worth paying attention to.

Where WHR’s performance is concerned, that has been quite ugly. The stock has kind of gone nowhere in years, trailing the S&P 500 by substantial margins:

Given the company’s products it is no surprise that it is treated — perhaps correctly —as a proxy for the housing market. This leaves it trading at compelling valuations:

* 13x forward earnings

* 0.8x EV/forward sales

* 0.4x forward sales

* 7x forward cash flows

Earnings excepted, those are pretty compelling multiples, all well below the median for the industry.

Unfortunately, the balance sheet tells a very different story:

* $8 billion in net debt versus a market cap of just $5.6 billion

* Unsold inventory accounts for $2.4b of its $5.4b current assets. Offsetting that is $3.5b of accounts payable

* Almost $6b of its $16b of total assets are goodwill and other intangibles versus $13.7b of total liabilities

* Almost $5b of the total debt is long term, meaning it carries a higher interest rate.

Ugly, dawg.

The verdict

Sometimes things are cheap for a reason. WHR’s balance sheet should alarm any potential investor. This will explain — and fully justify — the stock’s depressed valuations.

Sure, once interest rates move lower and the housing market recovers it will greatly help WHR’s fortunes. But when might that be? More importantly, the company needs to continue to service its debt in the interim. It is also sitting on (literally) billions of dollars of unsold inventory.

WHR does have a sizable dividend of $7/share, corresponding to almost 7% at current prices. That should probably be cut, if not eliminated outright. It would cause the stock to drop more in the short term but would make it a lot more appealing.

To management’s credit, long-term liabilities have dropped over the last year, from $6.7b to their current level of $4.8b. Maybe the ugliest days of the balance sheet are in the past. But a lot of work still needs to be done for this thing to be investable.

Maybe if today’s earnings show continued improvement to the balance sheet and a sizable cut to the dividend payout the stock will become more appealing. But those prospects appear to be remote at this point…

Housekeeping

* PSA: The scheduling of this briefing is being reshuffled a bit due to the success of the live video.

* This will air closer to the market open, typically between 0800 and 0900 ET.

* Free subscribers can join live. The recording will be available to premium subscribers.

* You should receive this briefing in your email and on the app — also Spotify — as previous. There are some reports that this is not happening consistently. Substack has been notified of this.

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

President Trump announced a ‘massive’ trade deal with Japan last night. This caused stocks in Japan to rally as the Nikkei gained 3.5% on the day. As we eye or board of indicators for signs of direction at 0815, these are mostly positive:

* Stock index futures are pointing to gains, led by small caps, usually a good sign. The Russell 2000 is up 0.9%. S&P 500 futures are 0.3% to the good. Nasdaq futures are flat. The Nasdaq actually dropped a bit yesterday;

* Copper is rallying, up 1.6%, close to fresh record highs. WTI crude oil is down 0.6% to trade around $65/barrel;

* Cryptos appear to be taking a bit of a breather. Bitcoin is down 0.5% to trade around $118,500;

* Bonds are down a bit. The 10-year yield is up 3 basis points to 4.36% (yields move inversely to prices).

Today’s Known Events

Earnings season is underway. We got some fresh reports already this morning:

* AT&T (T ) beat earnings earnings estimates and appears to have raised guidance but something in the report didn’t please investors as the stock is dropping in the pre-market, down 3% at the time of this writing;

* Hilton Worldwide (HLT ) also beat estimates but here too the stock is down -1.8%;

* Thermo Fisher Scientific (TMO ) beat estimates and that stock is rising in the pre-market, +2.5%;

* Hasbro (HAS ) trounced estimates and raised guidance and that stock is up 5%.

Of course the big names report after the close at 1600 ET: Google (GOOG )/(GOOGL ) and Tesla (TSLA ).

One economic data release to tell you about. Existing home sales are out at 1000. Economists who were surveyed expect 4.01 million sales, about the same as last month’s 4.03 million.

Finally, a 20-year bond auction is at 1300. No analyst estimate but last one of these resulted in a yield of 4.942%.

The Bottom Line

Trade deals are nice but we aren’t really seeing much of a reaction from US stocks. Maybe that’s because most of the scuttle around Japan negotiations have been positive so the market figured this was coming. But then copper prices certainly speak of increased risk appetite ahead.

The tech rally appears to be on pause, presumably until we get Google earnings tonight. While Google itself has actually been moving higher (+4% over the last week) what management says about AI spending in particular could be what is leading investors to sit on their hands a bit. It may also be simple profit taking from tech, which has been on quite a tear since the April lows (+33%).

The Contrarian, who (full disclosure) is long Google, will be watching the company’s AI datacenter investments that are reported in the form of capital expenditures (the datacenter piece may not be broken out explicitly, but we all know that’s what most of the capex is). Presumably analysts will also be watching because is a direct correlation to AI chipmakers, and therefore most of the tech sector these days. The expectation is for $18 billion in capex, up a bit over the $17 billion reported last quarter.

Beyond that we also have tariffs and trade-related news. The Aug. 1 deadline is still out there.

Housekeeping

* PSA: The scheduling of this briefing is being reshuffled a bit due to the success of the live video.

* This will air closer to the market open, typically between 0800 and 0900 ET.

* Free subscribers can join live. The recording will be available to premium subscribers.

* You should receive this briefing in your email and on the app — also Spotify — as previous. There are some reports that this is not happening consistently. Substack has been notified of this.

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks find themselves at record highs after moving higher last week. As we eye or board of indicators for signs of direction at 0915 ET:

* Stock index futures are unchanged with the exception of small caps, which are pointing higher. The Russell 2000 is up 0.5%;

* Cryptos are not really doing much after rising to records last week. Bitcoin is unchanged, trading around $118,000;

* Bonds are seeing some bids, interestingly enough. The 10-year yield is down 6 basis points to 4.37% (yields move inversely to prices);

* All is quiet in commoditiesland. WTI crude oil is unchanged trading around $66/barrel. Copper is up 0.5%. Silver is on the move a bit, up 1%. Gold +0.5%.

Known Events

It’s a massive week for earnings with the heavy hitters checking in at midweek. Tesla (TSLA ) and Google (GOOG /GOOGL ) are probably the biggest names we’ll hear from this week, both after Wednesday’s close.

So far today Domino’s Pizza (DPZ ), Verizon Communications (VZ ) and Ryanair (RYAAY ) all posted positive results.

After the close the highlight is chipmaker NXP Semiconductors (NXPI )

The Bottom Line

Good news from earnings so far, then. But again, the big names don’t report until midweek. We’ve still got tariffs hanging around, with the Aug. 1 deadline looming. Can expect to hear a lot more about that as the deadline approaches.

Even ahead of that there are some rumblings that tariffs could be less benign than initially anticipated. Automaker Stellantis (STLA ), the subject of a contrarian take this March, is warning of tariff-induced losses. There was also a recent Wells Fargo report, that noted a decline in discretionary spending on services and the ‘false narrative’ that tariffs were having a benign impact. We’ve also got student loan bills increasing for some borrowers, though a lot of those reports are fear-mongering clickbait.

Still: with stocks at record highs, this is not the environment for a Contrarian to allocate risk. Sure, there could be happy AI news from Google and chipmakers this week and Tesla could pull another rabbit out of its hat. But valuations are stretched and the rumblings under the surface are not a great sign.

Housekeeping

* PSA: The scheduling of this briefing is being reshuffled a bit due to the success of the live video.

* This will air closer to the market open, typically between 0800 and 0900 ET.

* Free subscribers can join live. The recording will be available to premium subscribers.

* You should receive this briefing in your email and on the app — also Spotify — as previous. There are some reports that this is not happening consistently. Substack has been notified of this.

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks have meandered this week due to lack of catalysts, just as was anticipated. As we eye or board of indicators for signs of direction at 0715 ET things are pretty quiet:

* Stock index futures are unchanged with no major US index moving more than 0.2% from the break-even point;

* The big move in commodities is in copper, which is consolidating after jumping to record highs earlier. This was caused by, you guessed it, tariffs or the threat thereof as President Trump said he would slap a 50% import tariff on the industrial metal. WTI crude oil is unchanged at $68.50/barrel. Gold and silver not doing much either;

* Cryptos aren’t moving much. Bitcoin unchanged trading around $108,80;

* Bonds are flat. The 10-year yields 4.40%.

Known Events

Minutes from the Federal Reserve’s last monetary policy meeting are out at 1400 ET. This is closely watched by investors even though it captures a moment in time from several weeks ago, in this case the June 17-18 meeting. The Fed held rates unchanged at that meeting but signaled there would be two rate cuts this year.

The minutes will provide some insights into the discussions that were held. This isn’t binding because a) presumably meeting participants could just agree to stop transcribing at various points and b) the Fed is data dependent and new data can and will impact FOMC voting members’ views as it becomes available. Indeed there has been new data since that meeting already, in the form of the PCE Deflator and non-farm payrolls, among others.

This is one reason The Contrarian doesn’t understand all the fuss around FOMC meeting minutes, but the market does move on this.

Tomorrow (Thursday) morning, second-quarter earnings season kicks off with traditional curtain-raiser Delta Air Lines (DAL ). Conagra Brands (CAG ) reports at that time as well. After the close we’ll get Levi Strauss (LEVI ) and WD-40 (WDFC ), among others.

The Bottom Line

Any Fed talk of inflation concerns in the minutes could put a damper on risk-taking as it will indicate higher-for-longer interest rates. If the discussions are more concrete around rate cuts, it should lead to a market rally. You’re going to want to watch Fed fund futures, currently pricing in just a 4% chance of a rate cut at the next meeting, on July 30. A rate cut at that meeting is off the table in all likelihood but futures are pricing in a 60% likelihood of a cut at the subsequent meeting, which isn’t until Sept. 17.

Fed-obsessing watching aside, the focus will otherwise be on tariffs. It’s not just copper that was caught in Trump’s latest comments on this matter but also pharmaceuticals…

Stocks On The Contrarian Radar©️

Trump’s comments have led to a drop in pharma stocks overnight, as evidenced by the SPDR S&P Pharmaceuticals ETF (XPH ), which is down 2% at the time of this writing. This drops the XPH to ~$40.50/share:

That latest move is not captured in the above chart, which doesn’t reflect pre-market activity. It moves the ETF toward the lower end of its five-year Bollinger Band range:

Technically that makes XPH cheap but not yet a bargain as it was in the middle of last year, for example. So the move in pharma stocks is not particularly dramatic here. It seems the market is getting wise to Trump’s tariff threats, treating these more as bombast than a clear reason to dump risk.

Perhaps more importantly, major pharma companies like Merck (MRK ), Johnson & Johnson (JNJ ), Eli Lilly (LLY ), and Novartis (NVS ) have already announced plans to expand US manufacturing as a direct result of previous tariff threats. All of these stocks factor prominently in XPH’s holdings.

If you add Pfizer (PFE ), a Contrarian Portfolio holding, into this mix to create a ‘Big 5’ of pharma stocks, you can observe a mixed bag of performance over the last year:

Merck, Eli Lilly, and Pfizer are the clear losers here with MRK having lost more than a third of its value! This leaves MRK trading at prices not seen since 2022 and at just 10x forward earnings versus an industry average of 17x. On a cashflow basis, MRK is even cheaper, trading at 8x forward cashflows versus an industry average of 14x.

Does this make Merck a buying opportunity? Maybe, though other valuation metrics (price/sales notably) are much more in line with the industry average. The balance sheet appears to be in good shape with $35 billion of total debt versus a market cap of more than $200 billion. But here too more scrutiny is needed, as $36 billion of the company’s $115 billion assets are ‘goodwill’ and ‘other intangibles.’

Let’s also not forget that the balance sheet will take a hit from Merck’s $10 billion buyout of Verona Pharma (VRNA ), though that may be priced in already. What that deal does tell us is that M&A in the pharma industry is alive and well. That speaks to an industry very much in expansion mode.

The Verdict

Some pharma companies are cheap by historical standards and Merck may be the cheapest pharma major at present. That makes a potentially compelling investment opportunity.

MRK also has a nice dividend, to the tune of 4% at current prices. That makes it a better candidate for tax-advantaged portfolios like IRAs than vanilla brokerage accounts (for US taxpayers at least).

Pharmas are also compelling because they are mostly divorced from economic realities. The assumption is that individuals need certain drugs and insurance plans, whether provided by the state or private enterprise (or employers), will make these purchases on their behalf. That isn’t 100% true of course as people lose their jobs and insurance plans, for whatever reason, make the purchase of brand name treatments more expensive. Generic drugs of course can also replace the successful brand treatments. Some pharma majors have generics divisions. Merck, at least in the US, does not.

The challenge with pharmaceuticals is gauging the valuation. Much of the stock price depends on the likelihood of success of future drugs more than anything else. That is not something The Contrarian, who barely passed ninth grade biology (when he took it in 10th grade), is educated to assess. He could read up on it, sure. Maybe some day he will. But as a major holder of Pfizer already he is loath to add another pharma major to his portfolio. At that point it really makes more sense to just buy the ETF.

For these reasons The Contrarian is sitting this opportunity out, at least for now. Should MRK or pharma ETFs become a lot cheaper than he will need to revisit this stance however.

Not investment advice. Do your own research. Make your own decisions.

Housekeeping

* PSA: The scheduling of this briefing is being reshuffled a bit due to the success of the live video.

* This will air closer to the market open, typically between 0800 and 0900 ET.

* Free subscribers can join live. The recording will be available to premium subscribers.

* You should receive this briefing in your email and on the app — also Spotify — as previous. There are some reports that this is not happening consistently. Substack has been notified of this.

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

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State of Play

B, with President Trump threatening new tariffs on countries that side with policies by BRICS nations. That is weighing on things as we eye or board of indicators for signs of direction at 0830 ET:

* Stock index futures are down but off of the lows. Small caps are seeing the worst of it with the Russell 2000 down 0.5%. S&P 500 and Nasdaq are down about 0.3% each;

* Bonds are seeing a bit of selling as well. The 10-year yield is up 4 basis points to 4.36% (yields move inversely to prices);

* Commodities are mixed. WTI crude oil is up 0.7% to trade around $67/barrel but copper is down 0.5%. Gold and silver are dropping as well, perhaps an indication the market isn’t taking this latest tariff stuff very seriously. Both are down 1-1.5%;

* Cryptos are unchanged. Bitcoin is up 0.5% to trade around $108,600.

Known Events

It’s a pretty slow day. Make that a slow week. Nothing of note on the calendar today. Tomorrow brings consumer credit. Wednesday a 10-year note auction and FOMC minutes from the last meeting. Thursday a few earnings and a couple of Fed speakers. Friday the WASDE Report.

So yeah, slow week

The Bottom Line

With nothing else going on the focus will be on tariffs. So far this is mostly noise, as evidenced by futures though it is enough to chill some of the good cheer we got with non-farm payrolls on Thursday.

This leaves us with a cautious start to the week. We may be in a holding pattern until FOMC meeting minutes on Wednesday, unless of course there is fresh tariff news to drop.

On the topic of the Fed, investors don’t seem concerned with all the noise Trump is making about removing Jerome Powell and replacing him with somebody who will cut interest rates. The questions this raises about the Fed’s independence are obvious. Perhaps investors figure nothing will happen until Powell’s term expires next May and when it does the Fed will already be on a rate-cutting course. And that Trump will leave offices some 20 months after that. Either way, it’s not something that seems to factor into risk calculations very much.

Stock On The Contrarian Radar©️

Tesla (TSLA ) is down 6% in the pre-market at the time of this writing after Elon Musk, who has apparently never hear of Ross Perot, said he is launching a political party. Buying opportunity for Tesla? This morning’s move drops the stock below $300 again:

As you can see, this is still a ways off of the lows of the year. TSLA is a crazy stock due to wild swings resulting from any number of factors. Ultimately the stock is priced for its potential in all things electric vehicles, self-driving cars, and more. For this reason it is the rare example where fundamentals really don’t apply. But other things do.

A lot of these have to do with Elon Musk himself. Investors clearly want Musk to not only be part of Tesla, but make it his primary focus. If he is starting a political party that obviously means less time spent on Tesla. And that is why the stock is dropping so dramatically this morning.

An interesting exercise is to hold TSLA up against the S&P 500 (SPY ):

Over the last two years or so, Tesla has kind of tracked the SPY albeit with much more volatility. Worth noting the period in late 2024 when TSLA trounced the SPY, presumably due to Musk’s involvement with the Trump administration and the benefits this was believed to bring for the stock. If you remove that outlier, the traction is much more solid.

In the past two years it has paid to buy TSLA when it dipped below the S&P’s return dating to the early 2023 start date. This was most recently in May. As the above chart indicates, TSLA is now close to the S&P but not close enough where it has (historically) presented a buying opportunity.

The Verdict

For this reason The Contrarian is not buying this dip in Tesla though he is monitoring the situation closely. If TSLA dips to the $250/share range it may make sense for The Contrarian to buy a few shares.

Full disclosure: The Contrarian has never owned TSLA outright though it is obviously included in several indexes he owns in retirement accounts.

Not investment advice! Do your own research, make your own decisions.

Housekeeping

* PSA: The scheduling of this briefing is being reshuffled a bit due to the success of the live video. This will air closer to the market open, typically between 0800 and 0900 ET. Free subscribers can join live. The recording will be available to premium subscribers.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Read this month’s update on the Contrarian Portfolio here.

State of Play

Non-farm payrolls, which we’ve been waiting for all week, just came in better than anticipated. As we eye or board of indicators for signs of direction at 0845 ET, risk on is the story:

* Stock index futures are moving higher after that jobs number, led by small caps (usually a good sign). The Russell 2000 is up 1%. S&P 500 and Nasdaq ~0.3% to the good;

* Cryptos are moving higher. Bitcoin is up 2% to trade around $109,400;

* Bonds are seeing a few bids. The 10-year yield is down 3 basis points to 4.26% (yields move inversely to prices);

* Commodities are quiet after a broad rally yesterday. Nothing to report there.

Today’s Known Events

Non-farm payrolls were obviously the big one. To go through the numbers:

* 147,000 new jobs versus 111k anticipated and 144k previous (revised upward from 139k)

* That drops the unemployment rate to 4.1% (4.3% anticipated/4.2% previous)

* Private payrolls were a miss however, printing at 74k (105k/137k)

* Average hourly earnings of 0.2% month-over-month (0.3%/0.4%)

* Average hourly earnings of 3.7% year-over year (3.9%/3.8%)

There are others worth keeping an eye on as well, however:

* We just had initial jobless claims come in at 233 versus 240k anticipated and 236k last week. The four-week average is 245k.

* US trade deficit was $71.5 billion ($69.9b/$61.6b)

* At 0945 we’ll get the final June figures for PMIs, but these will likely just confirm what was in the flash report.

* Factory orders are at 1000. The expectation here is for an increase of 8.1% MoM in May

The Bottom Line

Happy days are here again! The market is moving further into fresh record highs after this jobs report. Investors don’t seem worried about a high-for-longer Fed in all of this. Or at least not yet. For whatever reason that appears to be on the back burner.

Friendly reminder that fresh record highs are historically not a good time to put money into risk assets. One could go as far as to say that is a sucker’s move.

Having said that, it’s hard to see how we’ll go anywhere but up in today’s shortened trading session. Maybe beyond that as there is little on the calendar for next week.

Markets close early today, at 1300 ET and are closed all day tomorrow for July 4. We’ll be back on Monday to preview next week’s action.

Housekeeping

* PSA: The scheduling of this briefing is being reshuffled a bit due to the success of the live video. This will air closer to the market open, typically between 0800 and 0900 ET. Free subscribers can join live. The recording will be available to premium subscribers.

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Hot off the press: Read this month’s update on the Contrarian Portfolio here.

State of Play

Tesla (TSLA ) just reported second quarter deliveries. These fell short of estimates but apparently not enough to scare investors as the stock is moving higher in the pre-market. As we eye or board of indicators for signs of direction at 0915 ET:

* Stock index futures aren’t doing anything. No major US index is moving more than 0.2% from the break-even point;

* Commodities are moving higher. WTI crude oil is up 1.2% to trade around $66/barrel. Copper +2%. Gold is unchanged. Silver +1%;

* Cryptos also up a bit. Bitcoin +1% to $107,500;

* Bonds are selling off a bit. The 10-year yield is up 3 basis points to 4.29% (yields move inversely to prices).

Today’s Known Events

Tesla sales were the big one. Global sales dropped more than anticipated but not by much. There was good news on the autonomous vehicle front, which helps sentiment.

Rivian (RIVN ) for its part also reported a drop in Q2 deliveries. Maybe this is an indication consumers are starting to scale back big-sticker item purchases? It’s worth asking the question…

ADP Nonfarm Payrolls declined by 33,000 versus an expectation of +99k. Last month was revised downward to also become negative.

This is a big miss. It should have no bearing on the government’s non-farm payrolls figure, which will be out tomorrow. For this reason this will likely be ignored by the market. But there is no reason the ADP data is any less valuable and bears keeping an eye on for this reason. Over the long term, you figure the ADP and government figures will track each other.

The Bottom Line

Are investors being too sanguine about Tesla deliveries? Quarterly sales dropped year-over-year for the second straight period. But the number (384k) was close enough to analyst estimates (389k) to be considered a wash. Plus the autonomous vehicle stuff and it’s enough for investors to throw caution to the wind and bid up the stock.

The ADP figure, ignored by the market, could be a cause for concern. As we said in our monthly portfolio update, jobs growth has so far held up. This could be a sign that this is starting to turn. Or it could be an outlier. Either way, the market don’t care. If tomorrow’s non-farm payrolls number reinforces this trend, there will certainly be a sell-off, if only a short term one. But then, the ADP figure is not a leading indicator for non-farms.

Add it up and today’s data really wasn’t great. Investors seem to be ignoring a lot of potentially bad news. That may be because they have good reason to look past all of it, at least until tomorrow. Or it could be a sign of tougher days ahead….

Coming Up…

Tomorrow’s briefing will follow non-farm payrolls at 0830. It will be the last briefing before July 7 as markets are closed this Friday for the July 4 holiday.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

A return to normalcy appears to be on deck, judging by or board of indicators. As of 0755 ET these are pointing to risk-on:

* Stock index futures are rising, led by small caps. The Russell 2000 is up 1.1% with S&P 500 and Nasdaq both 0.6% to the good;

* Commodities have returned to earth. WTI crude oil is down 1% to trade around $70.50/barrel. Copper is effectively unchanged. Gold and silver down just 0.5%;

* Cryptos are rallying. Bitcoin is up <2% to trade close to $107,000 again;

* Bonds are unchanged. The 10-year yields 4.44%.

Known Events to Watch

The New York Empire State Manufacturing Index, at 0830 ET, is the only economic data release of note and it’s by no means a major indicator. There is an economist survey, which is for a decline of 5.9. That’s actually an improvement over the -9.2 recorded last month.

Tomorrow we get retail sales and industrial production. Wednesday is Fed Day, with the Fed widely expected to hold rates steady. Markets are closed Thursday for Juneteenth. Friday brings earnings from Kroger (KR ), Accenture (ACN ), Darden Restaurants (DRI ), and CarMax (KMX )

The Bottom Line

We told you on Friday that markets were already poised to brush off the Iran-Israel stuff, with oil the only real mover. And here we are, with stocks and cryptos recovering and oil dropping to below where it was before the Israeli air strikes.

There could be another shoe to drop in the Middle East of course, but that’s not how investors are playing this right now. This means the catalyst for the week will likely be the Fed on Wednesday. Investors will be looking for an indication, any indication, that the Fed is willing to cut rates. If we get that then markets should rally. If not, then it may not matter much in the whole scheme of things judging by how willing investors are to shrug off unwelcome news.

Things should otherwise be quiet. Summer is effectively here, even if the calendar doesn’t officially turn for a few more days. That means lower trading volumes. With that in mind, The Contrarian will likely not return until Wednesday, to preview the Fed. Unless something unexpected happens of course.

Housekeeping

* PSA: The scheduling of this briefing is being reshuffled a bit due to the success of the live video. This will air closer to the market open, typically between 0800 and 0900 ET. Free subscribers can join live. The recording will be available to premium subscribers.

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Israel carried out a series of attacks on and in Iran yesterday, adding a big dose of fear to the market set-up. As we eye or board of indicators for signs of direction at 06tk ET, this is being seen in commodity markets, first and foremost:

* Oil is spiking upward. WTI crude is up 8.5% to trade close to $74/barrel. Copper is down 2%. Gold and silver are higher but not as much as you might expect (<1.5%);

* Stock index futures are lower, but off of the lows. Nasdaq down 1.1%, S&P 500 is down 0.9%;

* Cryptos are down too, but not terribly either. Bitcoin is down <2% to trade around $105,000;

* Bonds are unchanged through all this. The 10-year yields 4.37%.

Today’s Known Events

Michigan Consumer Sentiment is out at 1000. That will be ignored. It’s all Middle East, all the time.

The market reaction ex-oil actually seems a bit muted. A drop of 1% and change for Nasdaq and S&P do not exactly speak to rampant fear. The selling could accelerate once the market opens of course, but so far this is really not that bad.

Markets hate uncertainty more than they hate bad news, but we’ve seen this movie before. There were some exchanges of hostilities last April. The market shrugged those off quickly. The question, then and now, is whether this spills into a broader Middle East conflict? Trump for his part is urging the sides to make a deal. Iran is calling this a declaration of war. Israel has said the operation is ongoing, whatever that means. Sabre-rattling or something more sinister?

The Bottom Line

The key question of course is what to do with one’s portfolio. How to protect against the possibility of a broader conflict? There are three options that immediately come to mind:

* Oil. One could argue there is more upside here. JPMorgan analysts are making that point at least, saying crude could rally to $120/barrel. That’s another 50% or so of upside.

The problem with this argument is it assumes demand will remain constant. If there is a broader conflict there will likely be economic retrenchment, which (one would think) will crimp demand.

* Gold. This is the traditional, proven, risk-off play. The muted move we’ve seen in gold overnight is perhaps an opportunity.

Problem with that is that gold is already trading at historic highs. Gold has no real tangible use. It has no yield. Is that really an investment you want to make right now?

* Bonds, specifically Treasuries. There too the reaction has been muted. But bonds are still pretty cheap, at least compared to the last two decades. Treasuries are of course a bet on lower interest rates. If there is economic retrenchment one figures interest rate cuts would be coming. The problem with that argument is that sustained higher oil prices will in turn move inflation higher

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks closed a little lower yesterday, despite a softer-than-anticipated CPI and proclamation by President Trump of a trade deal agreement with China. There were additional concerns about tensions between the US and Iran. As we eye or board of indicators for signs of direction at 0645 ET, things seem on edge a little bit. Trump’s latest comments, that unilateral tariffs would be imposed within weeks is weighing on things:

* Perhaps the most important move is in commodities specifically oil: WTI crude oil is down 1.5% to trade around $67/barrel. That can be seen as an indicator that fears over Middle East tensions are abating. But then gold is rallying, up 1.8%. Copper is caught in the middle, roughly unchanged;

* Stock index futures are pointed a bit lower. This is mostly seen in small caps with the Russell 2000 down 0.7%. S&P 500 and Nasdaq are down 0.4% each;

* Bonds are seeing some bids. The 10-year yield is down 3 basis points to 4.38% (yields move inversely to prices);

* Cryptos are dropping. Bitcoin is down <2% to trade around $107,300.

Add it all up and most indicators are pointing to risk-off.

Today’s Known Events

Yesterday we had consumer prices, today it’s the turn of producers. The Producer Price Index prints at 0830. This can be seen as a leading indicator of consumer prices under the pretext that producers pass higher costs off to consumers. The numbers anticipated by a survey of economists:

* Month-over-month headline PPI of 0.2%, after a decline of 0.5% last month;

* Year-over-year headline PPI of 2.6% (2.4% last month);

* MoM Core PPI of 0.3% (-0.4%);

* YoY Core PPI of 3.1% (3.1%).

Seeing how it’s Thursday we’ll get initial jobless claims at 0830 as well. These have been ticking up, with three straight increases. The expectation for this week is 242,000 new claims, which would be a drop from 247k recorded last week but still north of the four-week average of 235k.

There’s a 30-year bond auction at 1300. The last one of these produced a yield of 4.82%.

The Bottom Line

Our assessment yesterday that stocks would rally if the CPI came in soft turns out to have been misguided. In our defense, this China deal weighed on sentiment as do developments in the Middle East. For today, the latest tariff uncertainty introduced by Trump seems to be weighing on things.

Producer prices could have an impact but the sad reality is that the market tends to ignore this figure. The simple reason is that its record as a leading indicator is mixed. There are a number of reasons for this, perhaps most notably that things like healthcare and rent are not included in the PPI but factor heavily into the CPI. To wit, last month’s (much) softer than anticipated PPI only produced a modest rally in stocks. In fact, the Nasdaq dropped a bit that day.

Ultimately, the moves we’ve seen over the last 24 hours are not particularly dramatic. Certainly not compared to the volatility we saw in April. One would think that is a positive indicator where investor risk appetite is concerned.

PSA: The Contrarian will likely take tomorrow (Friday, June 13) off. Not because of the date but because there isn’t anything interesting on the calendar. If there are major developments today that warrant our attention he will do a briefing however.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks advanced a bit yesterday. There was no news on a trade deal between the US and China and no real market-moving news elsewhere either. As a result, The Contrarian took the day off. As we eye or board of indicators for signs of direction at 0655 ET, things are pretty quiet ahead of the CPI print at 0830, though perhaps on edge a bit in the bond market:

* Bonds are selling off a bit. The 10-year yield is up 3 basis points to 4.50%;

* Stock index futures are flat as a board, with no major US index moving more than 0.2% from the break-even point;

* Commodities are mixed. The big move is in copper, which is lower, to the tune of 2%. But WTI crude oil is up 1.5% to trade around $66/barrel. Gold and silver are unchanged;’

* Cryptos aren’t doing anything. Bitcoin is unchanged around $109,200.

Today’s Known Events

The Consumer Price Index, or CPI, is the main event of the day, out at 0830. The numbers anticipated by a survey of economists:

* 0.2% month-over-month headline CPI, the same as last month;

* 2.5% year-over-year headline CPI (2.3% last month);

* 0.3% MoM core CPI (0.2%);

* 2.9% YoY core CPI (2.8%).

So you can see that a slight uptick in inflation is anticipated, almost certainly due to tariffs.

There’s also a bond auction worth paying attention to, at 1300. Ten-year notes are on offer. The last one of these produced a yield of 4.34%.

The Bottom Line

The increased expectation for the CPI may give us a little breathing space. Not that this will change the inevitable highly dramatic headlines from mainstream media outlets, should the CPI number meet these expectations. Markets are wise to this however and should probably still rally if the CPI comes in exactly as anticipated.

Often this is exactly what happens. For all their (numerous) faults, economists are usually pretty good at gauging inflation figures on a monthly basis — unless there is an exogenous shock. We saw that during Covid and when Russia invaded Ukraine. So far with tariffs, economist estimates have been solid. But we’ve only had one month.

That’s another reason this CPI print today is a big deal. If it shows not just that inflation is rising more than anticipated, but that economist estimates are out of whack, it could spook markets. You’re going to want to pay attention to bond markets especially, but stocks will likely follow.

So to summarize today’s set-up:

* CPI below forecasts ➡️ stock and bonds rally

* CPI meets forecasts ➡️ stocks rally. Bonds maybe

* CPI above forecasts ➡️ stocks and bonds sell off

Then we have the bond auction in the afternoon, which also has the potential to hurt risk appetite. But a lot of the fear there appear to has dissipated as bond auction in other developed markets (specifically Japan) have been fine.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

It’s a quiet start to a week that will almost certainly be highlighted by China-US trade talks. As we eye or board of indicators for signs of direction at 0645, there isn’t much to go by:

* Stock index futures are flat with the exception of small caps and these are moving higher. The Russell 2000 is up 0.7%;

* Commodities aren’t doing much either. WTI crude oil is up 0.5% to trade close to $65/barrel, a high water mark for the past month or so. Copper is unchanged. Gold and silver are flat as well;

* Cryptos are showing a few signs of life with Bitcoin up <2% to trade north of $107,000;

* Bonds are seeing a few bids. The 10-year yield is down 3 basis points to 4.49%;

Today’s Known Events

Representatives from China and the US will meet in London this week to hammer out a trade deal. That should generate most of the headlines this week. On the topic of China, we just got a bunch of data from the world’s second-largest economy, including its trade balance which came out to a surplus of $103 billion, roughly in line with estimates. This despite imports and exports dropping precipitously. China’s economic data does not always make sense, which is why some will claim it is embellished if not invented outright.

Anyway that’s all we have on the calendar today. We’ll get the Consumer Price Index on Wednesday and producer prices on Thursday. A few earnings but nothing that should move the market at large.

The Bottom Line

The market appears in wait-and-see mode over these Sino-US trade talks. Stocks have rallied the last two weeks so there is that. Like we said last week, the presumptive move appears to be higher as investors seem to have rediscovered risk appetite after a tough spring.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Read this month’s portfolio update letter.

State of Play

Stocks closed lower yesterday amid a burgeoning feud between Elon Musk and President Trump. As a matter of fact, it may have already moved beyond ‘burgeoning’ to ‘full-fledged.’ As we eye or board of indicators for signs of direction at 0530 ET, things are in a holding pattern ahead of non-farm payrolls at 0830:

* Stock index futures are pointing to small gains. The S&P 500 and Nasdaq are up 0.4% each;

* Commodities are mixed. The big move is in copper, down 1.4%. WTI crude oil is unchanged trading around $63/barrel. Silver is up >1%, gold unchanged;

* Bonds are unchanged after rallying yesterday. The 10-year yields 4.38%;

* Cryptos aren’t doing much. Bitcoin is down 1% to trade around $103,600.

Today’s Known Events

Non-farm payrolls are the only game in town. The numbers we’re looking for:

* Headline number of 127,000 new jobs, versus 177k last month

* That would leave the unemployment rate at 4.2%

* Private payrolls of 110k (167k last month)

* Average hourly earnings to increase by 0.3% month-over-month (0.2%)

* Average hourly earnings to increase by 3.7% year-over-year (3.8%)

The Bottom Line

So economists are expecting a slowdown in hiring. Initial jobless claims came in hot the last couple of weeks and have increased for three weeks in a row, so there is that. We also had ADP payrolls come up short of estimates on Wednesday.

If we do get a soft jobs number today it may not necessarily be a bad thing however as it would increase the likelihood of Fed rate cuts.

Where the Trump-Musk feud is concerned, that is mostly being felt in Tesla ($TSLA ) stock right now. Indeed this thing has dropped 20% over the last week as the whole feud with Trump unfolded, though its worst drop was undoubtedly yesterday. That is taking indexes down with it. But you figure that is an overreaction as Tesla’s business can’t really take that much of a hit on Elon’s shenanigans, can it? Indeed, TSLA is up 5% overnight…

Finally be sure to check out the guest podcast recorded earlier this week with Meb Faber. That is available you (premium subscribers) exclusively at this time:

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Meb Faber of Cambria Investments joins the podcast to discuss the state of markets and the economy, the need to diversify internationally, and why dividends are not a good thing.

This episode was recorded Monday, June 2, 2025 and is being made available to premium subscribers exclusively at this time. Free subscribers can listen to the teaser clip attached to this post.

Content Highlights

* What are Meb Faber’s view of the economy and markets? His most contrarian take: non-US stocks are a bargain. The outperformance of US equities versus international peers is due for reversal (3:17);

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, May 28.

State of Play

Stocks rallied yesterday, ending a four-day losing streak on the ‘tariffs off’ move from the weekend. As we eye or board of indicators for signs of direction at 0645 ET, things are quiet:

* Stock index futures are unchanged, with no major US index moving at all from the break-even point;

* Commodities are moving a bit higher. WTI crude oil is up 1% to trade around $61.50/barrel. Copper is unchanged. Gold and silver are up just a bit, less than 0.5% in both instances;

* Cryptos are down a bit, with Bitcoin off 1% to trade around $108,500;

* Bonds are also seeing a little bit of selling. The 10-year yield is up 4 basis points to 4.47% (yields move inversely to prices).

Today’s Known Events

Earnings from Nvidia ($NVDA ) are the main event of the day, but those don’t happen until after the close at 1600.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, May 27. Welcome to the last week of May.

State of Play

President Trump on Sunday said he would hold off on imposing new tariffs on the European Union. That is helping risk appetite as we eye or board of indicators for signs of direction at 0645 ET:

* Stock index futures are pointing to gains, led by tech. The Nasdaq is up 1.7% with S&P 500 futures up 1.6%;

* Bonds are seeing some bids as well. The 10-year yield is down 4 basis point to 4.47% (yields move inversely to prices);

* Commodities are mixed. WTI crude oil is holding steady at $61.50/barrel but copper is down 1.7% while gold is down 2%;

* Cryptos are unchanged through this, with Bitcoin trading around $109,800.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, May 22.

State of Play

Stocks were on their way to a day of gains yesterday until a Treasury bond auction went awry. At issue was demand for 20-year Treasurys, which was hurt by all this tax bill stuff. This sent yields everywhere skyward (yields move inversely to prices, so this whole thing was very bad for bonds). The ensuing risk-off tanked stocks, as all but 14 of the S&P 500 closed lower.

As we eye or board of indicators for signs of direction at 0630 ET, a mixed bag awaits:

* Cryptos are rallying. Bitcoin is up 4% to trade close to $111,000, close to a new all-time high set yesterday;

* Bonds are recovering a tiny bit. Or at least they’ve stopped their bleeding for now. The 10-year yield is down 2 basis points to 4.58%. That’s off of the high of 4.60% recorded yesterday, but still quite close for comfort;

* Commodities are dropping. WTI crude oil is down 1.5% to trade around $60.50/barrel. Copper is down 1%;

* Stock index futures are stuck in the middle doing absolutely nothing. No major US index is moving more than 0.2% from the break-even point so this can be considered a wash.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, May 20.

State of Play

Stocks rebounded yesterday after an early bout of selling, shrugging off the Moody’s debt downgrade from the weekend to finish unchanged. Home Depot ($HD ) just reported earnings that were mostly in line with expectations but importantly reaffirmed its full-year forecast and said it would not raise prices due to tariffs. As we eye or board of indicators for signs of direction at 0635 ET things are quiet, perhaps tilted to risk-on:

* Stock index futures are not doing much. The Nasdaq is the only major US index moving at all from the break-even point, and it is down just 0.4%;

* Cryptos are rallying a bit, with Bitcoin up 2% to trade north of $105,000 again;

* Bonds have recovered from their weekend sell-off. The 10-year yield is down 2 basis points to 4.46% after flirting with 4.57% yesterday (yields move inversely to prices).

* Commodities are quiet. WTI crude oil is unchanged at $62/barrel as copper is down 0.9%. Gold and silver are unchanged, for a change.

State of Play

Stocks gained more ground yesterday, led by tech again as the Nasdaq put in its sixth straight day of gains. As we eye or board of indicators for signs of direction at 0715 ET things are pretty quiet:

* Stock index futures are taking a bit of a breather. The Nasdaq is down 0.6% with S&P 500 futures off 0.5%;

* Commodities are dropping. WTI crude oil is down 3% to drop below $61/barrel. Copper is down 0.3%;

* Cryptos are also taking on a little water. Bitcoin is down 2% to trade around $101,700;

* Bonds are unchanged. The 10-year yields 4.51%, which is around its highest level of the year.

Today’s Known Events

We’ll start with earnings again:

* Walmart ($WMT ) was the one we’ve been waiting for. All week really. Results were mixed but management importantly reaffirmed full-year guidance. The initial move in the stock is higher as a result;

* Alibaba ($BABA ) missed expectations and is dropping in the pre-market, down 5% at the time of this writing;

* Deere & Co ($DE ) earnings appear to have impressed investors as that stock is up 3% in the pre-market;

* Birkenstock ($BIRK ) raised guidance and is rallying in the pre-market, up 5%;

* After the close at 1600 we’ll hear from Applied Materials ($AMAT ) and Take-Two Interactive ($TTWO ), among others.

We have a bunch of economic data out today as well:

Retail sales are out at 0830. Economists who were surveyed expect the headline figure to be flat month-over-month after a 1.4% increase last month. Core retail sales, which exclude automobiles, are expected to increase by 0.3% after rising 0.5% last month.

We’ll also get producer prices at 0830. These are a good leading indicator for consumer prices under the premise that producers pass higher costs off to consumers. Especially with tariffs, one would expect this to be the case. The expectation here is for an increase of 0.2% MoM after a decline of 0.4% last month. That would leave the annualized figure at 2.5% after coming in at 2.7% last month. Core PPI, which excludes food and energy is expected to increase by 0.3% MoM after dropping by 0.1% last month. That would leave annualized Core PPI at 3.1% after printing at 3.3% last month.

Seeing how it’s Thursday we’ll get initial jobless claims, also at 0830. The expectation is for 229,000 new claims, effectively unchanged from last week’s 228k and basically in line with the four-week average of 227k.

Industrial production is out at 0915. This is expected to increase by 0.2% MoM after declining by 0.3% last month.

The Bottom Line

So welcome news from Walmart. That is certainly a relief after what happened last quarter. The caution on tariff’s impact to consumer prices is certainly ominous but then if tariffs are canceled then we’re all good, right?

Retail sales could move sentiment, though it’s worth keeping in mind that this will likely be a tariff-driven outlier. Plus retail sales tend to track employment and that is continuing to hold up fine. M&A markets appear to be fine as well, judging by this FootLocker ($FL ) deal, which can be viewed as a healthy indicator of corporate risk taking — and the financial industry’s willingness to bankroll this risk-taking.

Stocks on the Contrarian Radar©️

Safe to say it’s been a very bad stretch for United Health ($UNH ). First its CEO gets assassinated, then it missed earnings. Earlier this week its CEO quit. Now comes news the company is being investigated for possible Medicare fraud. The stock has fallen off a cliff as a result, giving up more than half its value over the last month:

This kind of ‘blood in the streets’ sentiment has The Contrarian naturally looking into the possibility of whether UNH may just present a buying opportunity. A look into the valuation shows the stock trading at:

* 13x forward earnings

* 0.6x forward sales

* 2.7x forward cash flows

That is cheap. The balance sheet seems to check out okay at first glance, with $81 billion in debt and $34 billion in cash versus a market cap of $279 billion (and shrinking). But looking through the assets, more than a third ($107 billion of its $309 billion) was in the dreaded ‘goodwill’ category last quarter with an additional $30 billion of ‘other’. That’s not good.

At issue are not just these scandals. The company is apparently also hit with increased insurance usage and costs, particularly in Medicare Advantage. This caused it to suspend guidance, which is going to throw some of its valuation into question. And of course that creates more uncertainty and investors hate uncertainty more than they hate bad news.

Verdict: UNH is cheap for a reason. The Justice Department probe has to be treated seriously because this is Trump’s Justice Department we are talking about. The President has spoken of his desire to lower prescription drug costs, but to disrupt such a big company like this — especially one that has attracted the vitriol of liberal media — has got to mean something. For this reason one suspects that there could be more bad news coming in the days and weeks ahead. It also unleashes a bunch more uncertainty, including the possibility the company could be broken up.

Health insurance companies can boast a ‘sticky’ stream of cash flows — until they can’t. All this uncertainty has the potential to upend this equation. That’s too much uncertainty even for a contrarian, and your author is going to stay away from UNH, at least for now.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, May 14.

State of Play

Stocks advanced again yesterday with tech leading the way again. As we eye or board of indicators for signs of direction at 0630 ET, there is very little to go by:

* Stock index futures are flat as a board. No major US index is moving at all from the break-even point;

* Bonds are seeing a few bids after several days of selling. The 10-year yield is down 5 basis points to 4.45% (yields move inversely to prices);

* Commodities are retreating a bit. WTI crude oil is down 1.4% to trade below $63/barrel again. Copper is down 0.6%;

* Cryptos aren’t doing anything. Bitcoin is unchanged trading around $103,500.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, May 12.

State of Play

News of this China-US trade deal is greatly helping risk appetite as we eye or board of indicators for signs of direction at 0655 ET:

* Stock index futures are rallying in a major way. Small caps are leading the charge, with the Russell 2000 up 4.5%. Nasdaq futures are 4% to the good with S&P 500 up 3%;

* Commodities are seeing a surge in oil prices — WTI crude is up 3% to trade around $63/barrel — as precious metals drop with the risk-on mood. Gold and silver are down 3% each;

* Bonds are dropping, keeping with the risk-on theme, with the 10-year yield up 8 basis points to 4.45% (yields move inversely to prices);

* Cryptos are surprisingly flat, with Bitcoin unchanged at $104,000.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, May 8.

State of Play

Stocks managed to close higher yesterday after the FOMC meeting was a non event, as expected. Overnight came news that the US and UK would sign a trade deal, the first such agreement since Liberation Day. As we eye or board of indicators for signs of direction at 0655 ET, this is helping risk appetite:

* Stock index futures are pointing to gains, with the Nasdaq up 1.5% and S&P 500 futures 1.1% to the good;

* Cryptos are rising as well on this news, with Bitcoin up 3% to edge close to $100,000 again

* Commodities are mixed. WTI crude oil continues to climb, up 1.8% to trade north of $59/barrel but copper is down 1.5%. Gold and silver are dropping as well, gold by 1%;

* Bonds aren’t doing anything. The 10-year yields 4.31%.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, May 7. Fed Day.

State of Play

Stocks dropped a bit yesterday but then positive earnings from $AMD after the close helped sentiment overnight. So did news of meetings between US and Chinese trade officials on tariffs. As we eye or board of indicators for signs of direction at 0645 ET, investors appear cautiously optimistic as a result:

* Stock index futures are pointing to gains. Small caps are leading things, usually a good sign. The Russell 2000 is up 0.9%. S&P 500 and Nasdaq both +0.5%;

* Cryptos are also showing signs of life, with Bitcoin up 3% to trade around $96,800;

* Commodities are mixed. The big move is in copper, and that is down, by 2%. WTI crude oil is up 0.6% to trade around $59.50/barrel. Gold and silver down a bit;

* Bonds aren’t doing anything. The 10-year yields 4.31%.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, May 6.

State of Play

Stocks dropped a bit yesterday for the first time in weeks on renewed tariff concerns. As we eye or board of indicators for signs of direction at 0650, it looks like we could be in for a little more selling:

* Stock index futures are down, led by tech again. The Nasdaq is down 0.9% with S&P 500 futures down 0.6%;

* Commodities are rising across the board. WTI crude oil is rallying, up 2.5%. Gold and silver continue to climb, up ~2% each. Copper is up just 0.3%;

* Cryptos are unchanged. Bitcoin trades around $94,000;

* Bonds aren’t doing anything either. The 10-year yields 4.36%.

State of Play

Stocks got beaten up yesterday the Nasdaq officially entered a bear market. As we eye our board of indicators for signs of direction at 0700, risk appetite appears to be returning:

* Stock index futures are pointing to gains, led by small caps (usually a good sign). The Russell 2000 is up 1.1%. Nasdaq and S&P 500 are up 1%;

* Commodities are gaining ground across the board, with WTI crude oil up 1.5% to trade around $63.50/barrel. Copper is up 0.8%. Precious metals continue their ascent, with gold and silver up 1% each;

* Cryptos are relatively quiet by comparison. Bitcoin is up 1% to trade around $88,500;

* Bonds are unchanged with the 10-year yielding 4.43%.

Today’s Known Events

It’s a big day for earnings. A few of these are in already:

* Staples company 3M ($MMM ) beat on top- and bottom-line and appears to have left guidance unchanged as the stock is rising in the pre-market, up 3% at the time of this writing;

* Fellow staples company Kimberly-Clark ($KMB ) reported mixed results but importantly lowered guidance (tariffs again) and that stock is sinking in the pre-market, down 3% in the pre-market;

* Home builder PulteGroup ($PHM ) beat estimates and is moving higher in the pre-market, to the tune of 2% at the time of this writing;

* Verizon (VZ ) beat estimates but its guidance appears to have disappointed investors as the stock is down 3.5% in the pre-market;

* GE Aerospace ($GE ) reported mixed results and updated guidance and investors appear to have liked what they saw as the stock is up 1.5% at the time of this writing;

Also reporting before the open: Defense contractors Lockheed Martin ($LMT ), RTX ($RTX ), Northrup Grumman ($NOC ), and Halliburton ($HAL )

After the close at 1600 the main event: Tesla ($TSLA )

The Bottom Line

At least earnings will supply a detraction from all this Trump stuff. If not tariffs, then undermining the independence of the Federal Reserve — all of this is creates uncertainty, which is bad for risk appetite. The sell-off we saw yesterday is the logical consequence of this.

Figure the market needs one of two things to happen for investors to regain confidence:

* Companies in their earnings indicate that tariffs are not that big of a deal;

* Deals between the US and its major trade partners EU, UK, Japan, and China.

We got a hint of item 1 in the bank earnings last week. Not overtly, but the loan loss provisions were not raised significantly to account for a wave of consumer defaults. GE and PulteGroup earnings today may have done the same, though Kimberly-Clark certainly did not.

Where item 2 is concerned, the situation remains quite fluid and it’s not entirely clear who to believe on everything. We do know that Vice President Vance is in India discussing a trade deal. Trump for his part has talked up a deal with Europe. Japan talks now appear stalled. China would appear to be even further afield.

Where the Fed is concerned, Trump is probably just going to keep raising pressure on Powell to cut rates. He had a rant to this effect on Truth Social yesterday. That would perhaps be an indication he is not that serious about removing Powell. But markets still seem scared by the whole thing.

That could leave us set up for the type of head fake typical of bear markets: higher moves in futures and at the open before sustained selling sets in, leading to a loss for the day. This generally holds true if futures are up less than 1% — if more than that, then the momentum usually carries through to a winning day, unless acted upon by an outside force of course.

Today’s futures are up exactly 1% so figure it could go either way — but watch for the bear trap.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, April 21.

State of Play

US stocks return to action today after a three-day absence. As we eye our board of indicators for signs of direction at 0655, sentiment is apparently being weighed down by news that President Trump is looking into firing Fed Chair Jerome Powell:

* Stock index futures are moving lower led by tech. The Nasdaq is down 1.3% with S&P 500 futures off 1%;

* Cryptos are rallying however. Bitcoin is up 3.5% to trade north of $87,000;

* Commodities are mixed. WTI crude oil is down 2.5% to trade around $62.50/barrel but copper is up 1% and precious metals have resumed their rally with gold and silver up over 2% each;

* Bonds are unchanged. The 10-year yields 4.35%.

Today’s Known Events

There is very little on the calendar for today. Some regional banks report earnings and an auction of short-term bills at 1130 ET and that’s about it.

Markets in Europe and Asia are closed today for Easter Monday.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, April 16.

State of Play

Stocks closed unchanged yesterday after a quiet trading session. (When was the last time we said that?) There was some bad news after the close from Nvidia ($NVDA ), which announced a big tariff hit for exports of its H20 processors to China. Overnight earnings from ASML ($ASML ) disappointed — tariffs again — adding to the negative sentiment for tech.

As we eye our board of indicators for signs of direction at 0650, this is impacting risk appetite, especially in tech:

* Stock index futures are pointing to a lower open. The Nasdaq is leading the drop, down 1.4%. S&P 500 futures are down 0.8%;

* Commodities are mixed. We’re seeing another big rally in gold and silver, both up 2.5% but then copper is down 0.7%. WTI crude oil is up <1% to trade close to $62/barrel;

* Cryptos are dropping with Bitcoin down 2% to trade below $84,000;

* Bonds are unchanged through this. the 10-year yields 4.34%.

Today’s Known Events

The main event is probably Fed Chair Jerome Powell’s speech at the Economic Club of Chicago at 1330 ET. Topic: the economic outlook. This will be broadcast live. One can expect Powell to speak of tariffs. His previous comments on the topic have been kind of non-committal, at least where interest rate policy is concerned.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, April 10.

State of Play

Stocks staged a major rally yesterday after President Trump announced a 90-day pause on reciprocal tariffs. When we say major rally, we mean major. We’re talking 9.5% for the S&P 500, its biggest one-day gain since 2008 and third-best day since World War II. The Nasdaq rallied even more, up 12%!

As we eye our board of indicators for signs of direction at 0630, a mixed bag awaits:

* Stock index futures are dropping again. Pretty significantly, in fact. Small caps are leading the drop, with the Russell 2000 down 2.2%. S&P 500 and Nasdaq are down 1.4% and 1.7%, respectively;

* Cryptos are rallying, with Bitcoin up 6% to around $82,000, its highest level of the week;

* Bonds are also rallying again. The 10-year yield is down 10 basis points to 4.30% (yields move inversely to prices), apparently all due to the tariff reversal. So much for China dumping all its Treasuries. Or maybe they’re buying them back again?

* Commodities are mixed. WTI crude oil is down 2.5% to trade below $61/barrel — still a lot higher than it was yesterday over reports China has slowed its purchases of US oil — as copper is up 4%. Gold and silver continue to rally as well, both up over 1.5%;

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, April 9.

State of Play

Stocks dropped yesterday after a dramatic mid-day reversal, all due to tariffs. As we eye our board of indicators for signs of direction at 0640 ET risk-off is once again the story:

* Stock index futures are down, led by small caps. The Russell 2000 is down 1.2% with the S&P 500 giving up 0.8% and Nasdaq -0.2%. The major movement is in pharma stocks, especially European pharma stocks. All of these are dropping on news that the Trump administration will impose tariffs on all pharmaceutical imports ;

* Commodities are mixed. WTI crude oil is dropping pretty precipitously, down 4% to trade around $57/barrel but copper is up 2%. Gold and silver continue their ascent, both up 2% or so;

* Bonds are getting dumped. The 10-year yield is up 11 basis points to 4.37% (yields move inversely to prices);

* Cryptos are down, but not much. Bitcoin is off 2% to trade around $77,500.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, April 8.

State of Play

Stocks finished roughly unchanged yesterday after one of the most volatile sessions in recent memory. As we eye our board of indicators for signs of direction at 0645, it looks like risk appetite is returning from the dead:

* Stock index futures are pointing to gains. Small caps are leading the way, usually a good sign, with the Russell 2000 up 2%. S&P 500 futures are 1.5% to the good with the Nasdaq up 1.3%;

* Commodities are rebounding as well. Copper is up 1.8%. WTI crude oil up 0.7% to trade around $61/barrel. Gold ands silver are up 1.5% each;

* Cryptos are up a bit, continuing the risk-on theme. Bitcoin is up 2.5% to trade around $79,000;

* Bonds are unchanged after selling off yesterday. The 10-year yields 4.16%.

Today’s Known Events

There’s simply nothing in the way of known events that can have any real impact on risk appetite.

The National Federation of Independent Business earlier released its Small Business Optimism survey for March earlier printed at 97.4, below the 98.9 where economists had pegged it. Exciting stuff. We’ve arrived at a stage of the game where the market is not paying attention to surveys at all.

We do have some earnings, but there too it’s hard to see how this will move the needle: Walgreens Boots Alliance ($WBA ) and Tilray ($TLRY ) are among the most prominent companies reporting today, both before the open at 0930, but neither will have any broad impact on markets.

For that we have to turn to the White House.

The Bottom Line

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, April 3.

Read this month’s portfolio update letter here!

State of Play

President Trump’s ‘Liberation Day’ address yesterday afternoon caused much consternation. Futures plummeted after his speech but appear to have found a bottom. As we eye our board of indicators for signs of direction at 0650, it is very ugly out there:

* Stock index futures are down precipitously, but off of the lows. Small caps are leading the drop, with the Russell 2000 down 4.7% (!). Nasdaq futures are down 3.8% and S&P 500 futures off 3.5%. Yes those numbers were worse earlier in the overnight session;

* Commodities, too are getting sold. WTI crude oil is down 4.5% to trade around $68/barrel. Copper is down 2.5%. Even gold and silver are retreating, down about 1% each;

* Bonds are rallying, keeping with the risk-off theme. The 10-year yield is down 12 basis points to 4.07%, its lowest point of the year;

* Cryptos are, perhaps amazingly, holding up okay in the scheme of things. Bitcoin is down just 2% to trade around $83,000. If there’s reason for hope, it’s this.

Today’s Known Events

A few earnings to start us off:

* Lamb Weston ($LW ), the potato supplier that caused so much consternation last summer, was due to report at 0630 but has not yet;

* MSC Industrial Direct ($MSM ), a metalworking company, missed estimates and initiated an outlook. Unfortunately the futures prices haven’t updated for this security so no way of telling how the market is reacting;

* Conagra Brands ($CAG ), producer of packaged foods (Slim Jim is perhaps the most recognized one) is also out before the open at 0930;

It’s Thursday so we’ll get initial jobless claims at 0830 ET. Economists who were surveyed expect 225,000 new claims this week, effectively in line with the 224k recorded last week and right in line with the four-week average which is 224k.

The US reports its trade balance at 0830 as well. The expectation here is for a trade deficit of $123 billion, down a bit from the $131 billion recorded last month.

ISM non-manufacturing (read: services) PMIs are out at 1000 ET. A reading of 53.0 is expected. That’s down a bit from the 53.5 recorded last month but still comfortably above the 50 line that separates expansion from contraction.

(It certainly looks like Trump has taken a flamethrower to markets, at least for now. Art by author via AI)

The Bottom Line

So apparently tariffs can still scare investors. The question we once again have to ask is this:

Can these tariffs cause the economy to enter recession?

State of Play

Stocks advanced yesterday but closed off the highs. As we eye our board of indicators for signs of direction at 0650, things are quiet ahead of Tesla ($TSLA ) deliveries and all this Liberation Day stuff :

* Stock index futures are dropping a bit, led by tech. The Nasdaq is down 0.8% with S&P 500 futures off 0.6%;

* Cryptos are showing a few signs of life. Bitcoin up 1% to move north of $85,000;

* Commodities are quiet. WTI crude oil is down just 0.5% to trade around $70.80/barrel. Copper is up 0.4%. Even gold and silver aren’t moving;

* Bonds are also quiet after rallying for the last couple of days. The 10-year yield is 4.15%.

Today’s Known Events

Tesla ($TSLA ) reports first-quarter deliveries today, presumably at 0900 ET. This will surely impact Tesla’s stock, which will also take major US indexes with it seeing how TSLA is part of nearly all of them. Tesla is down in the pre-market at the time of this writing.

ADP nonfarm payrolls are out at 0815 ET. Economists who were surveyed expect 118,000 new jobs, up from 77,000 recorded the previous month. This is potentially an important datapoint that will probably be ignored by the market. This just because the ADP number has no bearing on Friday’s government figure that is so closely watched. But you figure ADP has as good a beat on employment trends as the government, right? No matter, the market will in all likelihood ignore this.

Factory orders are out at 1000 ET. The expectation is for an increase of 0.7% month-over-month, less than the 1.5% recorded last month. This too is another potentially important datapoint and it too will be ignored by the market.

That’s because today is ‘Liberation’ Day, apparently with the moniker ‘Make America Wealthy Again.’ President Trump will announce exactly what this means in a Rose Garden address at 1600 ET.

The Bottom Line

Trump is not speaking until after the close — surely by design — but you can expect to see details of his speech leak throughout the day.

We know a few things already, besides the goofy MAWA moniker (how do you even pronounce that?):

* Tariffs will obviously be front-and-center here. There will definitely be new tariffs on certain countries and industries, maybe even on all of them;

* One item that has investors relieved is news that the US Trade Representative’s office is preparing an across-the-board tariff that would be lower than the 20% previously reported;

* The situation is otherwise fluid.

One question is whether there will be a ‘carrot’ to go with the ‘stick’ that is these tariffs. Could today’s announcement include tax breaks for certain industries? Who would benefit from that?

We’ll soon know more. It does look like investors are a little less scared of all this than they were last week.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Check out the new Fed Tracker here! You will have to request access but this is just a precaution as access will be granted if you are a premium subscriber;

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks sold off pretty dramatically on Friday after inflation data came in slightly ahead of forecasts. As we eye our board of indicators for signs of direction at 0655, risk off is the mood, though happily it appears inflation concerns have moved to the back burner:

* Stock index futures are moving lower, led by tech. The Nasdaq is down 1.3%. S&P 500 down 1%;

* Bonds are getting bid up, which tells us the inflation concerns that surfaced on Friday are less vexing than growth concerns. The 10-year yield is down 5 basis points to 4.20%, to its low point of the year (yields move inversely to prices);

* In commodities land, the interesting move is in copper, which is down 2%. This would indicate larger concerns about economic growth. Gold is up 1%. WTI crude oil is stuck in the middle, unchanged at $69.50/barrel;

* Cryptos are dropping a bit. Bitcoin down 1.7% to trade around $81,700.

Today’s Known Events

Not much. Chicago PMIs are at 0945 are about it. A reading of 45.5 is expected, the same as last month. That is below the 50 level that separates expansion from contraction. This would normally be ignored by the market. Today it may be watched a little more closely just because of all the selling we had on Friday.

It’s a slow day but a busy week. The whole thing culminates with non-farm payrolls on Friday, but in the interim we have this ‘Liberation Day’ to worry about. That means tariffs. The question is exactly how bad the tariffs are going to be and whom they will affect. The situation is extremely fluid, as are many things with Trump especially around tariffs.

The Bottom Line

The drop in bond yields (meaning a rally in bond prices) tells us that stagflation is not a concern for investors right now. The drop in copper prices indicate scaling back of economic growth prospects. Clearly investors are positioning for deflationary recession right now, at least judging by those indicators.

Whether that comes to pass remains an open question. It has certainly been an ugly month for stocks. The S&P 500 is down 6% with the damage in tech even worse as the Nasdaq has given up 8%. Since it’s high in early February, the S&P is down 11%. That puts it firmly in correction territory. Will it fall enough to enter a bear market? That would require it to drop to 4918 from its current level of 5524. Could happen. Probably won’t happen today. This week? If things get ugly enough?

A bear market is one thing. It’s still hard to see how tariffs alone will bring about a recession. As we pointed out last week, the economic data (actual data, that is. Not surveys) are not yet indicating any kind of retrenchment from the consumer. There was some noise on social media about home delinquency rates, but those have since been debunked. Don’t believe everything you see on social media.

Yes, appearance can catch up to reality. If consumers truly are concerned about a recession they will pull back on spending and it will become a self-fulfilling prophecy. That could happen, but there are few indications that it is. Airlines are cutting capacity for flights from Canada to the US, so there is that even if it isn’t terribly dramatic yet. Consider this a final reminder that media — and especially social media — are more than happy to push disaster scenarios. Not because they’re true, but because they result in clicks and clicks = revenues. The business model for media in today’s age is quite simple and very cynical. But that leaves room for opportunities for those who can spot them.

Stocks On The Contrarian Radar©️

The Contrarian has been researching tail risk ETFs. He started doing this last Thursday, during a big rally, then got distracted. Obviously the time to buy these would have been during the rally. Now that risk appetite has retrenched again, these funds should very much be in vogue. Still, it makes sense to take a look.

To simplify matters — and make things a little more palatable to us ADHD folks — we included just four metrics:

* strategy, i.e. ‘how it works’/its asset base

* fees

* dividends

* assessment of efficacy

We then assigned a grade, and ranked the funds in order of effectiveness.

1. Alpha Architect Tail Risk ETF ($CAOS )

* How it works: Trades options, mostly on the S&P 500. Uses leverage

* Fees: 75bps

* Dividend: none

* Assessment: CAOS is relatively new, having launched in 2023. It’s been positive since, and managed positive returns YTD (+0.7%).

* Grade: B. The use of leverage isn’t great though and it doesn’t even have the returns to make up for the additional risk. The fund appears to work, but the track record is not long.

2. SPDR® Bloomberg 1-3 Month T-Bill ETF ($BIL )

* How it works: BIL buys and holds short-term Treasuries. Simple!

* Fees: 15bps

* Dividend: 4.85%

* Assessment: While not strictly a tail-risk fund (or at least not advertised as such), BIL invests in the safest portion of the Treasury market, making it a good hedge for risk-off. During periods of dramatic risk off (2008, 2020) it did appreciate a bit. As such, it works as advertised.

* Grade: B. BIL is cheap. It also doesn’t move very much, having gained a whopping 12 basis points since inception in 2007.The dividend makes it better than holding cash, but the dividend fluctuates with interest rates (and appears to follow the Fed fund rate pretty closely, which makes sense).

3. iShares Short Duration Bond Active ETF ($NEAR )

* How it works: NEAR buys Treasury notes and short-term bonds, including some (limited) corporates

* Fees: 33bps

* Dividend: 4.9%

* Assessment: Like BIL, NEAR is not a tail-risk fund per se. However as a holder of short-term Treasuries it can certainly work like one. It has slightly more volatility than BIL. As such, it is a bit more aggressive and therefore a tiny bit more risky. It tends to drop marginally with the bond market. It crucially did not do well during March 2020.

* Grade: C+. NEAR works fine as a short-term bond proxy. As such it will rise a bit during Treasury rallies and drop when bonds lose their favor. With a slightly higher price point than BIL and more volatility but with the same yield, it gets a slightly worse grade.

4. Cambria Tail Risk ETF (TAIL )

* How it works: Buys mostly Treasuries, trades options

* Fees: 73bps

* Dividend: 2.7%

* Assessment: TAIL has been around since early 2017. It has done its job during major drawdowns: The fund appreciated in price during COVID, in 2022, last summer, and this year (it’s up 5% YTD).

* Grade: C. TAIL is not cheap. It appears to work as advertised during major moments of chaos. However, held over the long term the fund has performed poorly (see charts below).

5. Global X S&P 500® Tail Risk ETF (XTR )

* How it works: Trades options, but also buys stocks seeking out ‘defensive’ names

* Fees: 53bps

* Dividend: 21%

* Assessment: XTR is the cheapest tail risk ETF reviewed here. It also appears to the be the last effective, with a 11% drawdown this year. The fund has been around since late 2020 but does best when markets rally.

* Grade: D. The performance record speaks for itself. Returns this year are worse than the S&P, which means XTR literally doesn’t do what it is intended to. The dividend is almost certainly not long for this earth at its current yield, but is a nice bonus while it lasts. Still, the risk is too great, especially for a product that is supposed to protect from risk-off.

NB: BIL and NEAR are hardly the only short-term bond funds on offer. There are many others that The Contrarian has not, to date, looked into. He holds the NEAR in his Roth IRA account. There are of course many other ways to hedge risk, not least through inverse ETFs. But those are another topic for another day.

It’s worth asking how the actively-managed funds TAIL and CAOS behave versus ‘vanilla’ fixed-income ETFs like BIL or iShares 1-3 Year Treasury Bond ETF ($SHY ). Let’s hold them up to the S&P 500 ($SPY ) and take a look:

As you can see, this five-year chart is pretty telling. The S&P has more than doubled during this time. CAOS has managed to gain 18% (since inception in 2023) while SHY is down a bit and BIL has done absolutely nothing. TAIL however, has dropped 51%! That’s a heavy price to pay for tail risk.

Let’s move in a bit and look at the last couple years, to the start of 2023:

Again, period corresponds to a bull market. So we would expect the S&P to be the best performing index during this time. CAOS again managed to produced gains while the two bond proxies were roughly even. But TAIL again gave up a lot, 22%.

The Verdict

These ETFs certainly present some interesting options for those concerned about imminent disaster. It is worth keeping in mind that anything linked to Treasuries will not perform well in stagflation. Probably an options strategy is a better bet at that point. For deflationary recessions like we saw in 2008 and (briefly) in 2020, Treasury-linked funds should do fine. The question then becomes why you shouldn’t just buy Treasuries? You can, but that market is more illiquid and requires more upfront costs than ETFs. In such a scenario, a cheap Treasury proxy like BIL can make sense. Again BIL is just one option. Do your own research, make your own decisions.

The Contrarian for his part is loath to buy a tail risk fund when everybody is concerned about tail risk. He will wait for a happier day in markets to consider an investment like that. Otherwise he is not being contrarian but just fearful.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Check out the new Fed Tracker here! You will have to request access but this is just a precaution as access will be granted if you are a premium subscriber;

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks sold off again yesterday, reversing most of the week’s gains especially in tech land. It was not all bad however as consumer staples stocks gained ground. As we eye our board of indicators for signs of direction at 0710, things appear mixed:

* Stock index futures are flat, with no major US index moving more than 0.2% from the break-even point;

* Bonds are selling off, interestingly enough. The 10-year yield is up 6 basis points to 4.40% (yields move inversely to prices);

* Commodities are taking a breather for a change. Industrial commodities, that is. WTI crude oil is unchanged at $69.50/barrel. Copper also unchanged. Gold and silver are gaining ground however, both up 1%;

* Cryptos aren’t doing much with Bitcoin down <1% to trade around $87,300.

Today’s Known Events

It’s another quiet day. We do have some earnings however:

* Winnebago Industries ($WGO ) beat estimates and appears to have raised guidance as the stock is up 3.5% in the pre-market;

* Lululemon ($LULU ) is due after the close.

In terms of economic data we do have initial jobless claims at 0830 seeing how it’s Thursday. Economists who were surveyed expect 225,000 new claims, up a bit over last week’s 223k but still below the four-week average of 227k.

Pending home sales are out at 1000. The expectation here is for a month-over-month increase of 0.9% after a decline of 4.6% last month.

The Bottom Line

Tariffs appear to be the story again. President Trump last night announced a 25% levy on US car imports. This was widely expected and indeed appears to have been the cause for yesterday’s sell-off. Tech has other issues to deal with as well, with Microsoft ($MSFT ) reportedly abandoning data center projects.

All of a sudden this makes the set-up look pretty bearish. It also makes Monday’s rally look like a bit of a dead-cat bounce. But the fact that staples and energy stocks have rallied through this tells us investors are not willing to throw the baby out with the bathwater quite yet. They have simply soured on the tech sector.

Don’t fight the tape. The Contrarian is holding on to his tech investments even though some of them are under water. He is happy to have a large allotment to staples and happier still to see dollar stores rallying. He is not looking to add to any positions at these prices, other than an occasional purchase of Nuveen New York AMT - Free Quality Municipal Income Fund ($NRK ) for tax free income, and maybe just maybe a beleaguered automaker if it’s on sale?

Stocks On The Contrarian Radar©️

One does have to look at automakers. For one, just to observe the damage. The biggest are Ford ($F ), General Motors ($GM ), Tesla ($TSLA ), Toyota ($TM ), Volkswagen (VWAGY), Rivian ($RIVN ) and Stellantis ($STLA ). There’s an ETF, Max Auto Industry 3X Leveraged ETN ($CARU ) that we can use as a proxy for the entire industry, though it isn’t limited to automakers but also things like Carvana ($CVNA ), its largest holding, and AutoZone ($AZO ).

Here’s the overnight damage:

* Tesla: +0.9%

* Rivian: +0.25%

* VW: -0.7%

* Stellantis -1.4%

* Toyota -1.7%

* Ford -3%

* GM -6.5%

Quite a mixed bag, with the move in US electric vehicle manufacturers perhaps an indication that investors are already dipping their toes back in.

For the longer-term view, let’s just take the largest automaker, Toyota, the largest US brand, Ford, and Stellantis to get the European aspect, and hold them up against the CARU ETF. As you can see, Ford is the only one still up so far this year:

Zoom out a bit, to the trailing 12-month chart, and the picture changes. The ETF has actually held on to gains while the others have gotten beaten up:

WTF is going on with Stellantis? It may be in part due to the generous dividend, worth 10% at current prices.

Looking at the valuation, STLA trades at:

* 4x forward earnings

* 0.2x forward sales

* 1.9x forward cash flows

That is literally screaming cheap AF. Turning to the balance sheet, one quickly understands why. The company has $38 billion in debt versus $35 billion market cap. Of its $84 billion in assets, $16 billion are in goodwill with $20 billion in ‘other intangibles.’ That means $36 billion of its $84 billion in assets, more than 40%, effectively doesn’t exist.

So yeah, that dividend is probably not long for the world. But could the stock be worth a punt at these prices? The company’s auto brands include names like Alfa Romeo, Chrysler, Citroen, Dodge, Fiat, Jeep, Maserati, Ram, Opel, and Peugeot. Those are some very well known names, including several in the lucrative US market. The crown jewel, of course, is Maserati. One need only look at Ferrari ($RACE ) to see the potential for ultra high end cars. Here’s the five-year chart of RACE, STLA, and the S&P 500 ($SPY ).

You’ll note the divergence in July when STLA clearly separated from the others. One has to wonder if this gap will start to narrow at any point?

Clearly more research is required, but maybe just maybe it’s worth taking a punt on Stellantis. Yeah automakers are cyclical but this thing has gotten beaten up so badly it’s kind of hard to justify the price even with tariffs. Even if most of its auto brands are junk, especially in the age of electric vehicles, some like Jeep have loyal brand followings. Alfa Romeo has cachet. Even Opel’s name carries weight in German-speaking Europe.

The Verdict

The Contrarian is intrigued about the possibility of Stellantis and will look into possibly taking a small position if it drops further. The understanding is that this is a speculative punt and maybe a call option on Maserati getting spun out.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Check out the new Fed Tracker here! You will have to request access but this is just a precaution as access will be granted if you are a premium subscriber;

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks rose yesterday for the third day in a row, though it was a quiet session with marginal gains. As we eye our board of indicators for signs of direction at 0650, there is not an awful lot to go by:

* Stock index futures are flat with no major US index moving more than 0.2% from the break-even point;

* Commodities continue their ascent. We’ve been repeating this for days. Copper is up 1.3% to climb to fresh record highs again. WTI crude oil is up 0.8% to trade round $69.50/barrel;

* Cryptos are showing a few signs of life with Bitcoin up 1% to trade north of $88,000;

* Bonds are seeing a bit of selling. The 10-year yield is up 3 basis points to 4.34% (yields move inversely to prices).

Today’s Known Events

We start with earnings:

* Dollar Tree ($DLTR ) just reported earnings that fell short of estimates and initiated outlook at the lower end of the range. The bigger news was that the company is reportedly selling the Family Dollar business for $1 billion. The stock is rallying on this news;

* Chewy ($CHWY ) and Paychex ($PAYX ) also report before the open at 0930.

Durable goods orders are out at 0830 ET. Economists who were surveyed expect a drop of 0.6% month-over-month, a significant decline from the +3.1% reported last month. Core durable goods, which exclude transportation items, are expected to increase by 0.4% after no change last month.

The Atlanta Fed GDPNow is out at 1130. That is expected to show a decline of 1.8% for the first quarter, same as at the last reading.

The Bottom Line

The big news yesterday appears to have been the consumer confidence report that had some pretty depressing things to say. The fact that the market failed to react tells you what investors think about these surveys. As we said yesterday, the public is divided along political lines on a lot of things including its perception of the economy. Seems this survey only polled members of a certain party.

That said, appearance can become reality very quickly. If a large portion of Americans say they are concerned about the direction of the economy, then they can and will pull back spending. The only problem is that none of the hard data matches these statements. Actual consumer spending is holding up well, jobs are plentiful, and industrial production remains healthy. For whatever reason the factories of the world are ordering more copper, leading to the surge in copper prices that we’ve seen.

Of course, the name of the game is to figure out where the economy is heading next and investors will use all the clues they can get. It just doesn’t look like this survey is scaring anybody. Maybe investors are making a mistake in looking past it? If so, and if the economy truly is grinding to a halt, then it makes sense to increase exposure to fixed income. Because the Fed has ample room to cut rates and if it has enough indication (again hard data) that the economy is slowing, then it can and will slash rates — probably more than it needs to, if past patterns are any guide. That will lead to a surge in bond prices.

Stocks On The Contrarian Radar©️

Maplebear, aka Instacart ($CART ) is down multiple percent overnight. This stock attracted a ton of attention at its IPO but has since kind of disappeared from the radar. As you can see the last month has been particularly unkind:

If you zoom out on the chart and hold CART up against the S&P 500 ($SPY ), you can see it has kind of tracked the index, albeit with a lot more volatility:

Cyclical + more volatility is normally not a good combination, or at least not what The Contrarian is going for in his quest for uncorrelated returns. Nevertheless, it’s worth checking in to the valuation.

CART trades at:

* 24x forward earnings

* 2.9x forward sales

* 15x forward cash flows

That’s not cheap, though not terrible for a growth stock. Question is: where could that growth materialize? Instacart is the leading online grocer in the US, a market that is estimated to grow to some $700 billion by 2040. Globally the total addressable market (“TAM”) is even bigger of course. CART apparently controls 85% of the US market already.

The company encouragingly has virtually no debt on its balance sheet and $1.3 billion in cash. Enough to fund expansion. It will need the balance sheet flexibility as competition can be expected to be fierce with Doordash ($DASH ) and Uber Eats and individual grocery stores doing their own delivery service. That doesn’t give leeway to raise prices so would not expect much in the way of margin improvement going forward.

Competition is a major risk. It will be hard to see how these companies can differentiate themselves without major marketing spend. On that, maybe CART has an advantage with its balance sheet.

Another risk is that this may be a luxury item for most consumers. The Contrarian used Instacart once, during the pandemic, but the fees were so astronomical that he felt so violated he vowed to never do it again (and hasn’t). Yes, Americans are lazy, but one figures grocery delivery would be one thing they would cut back on if times get tough. Of course not everybody will have that luxury and there is a growing demographic of aging consumers who can and will happily pay for grocery delivery.

The Verdict

CART presents an interesting case. Who knows, it could be a buying opportunity. The Contrarian is encouraged by the company’s balance sheet but worried about competition and the discretionary nature of its service. Plus the stock just isn’t cheap enough. If it were to drop below $35 it would be much more compelling. For now, it’s on the watch list.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Check out the new Fed Tracker here! You will have to request access but this is just a precaution as access will be granted if you are a premium subscriber;

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks put in a big rally yesterday on news of softer tariffs and better-than-anticipated flash PMIs. Tesla ($TSLA ) was one of the biggest winners on the day. Tech stocks rallied across the board.

As we eye our board of indicators for signs of direction at 0640, there is not an awful lot to go by:

* Stock index futures are unchanged with the exception of small caps. These are down just a bit. The Russell 2000 is off 0.4%;

* Commodities continue their ascent. Copper is up 1%. WTI crude oil up 0.5% to trade around $69.50/barrel;

* Cryptos are flat. Bitcoin is unchanged hovering just over $87,000;

* Bonds continue to drop. The 10-year yield is up 3 basis points to 4.58% (yields move inversely to prices).

Today’s Known Events

A bunch of housing data:

* Building permits for February are out at 0800 ET. Economists who were surveyed expect 1.456 million new permits, down a bit from the 1.47 million recorded last month;

* Case-Shiller home prices are out at 0900 ET. The 20-city average is expected to rise by 4.6% year-over-year, effectively unchanged from the 4.5% recorded last month;

* New home sales are out at 1000 ET. The expectation here is for 682,000 transactions, which is up from the 657k recorded last month.

CB Consumer Confidence is out at 1000 ET as well. A reading of 94.2 is anticipated, which is well below the 98.3 recorded previously. Friendly reminder that these consumer surveys — like just about everything else, it seems — is divided along political lines these days. If you support the party in power you will generally be optimistic. If you don’t, you won’t.

New York Fed President John Williams speaks at a regional and community banking conference hosted by his office. It appears this will be broadcast live. Williams laid his views out pretty succinctly in a speech last week.

The Bottom Line

Nice rally yesterday. There was some additional good news on the tariff front overnight, with India saying it will cut some levies on US imports. The question is how the market will react if/when fresh tariffs are announced/threatened by the Trump administration? Hard to see how it will escape the tariffs on/tariffs off cycle, at least until we get some fresh data.

That could come today from the housing market. We had some disappointing earnings from KB Home ($KBH ) last night and one can’t help but wonder if a miss from any of today’s housing data will lead to selling in the broader stock market. If so, bonds might present an opportunity seeing how much they have dropped over the last couple of days.

If today’s housing data doesn’t deliver a catalyst (good or bad) we will almost certainly be in a holding pattern until Friday’s PCE Deflator for the simple reason that there is very little in terms of known events until then. Or maybe the market will find something else to obsess about?

Stocks On The Contrarian Radar©️

As mentioned, KB Home ($KBH ) dropped overnight after reporting disappointing earnings. The stock now trades at fresh 52-week lows if the overnight drop is factored in (not reflected in the below chart):

As we reported in this space last week, it’s been a rough time for homebuilder stocks. The iShares US Home Construction ETF ($ITB ) also trades at 52-week lows and has actually performed worse than KBH. Just for fun, we added the stocks of two major homebuilders, NVR ($NVR ) and Lennar ($LEN ) to the chart below:

As you can see, KBH trades pretty much in lockstep with ITB. NVR does too, but has outperformed a bit. LEN is the clear laggard.

Lennar was the topic of last week’s discussion. Turning back to KB Homes, we find a pretty compelling valuation. KBH trades at:

* 7x forward earnings

* 0.6x forward sales

* 6x forward cash flows

For sake of comparison, LEN’s version of these multiples are 11/0.9/14.

KBH’s balance sheet looks pretty clean, with $1.7 billion of debt versus a $4.3 billion market cap and $600 million in cash.

The problem was yesterday’s earnings. These missed estimates across the board, with revenues declining on a year-over-year basis. Sales dropped too, offset a bit by higher costs. Inventories are up. Margins are down. Cancellations were up last quarter too. Apparently KBH is more exposed to first-time buyers than Lennar and apparently this part of the market is starting to retrench.

None of that is good. Not for KBH, probably not for LEN, and not for the economy either. Real estate is a major driver of growth in the US but its biggest impact may be psychological: If fewer Americans are buying homes, and existing homeowners aren’t seeing prices appreciate as much as they’d like (or at all), it creates a very pessimistic backdrop.

Prices do appear to have reaccelerated however, at least nationally. Today’s Case-Shiller report should supply some new data on that front. And lower interest rates, should they happen, will lower mortgage costs. Assuming Americans stay employed, that may be enough to keep the housing market from rolling over.

That would make KBH cheap. Its balance sheet does keep the doom at bay a little bit. But the whole business is so cyclical and right now the cycle seems long in the tooth.

The Verdict

It’s too hard to justify the risks of buying a homebuilder right now. More generally, KBH’s earnings should probably be heeded as a warning. So The Contrarian is going to stay away from this cyclical monster and more generally exercise greater caution when taking on risk allocations.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Check out the new Fed Tracker here! You will have to request access but this is just a precaution as access will be granted if you are a premium subscriber;

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks advanced yesterday — the second day in a row — but finished off the highs. As we eye our board of indicators for signs of direction at 0700, things are quiet:

* Stock index futures are down a tiny bit. The Nasdaq is pointing to a drop of 0.3% at the open with the S&P 500 just behind it;

* Commodities are showing some signs of life. WTI crude oil is up 1% to trade north of $68/barrel, surely helped by the latest news out of the Middle East. Copper is unchanged. Gold and silver are advancing, up ~1% each;

* Cryptos aren’t doing anything. Bitcoin is unchanged at $82,800;

* Bonds also quiet. The 10-year yields 4.30%.

Today’s Known Events

Housing starts are out at 0830. Economists who were surveyed expect 1.38 million new starts, up a bit over the 1.366 billion recorded last month. Building permits are expected to hold steady at 1.45 million (1.47 million last month).

Industrial production is out at 0915. The expectation here is for an increase of 0.2% month-over-month versus 0.5% last month.

The Atlanta Fed puts out its GDPNow tracker at 1315. The expectation is for a decline of 2.1% for Q1, identical to what it was at the last iteration.

Japan, a crucial export nation, has a bunch of stuff happening tonight:

* Trade balance figures are out at 1950. Exports are expected to jump 12.1% year-over-year after 7.2% last month;

* Core machinery orders, also out at 1950, are expected to increase 6.9% YoY after 4.3% the previous month;

* The Bank of Japan decides on interest rates at 2300. The BOJ is widely expected to keep its key policy rate unchanged at 0.5%.

The Bottom Line

Parts of the housing market are starting to show signs of turning. Take Florida or Austin, Texas, two of the hottest housing markets since Covid. This makes today’s housing starts an important datapoint where the future direction of the economy is concerned.

We’ve spoken how labor market data can be a leading indicator for consumer spending and therefore economic growth. What can also happen is consumers start to feel poorer, in part because the price of their homes drop, and they start to retrench. This was, in part, the story of 2008.

Stocks On The Contrarian Radar©️

An opportune time to look at the shares of some of these home builders. Conveniently there is an ETF, the iShares US Home Construction ETF ($ITB ) that can be used as a proxy. As you can see this has taken on water lately and finds itself at 52-week lows:

Interesting to observe, also how volume has shot up since the start of the year. Looking at some of the biggest stocks in this sector shows a similar story. Here are PulteGroup ($PHM ), NVR ($NVR ), and Lennar ($LEN ):

Lennar ($LEN ) with its $31 billion market cap is the largest of the three and — perhaps for that reason — has dropped the most. This makes The Contrarian a bit curious about whether it might present a buying opportunity.

LEN trades at:

* 10x forward earnings

* 0.9x forward sales

* 14x forward cashflows

Not bad! A quick look at the balance sheet shows LEN flush with cash — $8 billion, or more than a quarter its market cap — and manageable debt ($4.5 billion). Unfortunately $3.4 billion of the $41 billion assets are “good will.” Most of the assets ($20 billion) are “inventory.”

LEN’s margins are decent. Gross margins are just 22% versus a sector median of 38% but net income margins of 11% are much better than the sector median of 4%.

The recent trend in (certain) home prices is certainly cause for concern but a bright spot is that mortgage rates have declined. Can that turn the housing market around? Or is it on a trajectory downward? The answer to this question will likely determine Lennar’s fortunes.

Verdict: LEN is compelling but the crucial cashflow multiple isn’t low enough for The Contrarian to buy. Plus this is the mother of all cyclical stocks. If it gets a lot cheaper it will certainly be very compelling but then if it gets a lot cheaper it may very well be for good reason, namely that the housing market is crashing.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Check out the new Fed Tracker here! You will have to request access but this is just a precaution as access will be granted if you are a premium subscriber;

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks got beaten up yesterday. Tech saw the worst of it, with the Nasdaq dropping 2%. The bigger news was the S&P 500 entering correction territory, defined as a drop of 10% from the all-time high. Ugly!

As we eye our board of indicators for signs of direction at 0545, it looks like risk appetite is re-emerging. Whether that is subject to swift reversal (aka the dreaded ‘dead cat bounce’) remains to be seen:

* Stock index futures are rebounding, led by tech. The Nasdaq is up 1.1%. S&P 500 futures are up 0.8%;

* Cryptos are treading water. Bitcoin is unchanged trading around $83,000, pretty much where it’s been for a couple of days;

* Commodities aren’t doing much. WTI crude oil is up 1% to trade north of $67/barrel again. Copper is unchanged;

* Bonds aren’t really moving either. The 10-year yields 4.30%.

Today’s Known Events

It’s a slow day with little to detract from the narrative. We have the University of Michigan’s Consumer Sentiment survey at 1000. This rarely gets noticed much by the market. Would not expect today to be any different.

There is an economist survey number for this: 64.3 is what’s anticipated. Effectively unchanged from last month’s 64.0. The University of Michigan also polls consumers on expectations, current conditions, and five-year inflation expectations.

Judging by yesterday’s market activity, the market does not care at all about inflation expectations anymore.

The Bottom Line

It turns out our caution over the drawdown in consumer staples stocks was warranted. Investors simply aren’t keen on risk assets right now and a couple of soft inflation prints did nothing to change that. Welcome to the correction. The Nasdaq of course has been here for a few days already. Now the S&P is as well.

The financial media (and social media) this morning will be full of “here’s what happens next” stories. These will be based on records of previous corrections. All can be ignored unless you subscribe to the belief that past performance predicts future results.

Nobody knows what happens next. What we do know is that available economic data is not pointing to a slowdown. There are a few secondary indicators that things aren’t rosy, but one can always find secondary indicators. Things like employment and consumer spending are simply not pointing to a slowdown. Period.

Of course that can change. Maybe it will change. Maybe the people predicting a downturn will be proven right. But it’s just not showing up in any of the main data points right now.

So maybe, just maybe this is a buying opportunity. One needs a strong stomach to wade into choppy waters like this. It is not without risk. But risks can also bring rewards. The market is not always right. Maybe this is one of those times when it is wrong (another one, the most recent one being last summer. Oh by the way, back then we actually had labor market data that was a point of concern).

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Check out the new Fed Tracker here! You will have to request access but this is just a precaution as access will be granted if you are a premium subscriber;

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Yesterday saw a rally in tech stocks as the rest of the market was left behind. Staples actually dropped with bond prices. As we eye our board of indicators for signs of direction at 0705, all is quiet:

* Stock index futures are flat as a board, with no major US index moving at all from the break-even point;

* Commodities aren’t doing anything either. Copper is unchanged. WTI crude oil down 0.5% to trade around $67/barrel;

* Cryptos too are flat. Bitcoin unchanged to trade around $83.000;

* Bonds are consolidating after yesterday’s sell-off. The 10-year yields 4.33%. It was in the low 4.2s as recently as a couple of days ago.

Today’s Known Events

We start with earnings:

* Weibo ($WB ), the Chinese social media platform, earlier beat analyst estimates even as its advertising revenues dropped. The stock is rising in the pre-market. More good news for China bulls, presumably;

* Dollar General ($DG ), a sizable position in The Contrarian’s portfolio, just reported mixed results but importantly had positive same-store-sales and the stock is moving a big higher in the pre-market;

* After the close the highlights are DocuSign ($DOCU ) and Ulta Beauty ($ULTA )

* TransAct Technologies ($TACT ), a company none of you have likely heard of but which occupies a small portion of The Contrarian’s portfolio, also reports after 1600 this afternoon.

Yesterday we had consumer prices, today it’s the turn of producers. The PPI is out at 0830. This will likely be completely ignored by the market even though it is the more leading indicator for inflation under the premise that producers pass higher costs off to consumers.

Anyway, the numbers we’re looking for according to a survey of economists:

* 0.3% month-over-month headline PPI (0.4% last month)

* 0.3% MoM core PPI (0.3%)

* 3.3% year-over-year headline PPI (3.5%)

* 3.6% YoY core PPI (3.6%)

Seeing how it’s Thursday we’ll also get initial jobless claims. The expectation here is for 226k new claims, up a bit from the 221k recorded last week and just north of the four-week average of 224k.

The Bottom Line

Yesterday’s rally was unconvincing. It certainly didn’t amount to the type of relief rally we have come to expect from soft inflation prints. As we previewed yesterday, that tells us there is something else vexing investors. That something else could be tariffs or it could be recession. Two strange things about yesterday’s market action:

* Staples stocks sold off pretty dramatically

* Bond yields moved higher, meaning investors sold bonds as well.

We have talked about how these have been two bright spots as tech sold off over the last couple of weeks. Yesterday that situation reversed. Seeing how little sense the move in yields makes after a soft inflation print, the only logical conclusion is that this was simple profit taking — at least in the bond market. The sell-off in staples is potentially more worrisome seeing how it could portend a broader move away from stocks.

If investors didn’t pile in to risk assets after yesterday’s soft CPI print, it’s hard to see how today’s PPI will do the trick either. Perhaps jobless claims will be more closely watched anyway. If recession really is the main concern here, then it stands to reason that investors will be watching the labor market more closely.

For now, yesterday’s action looks suspiciously like a dead cat bounce. This would indicate we are in no way out of the woods.

Stocks On The Contrarian Radar©️

Kemper Corp ($KMPR ) a midcap insurance company, is down multiple percent overnight on no apparent news. Seeing how much Warren Buffett likes insurance companies, and given their non-cyclical nature, it behooves us to take a closer look:

The overnight move drops the stock below $64/share. It’s still up more than 10% over the last 12 months. Importantly this makes it a better performer than the S&P 500, however it does trail peers measured by the SPDR S&P Insurance ETF ($KIE ).

Moving on to valuation, we can see KMPR trading at 10.5x forward earnings, which isn’t great for an insurance company (sector median is 10.8x). It trades at 1.3x price/book, which isn’t great either. According to Investopedia, cheap for an insurance company is 1x. The sector median is 1.1x.

Looking at the return-on-equity metric that is also vital to valuing insurance companies, KMPR sports a 12% figure here, which is much more positive (the sector median is 10.4%).

Turning to the balance sheet, KMPR has a debt load of ~$2 billion versus $4 billion in equity, which for an insurance company isn’t bad on the face of things. Unfortunately over $1 billion of its “assets” are in “goodwill. Almost 75% of the debt appears to be long term, which isn’t great.

Verdict: The sell-off is enticing and insurance companies might be a good place to be in the next couple of years if a recession does indeed come to pass. However, KMPR is not cheap enough yet to warrant an investment from The Contrarian. He will keep it on his watch list however.

PSA: Probably no briefing podcast tomorrow due to the dearth of known events on the calendar;

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Check out the new Fed Tracker here! You will have to request access but this is just a precaution as access will be granted if you are a premium subscriber;

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Be sure to read this month’s Contrarian Portfolio update letter.

State of Play

Stocks dropped again yesterday but finished off the lows due to news of Trump tariffs apparently being scaled back already. The president also gave a long speech to Congress last night that was long on style but short on substance and importantly didn’t dial back any of the trade war rhetoric — and may have actually increased it.

As we eye our board of indicators for signs of direction at 0650, it does look like risk appetite is emerging:

* Stock index futures are pointing to a higher open, led by small caps. The Russell 2000 is up over 1%. Nasdaq futures +0.7% and S&P 500 +0.6%;

* In commodities land, a major rally in copper, up 4.5%. This is surely due to trade wars with China. WTI crude oil is down 1.5% to trade around $67/barrel;

* Cryptos are gaining as well, with Bitcoin up 7% to trade close to $90,000;

* Bonds are seeing a bit of selling with the 10-year yield up 3 basis points to 4.24% (yields move inversely to prices).

Today’s Known Events

We start once again with earnings:

* In Germany, Adidas and Bayer AG reported earnings that appear to have impressed investors as those stocks are moving higher in Frankfurt trading;

* Foot Locker ($FL ) just reported mixed results but the stock is rising in the pre-market, to the tune of 3% at the time of this writing. This comes right after FL dropped to a 52-week low yesterday;

* Abercrombie & Fitch ($ANF ) and Campbell Soup ($CPB ) also report before the open at 0930;

* After the close at 1600 the big name is semiconductor manufacturer Marvell Technology Group ($MRVL )

Some economic data to tell you about as well:

* ADP Nonfarm Payrolls are out at 0815. This is separate and appears in no way related to Friday’s non-farm payrolls from the Bureau of Labor Statistics. As a result, it rarely (ever?) gets a reaction from markets. But it’s an important economic data point nonetheless. The expectation is for 144,000 new jobs in February, a bit below the $183,000 number the previous month.

* Non-manufacturing PMIs are out at 1000. The expectation here is for a reading of 53.0, a bit above the 52.8 recorded last month and still comfortably above the 50 level that separates expansion from contraction. This could move markets because the services sector is such a crucial source of high-paying jobs. As we’ve been saying for some time, if the job market takes a turn for the worse economic growth will soon follow.

* Factory orders are also out at 1000. Economists who were surveyed expect an increase of 1.5% month-over-month, an improvement over the -0.9% print recorded the previous month.

* The Fed’s beige book is out at 1400. This a report on economic conditions in each of the Fed’s 12 districts. It only happens eight times a year. Unfortunately there is no number attached to it but it’s worth paying attention to nonetheless and does sometimes move markets.

(Cover art by author via Flux Dev AI)

The Bottom Line

Stock index futures have not been a good indicator of price movement. We’ve seen this pattern before and the price gains quickly evaporate once regular trading commences. Copper prices have been a much better gauge, but the relationship is tenuous and it’s not clear how much longer this will hold up — at least as long as tariffs are the catalyst for copper moving higher.

These are volatile times, with risk appetite waxing and waning with tariff news. That should change on Friday when we get non-farm payrolls.

Stocks On The Contrarian Radar©️

Aptiv ($APTV ), a Swiss manufacturer of automotive parts, tumbled overnight on no apparent news. The stock has gone nowhere for years, and declined by 20% over the last 12 months:

Automotive parts seems like a pretty straightforward business. APTV’s technology is supposedly at the leading edge of the connected car and driverless technology. Its main business appears to be supplying electrical components for driver assistance (cameras and sensors and the like). It supplies all the largest OEMs. Its business is global, pretty much evenly split between North America, Europe/Middle East/Africa, and Asia-Pacific.

The valuation seems to check out. APTV trades at:

* 11x forward earnings

* 0.7x forward sales

* 7x forward cash flows

The balance sheet is a little more worrisome as its $15 billion of total assets contains $5 billion of goodwill and $2 billion of ‘other intangibles.’ So almost half of its asset base is, well, nonsense. That’s not great. Encouragingly there is very little long-term debt on the balance sheet.

This sounds like a well-established company in a major growth industry trading at compelling valuations. Oh yeah, management is also buying back shares. Why has the stock done so poorly?

Several reasons, including:

* Slowing electric vehicle adoption, including Tesla ($TSLA ), a major customer;

* Concerns about demand out of China;

* Tariffs of course.

The Verdict

APTV is cheap. While there are certainly concerns about electric vehicle adoption, this is ultimately not a very large part of the company’s business. Its main segment (driver assistance technology) is not going anywhere. Tariffs may hurt a bit in the short term, but ultimately there should be buyers of its products.

The Contrarian does not know enough about this technology to assess whether APTV can be easily displaced by cheaper competition. It doesn’t sound like the kind of thing that can happen quickly, but more research is required.

Automobile sales are of course very cyclical and it makes sense that Aptiv’s business ebbs and flows with this. This does not appear to be a great point in that cycle. If automobile stocks haven’t peaked yet, it’s hard to see how there will be much more growth before the consumer cycle commences a downturn.

Another worrisome point is all the ‘goodwill’ and ‘intangible assets.’ This is normally a red flag. But the absence of long-term debt balances this out. Call this one a wash.

Add it all up and The Contrarian as a hater of cyclical businesses is stuck on the sidelines. He will add this name to his watch list however. If it gets a lot cheaper he may just have to buy some. Assuming the aforementioned research checks out, that is.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Be sure to read this month’s Contrarian Portfolio update letter!

State of Play

Stocks advanced on Friday, all thanks to a late-day rally that came out of nowhere. As we eye our board of indicators for signs of direction at 0640, it looks like risk-on is set to continue, thanks in no small part to the crypto market:

* Cryptos are rallying, with Bitcoin up 7.5% to trade around $92,500 after President Trump announced a strategic crypto reserve over the weekend;

* Stock index futures are moving a bit higher, led by small-caps. The Russell 2000 is up 0.7% with S&P 500 and Nasdaq up about 0.5%;

* Commodity prices are rising, especially gold which is up 1.3%. Copper is up 0.9%. WTI crude oil unchanged around $70/barrel;

* Bonds aren’t doing much. The 10-year yield is up 3 basis points to 4.26% (yields move inversely to prices).

Today’s Known Events

A couple of economic data releases are all that’s on the calendar today:

* ISM Manufacturing PMIs are out at 1000. Economists who were surveyed expect a reading of 50.6, a bit below the 50.9 recorded last month but still north of the 50 line that separates expansion from contraction.

* Construction spending is out at the same time. The expectation here is for a drop of 0.1% month-over-month in February after an increase of 0.5% last month.

The highlight of the week is Friday’s non-farm payrolls. Before then we’ll get earnings from Target ($TGT ) and other retailers tomorrow, chipmaker Marvell ($MRVL ), and Costco ($COST ) on Thursday.

The Bottom Line

Friday’s late-day rally really came out of nowhere. It’s unusual for stocks to turn so suddenly on a Friday afternoon on no news. Maybe it was a last-minute attempt by investors to juice their monthly returns, though that gets a bit into conspiracy theory territory.

What it does show is that there is still risk appetite floating around out there looking for a home. The weekend rally in cryptos bears this out. Does this rally have legs or will it fall back to earth like almost everything else this last week-and-a-half?

We shall see. It would not be at all unusual for cryptos to unleash the animal spirits however, at least until Target earnings tomorrow.

Stocks on the Contrarian Radar

CACI International ($CACI ), a government contractor in the realm of research and consulting, primary to the defense sector, was one of the worst-performing stocks overnight. It was down 5% in the pre-market at some point to sink to fresh 52-week lows. It has since rebounded.

Still, it’s clearly been a rough couple of months for CACI, a result of (you guessed it) DOGE:

A drop like this for a company on government contracts would in normal times be a buying opportunity. However these are not normal times. Elon Musk & Co. have made it their mission to slash government spending and one would think contractors offering consulting of all things would be very high on the list of non-essential services to fall victim to these efforts.

For this reason it makes sense for the stock to trade at a discount. How much of a discount though? Surely at some point consultants will figure out a way to consult again — and charge obscene amounts of money for their, um, expertise? Right?

Unfortunately, CACI is not exactly screaming cheap, trading at:

* 16x forward earnings

* 0.9x forward sales

* 15x forward cash flows

Earnings and sales multiples aren’t bad. Cash flows not great.

The balance sheet seems to check out at first glance, with $3.4 billion of debt versus $7.5 billion of assets. But a closer look at assets reveals $4.9 billion (!) in “goodwill” (always a red flag) and $1.2 billion in “other intangibles.” So that’s more than $6 billion of its $7.5 billion assets in things that basically don’t exist.

Did we mention this is a consulting company?

Oh yeah, and $3 billion of its debt is long term.

Hard pass.

Verdict: CACI may be cheaper than it once was. But that does not make it cheap enough. The amount of weird assets (goodwill and ‘other intangibles’) is a red flag even during good times. These would appear to not be good times for government contractors. Even assuming DOGE does not manage to do anything substantial, it’s hard to see how this is a company whose stock one would want to buy. The Contrarian will sit this one out.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Friday, Feb. 28.

State of Play

Stocks dropped again yesterday, led by tech. It was actually the worst sell-off of the week and makes for a pretty big intermittent drop for the Nasdaq 100 ($QQQ ), which is down more than 7% since setting an all-time high on Feb. 19.

As we eye our board of indicators for signs of direction at 0530, it looks like the risk-off is going to continue:

* Cryptos have resumed their drop. Bitcoin is down 8% to drop below $80,000;

* Commodities are also a sea of red. Copper is down 1.4%. WTI crude oil is down 1% to trade around $69.50/barrel;

* Stock index futures are pointing to small gains, weirdly enough, with Nasdaq and S&P 500 up 0.3% each. That may be due to the early hour of today’s brieifing;

* Bonds are continuing to see bids, with the 10-year yield down 4 basis points to 4.24% (yields move inversely to prices).

Today’s Known Events

Personal Consumption Expenditures, aka the PCE Deflator, the Fed’s preferred inflation gauge, is out at 0830. This is a bit of a non-event seeing how it mostly just repeats what was in the Consumer Price Index a few weeks ago. But it could always deviate from from the CPI and give investors something new to focus on.

The numbers we’re looking for:

* Monthly headline CPI of 0.3% (versus 0.3% last month)

* Annualized headline CPI of 2.5% (2.6%)

* Monthly Core CPI of 0.3% (0.2%)

* Annualized Core CPI of 2.6% (2.8%)

Worth noting that these numbers are significantly lower than what we saw from the CPI, which was 0.5% headline and 0.4% core. Could these forecasts be too optimistic then?

State of Play

Stocks dropped again yesterday. Tech saw the worst of it as the Nasdaq declined by more than 1%. The close of trading brought more bad news, with Hims & Hers ($HIMS ) earnings disappointing investors and Trump tariffs on Canada and Mexico apparently back on.

As we eye our board of indicators for signs of direction at 0640, risk appetite is continuing to retrench, nowhere more visibly than in crypto land:

* Cryptos are falling off a cliff. Bitcoin is down 8% to trade around $88,000. This is apparently good-old-fashioned risk off, if CNBC is to be believed. Not sure how or why tariffs should affect cryptos, but here we are;

* Stock index futures are pointed lower, led by tech again with the Nasdaq down 0.3%;

* Bonds are seeing a few bids in this flight to safety. The 10-year yield is down 5 basis points to 4.34% (yields move inversely to prices);

* Commodities are flat, weirdly enough. WTI crude oil is unchanged trading at $70.50/barrel. Copper is up 0.2%.

Today’s Known Events

Earnings are the main story of the day again:

* Home Depot ($HD ) is already in, crucially offering an outlook below forecasts. That stock is dropping in the pre-market, down 2% at the time of this writing;

* Planet Fitness ($PLNT ) just beat estimates and initiated an outlook that appears to have failed to impress, as the stock is down in the pre-market;

* Henry Schein ($HSIC ), which we took a, um, shine to a few weeks ago, just missed on top- and bottom-line estimates. The supplier of dentistry equipment is dropping a bit in the pre-market, to the tune of 1% at the time of this writing. HSIC is still up over the past month however;

* Keurig Dr. Pepper ($KDP ) also reports before the open at 0930.

* After the close at 1600 we’ll hear from Cava Group ($CAVA ), AMC Entertainment ($AMC ), Workday ($WDAY ), Instacart $CART ), and others.

Case-Shiller home prices are out at 0900. The 20-city index is expected to increase by 4.3% year-over-year for December, identical to last month (Case-Shiller is unfortunately a bit dated).

The Bottom Line

Market sentiment has suddenly turned pretty negative. Tech stocks are taking on water and former market darlings Hims & Hers ($HIMS ) and Palantir ($PLTR ) are getting beaten up. PLTR is down four days in a row, including 10% yesterday.

The earnings that have come in, especially HD’s lower-than-expected forecast for same-store sales, are certainly not helping. Remember that this whole thing was kicked off by the disconcerting outlook supplied by Walmart ($WMT ) last week. HD lowering their outlook on top of this is clearly not good, though HD has a bit of a history of pessimistic outlooks.

Then we have the tariffs on/tariffs off trade. Tariffs are apparently back on, but as we’ve seen before this is by no means permanent. If anything is a buying opportunity, it’s probably the (over)reaction to tariffs. The question is why this is only being felt in the crypto market so far? Do cryptos maybe speak of something more sinister taking place when it comes to investor risk appetite? It is something to keep in mind…

Stocks On The Contrarian Radar©️

Nvidia ($NVDA ) of course. The AI chipmaker reports earnings after tomorrow’s close. This could still rescue markets. If NVDA provides a positive outlook it’s hard to see how we don’t rally across the board. Tech would certainly regain its luster very quickly in such instance.

The Contrarian discussed this and the broader market sentiment with Phil Pecsok yesterday. That podcast is already available for premium subscribers. Check it out here:

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Dan Rasmussen of Verdad Capital joins the podcast to discuss the dwindling prospects for AI stocks and why investors might want to look outside the US for better returns.

This podcast episode is available to premium subscribers only at this time. Free subscribers may listen to the short preview clip attached to this message. Of course free subscriptions can be converted at any time through the below link.

Not investment advice! Do your own research, make your own decisions.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Feb. 18. Welcome back after the long weekend.

State of Play

As we eye our board of indicators for signs of direction at 0630, things are pretty quiet:

* Stock index futures are showing a few signs of life, with the Nasdaq up 0.4% and S&P 500 up 0.3%;

* Commodities are mixed. WTI crude oil is up 1% to trade around $71.50/barrel as gold (+0.8%) and silver (+0.4%) resume their ascent. But copper is down 1.3% and natural gas down 3%. On the topic of gold, Goldman Sachs just raised their year-end target to $3,100/oz, which is probably what is driving the precious metal higher this morning;

* Cryptos are unchanged. Bitcoin is holding around $95,700;

* Bonds are seeing a bit of selling. The 10-year yield is up 4 basis points to 4.51% (yields move inversely to prices).

Today’s Known Events

We start with earnings:

* Baidu ($BIDU ), the Chinese online retailer, overnight beat top- and bottom-line estimates but apparently found a different way to disappoint investors as the stock is down ~1% in the pre-market;

* Chemours ($CC ), a chemicals company that for some reason seems to ebb and flow with the economy, just reported mixed results but had some positive things to say about its outlook and the stock is rising in the pre-market. (Chemours is a portfolio holding going back many years, which is why The Contrarian is aware of its ebb and flow coinciding with broader economic trends. On some level this makes sense as companies will increase their orders of chemicals as the economy ramps up — and conversely dial back orders as the economy contracts or growth slows).

* After the close at 1600 we’ll hear from Arista Networks ($ANET ) and Occidental Petroleum ($OXY ), among others.

Baidu and Arista Networks, the earnings highlights today. Art by author via Grok AI

State of Play

Yesterday was a blah day in markets with little movement. We did get positive earnings from Supermicro ($SMCI ) after the close. SoftBank was less impressive. All is quiet as we eye our board of indicators for signs of direction at 0615:

* Stock index futures are flat as a board ahead of the CPI, with no major US index moving from the break-even point;

* Commodities remain volatile. WTI crude oil is down 1.3% to trade around $72/barrel. Gold and silver are retreating as well, gold by almost 1%. Copper is unchanged;

* Cryptos are dropping a bit, with Bitcoin down 2% to trade around $96,000;

* Bonds are unchanged. The 10-year yields 4.55%

Today’s Known Events

The CPI is the main event, out at 0830. Been talking about this all week. The numbers we’re looking for, as anticipated by a survey of economists:

* Monthly headline CPI of 0.3% versus 0.4% recorded last month;

* Annualized headline CPI of 2.9%, the same as last month;

* Monthly core CPI of 0.3% (0.2%);

* Annualized core CPI of 3.1% (3.2%).

Some earnings to tell you about as well:

* Vertiv Holdings (VRT ), which supplies power management tools like switchgear boxes, beat analyst estimates and is rising in the pre-market, up 3% at the time of this writing;

* CVS ($CVS ) is due intermittently;

* So is Camtek (CAMT ) one of our ‘undiscovered’ AI chip stocks and a portfolio holding;

* Kraft Heinz ($KHC ) and Restaurant Brands International ($QSR ), owner of Burger King restaurants, are also due out before the open at 0930;

* After the close at 1600 we’ll hear from Cisco ($CSCO ) and Trade Desk ($TTD ), among others.

Fed Chair Jerome Powell returns to Capitol Hill, this time to testify in front of the House Financial Services Committee where he’ll probably just repeat his exact comments from yesterday’s testimony in the Senate.

The Bottom Line

The CPI very rarely misses economist estimates by very much and when it does that is usually due to exogenous shocks like Covid, Covid stimulus, or Russia invading one of its neighbors.

The set-up for today is very simple:

* Lower-than-anticipated CPI (literally anything below 0.3% MoM) and we get a relief rally;

* Higher-than-anticipated CPI (0.4% MoM or above) and we’ll get a sell-off in stocks and bonds;

* If the CPI meets expectations right on the nose, as it is wont to do, then the market will revert to whatever broader forces of greed or fear are driving it — in this case greed is still boss, seeing how we’re very much still in a bull market.

Stocks On The Contrarian Radar©️

Warner Music Group ($WMG ) has gone nowhere in years and is one of the biggest losers among S&P 400 Midcap stocks overnight, down 3%. That move returns most of its gains after reporting earnings last week:

(The overnight move is not reflected in the above chart. It drops the stock back into the mid-$32 range)

WMG has trailed peers Universal Music Group (UMGNF) and the Global Music Industry ETF ($MUSQ ) over the past year:

This all begs the question if the stock might be due for a reversal. There were some positive signs from earnings, which caused the stock to jump: not only did WMG beat analyst estimates but it also announced a deal with Spotify ($SPOT ) and Amazon ($AMZN ).

WMG’s valuation does leave quite a bit to be desired:

* 22x forward earnings (above the sector median of 20.5x)

* 15x EV/EBITDA (8x)

* 2.7x forward sales (1.4x)

* 20x forward cashflows (8.8x)

By those metrics the stock looks expensive.

However: Margins are healthy (15% EBIT versus a sector median of 10%) and the company’s return on capital is excellent at 12% versus a sector median of just 4%. The balance sheet is in good shape, with just $4 billion in debt versus a $17 billion market cap, though almost all the debt is long-term. Keep in mind this is after just announcing the acquisition of Tempo Music, which gives it rights to Bruno Mars and Adele songs. At $450 million that doesn’t sound like a huge price to pay (unless of course nobody listens to Bruno Mars and Adele anymore).

WMG is held up to Spotify and Live Nation ($LYV ), which unfair. One is a technology company, the other focuses on live events. Different businesses.

The Contrarian is encouraged by WMG’s impressive returns on capital, which speak to management’s ability especially when it comes to acquisitions. Record labels may not be the most exciting businesses anymore, but there is probably something universal about them. While it’s true that AI could put a lot of recording artists out of business, this could also play into record labels’ hands if they play it smart and make the right investments. Not having to shell out millions of dollars to acquire song catalogues makes for better margins. But intellectual property will need to be established to get an edge over anybody else with a laptop and an internet connection.

That is one wild card that would need to be investigated further. What is WMG doing on that end? Anything? If so, it would make potential investors a lot more confident in its future.

Bottom Line: Right now the stock is probably still too expensive to be considered an investment opportunity. If it drops further, below $30 say, that could change. So The Contrarian is on the sidelines for now, but adding the stock to his watch list.

Not investment advice. Do your own research. Make your own decisions.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Fresh news from tariff land, with President Trump saying he will impose 25% charges on steel and aluminum tariffs. As we eye our board of indicators for signs of direction at 0700 that has impacted commodity markets:

* Commodities are gaining ground. Not just steel and aluminum, but gold and silver, which are up over 1%. WTI crude oil is up 1.3% to trade close to $72/barrel and copper prices up another 0.7%;

* Stock index futures are showing some signs of life. The Nasdaq is up 0.7% with S&P 500 futures 0.5% to the good;

* Cryptos aren’t doing much. Bitcoin is up 1% to trade around $97,700;

* Bonds aren’t doing anything. The 10-year yields 4.49%.

Today’s Known Events

We start with earnings:

* McDonald’s ($MCD ) just missed on top- and bottom-line estimates but stock is weirdly up so far in the pre-market;

* onsemi ($ON ) reports later this morning;

That’s pretty much it for today. But don’t get too comfortable because the rest of the week is packed with action: Fed Chair Powell testifies to Congress tomorrow, CPI is Wednesday, producer prices on Thursday, and retail sales on Friday. Several earnings throughout.

Inflation returns to the menu this week, by author via OpenArt.ai

The Bottom Line

The tariff news raises the stakes on the inflation gambit. Gold’s rally this morning, to fresh record highs, is the logical result. So is the move in Fed fund futures, which are now no longer pricing in a rate cut for June. Bonds haven’t moved (yet).

The stock market so far seems unaffected. After all, tech companies aren’t impacted by steel and aluminum tariffs. Indeed some of these companies may even be good hedges of inflationary pressures. With investors still flush with cash, it makes sense for them to put some of it to work in this part of the market.

If the CPI prints hot on Wednesday that could change things and potentially bring real inflationary fears to the fore. Worth watching.

Stocks On The Contrarian Radar©️

Newell Brands ($NWL ), a portfolio holding, got beaten to a pulp after reporting earnings on Friday. It was in fact the worst one-day drop in the history of the Rubbermaid and Sharpie pens maker as a public company. Guidance was the issue, with management predicting a loss for the first quarter. The damage to the stock is apparent when looking at the chart:

NWL had been making such progress too! Almost doubling from its lows last July. That is all out the window now.

Buying Opportunity?

These kind of headlines (“worst drop in history”) for a staples stock leaves The Contrarian wondering if this might just be a buying opportunity.

A valuation check indicates NWL is cheap by most popular metrics:

* 10x forward earnings

* 1x EV/forward sales

* 0.4x forward sales

* 6x trailing 12-month cashflows

Okay, so what’s the catch? The pesky balance sheet!

NWL has $5 billion in total debt versus a market cap of just $3 billion and just $200 million of cash on hand. Almost all the debt ($4.5 billion of $5 billion, or 90 percent) is long term.

Not great, Bob!

Almost $5 billion of the $11 billion assets are a combination of “goodwill” and “other intangibles”. Never a good sign.

Bottom Line: Pass

This exercise reveals why it is so important to look past the traditional valuation metrics used by many armchair (and indeed professional) analysts. The stock could be screaming cheap but if the company has massive debt loads to deal with it will prevent them from allocating capital to productive uses. While that may not be the end of the world for a staples company, it certainly doesn’t leave one bullish about the future.

The stock still pays a generous dividend of almost 4% at current prices. One would think that could be at grave risk of being cut or perhaps eliminated outright with the debt loads at their current levels. That would provide another negative catalyst for the stock (but weirdly might prevent a better opportunity to buy for the long term).

So The Contrarian will sit this one out. He is not confident his holdings of NWL will produce much in the way of returns. When and if the dividend is cut and the balance sheet starts to look a little better it will warrant a revisiting of that stance.

Not investment advice. Do your own research. Make your own decisions!

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, Feb. 6..

Be sure to read the monthly portfolio update!

State of Play

Stocks closed higher yesterday after a kind of blah session. There was more bad news for semiconductors after the close, as Qualcomm ($QCOM ) and Arm Holdings ($ARM ) reported earnings that disappointed investors. As we eye our board of indicators for signs of direction at 0645, things are pretty quiet:

* Stock index futures are flat, with no major US index moving more than 0.2% from the break-even point;

* Commodities are moving a bit higher, with WTI crude oil up 0.8% to trade around $71.50/barrel and copper up 0.5%;

* Cryptos aren’t doing anything, with Bitcoin trading around $98,500;

* Bonds are unchanged. The 10-year yields 4.44%.

Today’s Known Events

Earnings are where we’ll start again:

* Honeywell ($HON ) just beat top- and bottom-line estimates, and confirmed plans to split into three companies, but the stock is down 4% in the pre-market;

* Hilton Worldwide ($HLT ), a good gauge of consumer travel, reported mixed results, but is moving a bit higher in pre-market trading;

* Roblox ($RBLX ), Peloton Interactive ($PTON ), Eli Lilly ($LLY ) ConocoPhillips ($COP ), Hershey ($HSY ), Tapestry ($TPR ), Under Armour ($UAA ), and Philip Morris International ($PM ) are among companies reporting before the open at 0930;

* Amazon ($AMZN ) is the main report to watch after the close;

* e.l.f. Beauty ($ELF ), Cloudflare ($NET ), and Affirm ($AFRM ) also report after 1600.

Be sure to read the monthly portfolio update!

State of Play

Stocks rallied yesterday, led by tech. There was unfortunately some bad news after the close from tech land as Google/Alphabet earnings disappointed investors. As we eye our board of indicators for signs of direction at 0640, that is weighing on markets:

* Stock index futures are pointing to a lower open, led by tech. It actually wasn’t just Google but also AMD ($AMD ) that is weighing on things. The Nasdaq is down 0.9%. S&P 500 futures are down 0.5%;

* Bonds are seeing a few bids for some reason. The 10-year yield is down 4 basis points to 4.47% (yields move inversely to prices);

* Cryptos aren’t doing much. Bitcoin is unchanged trading around $98,000;

* Commodities are pretty quiet as well. WTI crude oil is down 0.7% to trade around $72/barrel. Copper is unchanged.

Today’s Known Events

Earnings get us started again:

* Disney ($DIS ) just reported mixed results but is still up a bit in the pre-market;

* Toyota Motor ($TM ) earlier reported results that appear to have impressed investors and that stock is moving higher in the pre-market.

* Uber ($UBER ) is also due before the open at 0930;

* After the close at 1600 we’ll hear Arm Holdings ($ARM ), Qualcomm ($QCOM ) and Ford ($F ) among others.

In terms of economic data, we get ISM non-manufacturing PMIs at 1000. Economists who were surveyed expect a reading of 54.2, effectively in line with the 54.0 recorded last month.

One Fed speaker The Contrarian was able to confirm: Chicago Fed President Austan Goolsbee at 1430 ET.

There is of course also the matter of the Sino-US trade war. Unlike the US-Mexico and US-Canada matches, this one does not appear to be going anywhere.

The Bottom Line

Jittery signs from tech but the pre-market drop is not really anything to get worried about. On Monday morning things were looking far worse with the tariff shock. The fact that cryptos are languishing is maybe the more telling sign in terms of overall risk appetite.

The Sino-US trade war appears to be escalating. Latest news there is that Chinese regulators are considering a probe into Apple ($AAPL ) App Store practices. Consider this a reminder that trade wars can involve different weapons, especially when you have the Chinese Communist Party involved.

Trade war stuff can and will drag on stocks. That can easily be reversed with a “making progress on China trade talks” tweet from the White House. That was the pattern from 2017 through 2019. Makes sense that it would be the same again now…

Stocks On The Contrarian Radar©️

Google/Alphabet is dropping in the pre-market after reporting earnings:

As you can see from the orange “Pre” line above, this knocks GOOGL (we’re using the A shares here, just for simplicity’s sake) right down to its lowest level of the year. It’s a big drop in percentage terms (7%) but in the grand scheme of things it isn’t terribly dramatic.

What happened with earnings? For one, revenues missed expectations. Never a good thing. There is also the issue of capital outlay. Google announced that it would invest an additional $75 billion, largely in AI, this year. That kind of expense scares investors.

The good news is advertising revenues are holding up, effectively unchanged from a year ago. So much for Chat GPT and the others eating Google’s lunch on that front. People apparently still like to, well, google.

ITO valuation, GOOGL does not appear to be screaming cheap, trading at:

* 23x forward earnings

* 6.5x forward sales

* 17x forward cash flows

Unfortunately Google’s valuation metrics are no less persuasive on a historical basis. Price/sales, price/earnings, and price/gross profits are all near multi-year highs.

If you hold GOOGL up against the S&P ($SPY ) and Nasdaq 100 ($QQQ ) it looks like the best buying opportunity may have already passed:

Even with the pre-market drop, GOOGL is outpacing the two indexes over recent months, thanks largely to a breakout that came in early December.

So the overnight price drop, while enticing, does not make the stock screaming cheap. One could have made the argument late last year that that was the case. Now, not so much.

Surely Google is still one of the world’s leading companies. It will surely grow in the future. Will it grow enough to justify these valuations? Maybe. But the risk/reward is not enticing enough for The Contrarian to buy.

Full Disclosure: The Contrarian is long GOOGL after building the position late last year. Average price of around $182.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, Jan. 29. Fed Day. Also Tesla ($TSLA ) earnings day.

State of Play

Stocks rallied yesterday, led by a rebound in tech. The Nasdaq gained 2% as semiconductor stocks rallied, not quite recapturing the losses from Monday but close enough. As we eye our board of indicators for signs of direction at 0645, there is very little to go by:

* Stock index futures are effectively unchanged. The Nasdaq is pointing to a gain of 0.4% at the open. S&P 500 flat;

* Cryptos are flat as a board. Bitcoin is unchanged trading around $102,500;

* Not much going on in commodities land either. WTI crude oil is down 0.7% to trade around $76/barrel. Copper is unchanged;

* Bonds also flat. The 10-year yields 4.53%.

Today’s Known Events

We once again have some earnings to kick things off:

* ASML Holding ($ASML ) overnight reported results that beat analyst estimates and that stock is surging in the pre-market, up 7%;

* General Dynamics ($GD ) reports before the open.

Focus then turns to the Fed. The US central bank is widely expected to keep its key policy rate unchanged at 4.50%. But there are a lot of questions surrounding this decision, the first under the new/old president. There is also the question of the long-term outlook. Fed fund futures aren’t pricing in a rate cut until June. Could today provide something that changes that narrative?

After the close the focus will return to earnings. Some heavy hitters here:

* Tesla ($TSLA )

* Microsoft ($MSFT )

* Meta ($META )

Those are the highlights people will be talking about.

(Fed, Tesla compete for investor attention today. Image by author via Grok AI)

Les Rubin of Main Street Economics joins the podcast to discuss his chief concern facing not just markets and economies, but the world at large: US sovereign debt.

This podcast episode was recorded today and is being made available for premium subscribers only. Free subscribers may listen to the short preview clip and, of so obliged, upgrade their membership. There are many benefits.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, Jan. 16.

State of Play

Stocks advanced yesterday, putting in a broad-based rally after the CPI came in a little below forecasts. As we eye our board of indicators for signs of direction at 0700, things are tilted to risk-on:

* Stock index futures are mixed. Tech is moving higher after Taiwan Semiconductor Manufacturing ($TSM ) earnings, with the Nasdaq up 0.5% but other US indexes aren’t budging from the break-even point;

* Cryptos are joining the tech party, with Bitcoin up 2.5% to trade north of $99,000 again;

* Commodities are mixed, with WTI crude oil down 1% to trade below $78/barrel but copper up 0.7%. Gold and silver continue to move higher;

* Bonds aren’t doing anything. The 10-year yields 4.67%.

Today’s Known Events

Some earnings to kick things off:

* Taiwan Semiconductor crushed estimates overnight and the stock is up 5% in the pre-market, taking Nvidia ($NVDA ) and other AI stocks with it.

(TSM Earnings bolster bull case for AI, by author via Grok AI)

State of Play

Stocks bounced around yesterday, rallying after producer prices came in below forecasts, but finishing largely unchanged. As we eye our board of indicators for signs of direction at 0600 ET, things are pretty quiet:

* Stock index futures are pointing to modest gains, led by small caps. Worth mentioning that the Russell 2000, which tracks small caps, did put in a 1% rally yesterday. This morning the Russell is up 0.5%. S&P 500 and Nasdaq are up 0.2% each;

* Industrial commodities aren’t doing much, though precious metals are continuing to rise with gold and silver up 1%+ each. WTI crude oil is unchanged, trading around $76.50/barrel. Copper is unchanged;

* Cryptos aren’t doing anything either. Bitcoin is unchanged trading right around $97,000;

* Bonds are also unchanged. The 10-year yields 4.78%.

Today’s Known Events

The Consumer Price Index is the main data release of the day. This follows yesterday’s encouraging Producer Price Index. The numbers anticipated by a survey of economists:

* Headline CPI of 0.4% month-over-month, a slight increase over the 0.3% recorded last month;

* Headline CPI of 2.9% year-over-year (2.7% last month);

* Core CPI, which excludes food and energy, of 0.3% MoM (0.3%);

* Core CPI of 3.3% YoY (3.3%).

(CPI scrutiny, by author via Grok AI)

There are bank earnings to tell you about as well:

* Blackrock ($BK ), not actually a bank but an asset manager that gets grouped with the banks anyway (when it comes to earnings at least), is due at 0655;

* JPMorgan Chase ($JPM ) and Wells Fargo ($WFC ) are up at 0700. Jamie Dimon’s comments on JPM’s call are always worth paying attention to;

* Goldman Sachs ($GS ) at 0730;

* Citigroup ($C ) at 0800;

* (All times eastern)

Finally, some Fed speakers to tell you about:

* Richmond Fed President Tom Barkin gives the keynote at a Maryland Chamber of Commerce event at some point this morning. Barkin is not an FOMC voting member this year;

* Minneapolis Fed President Neel Kashkari provides opening remarks and participates in a fireside chat at an event hosted by his office at 1200. Kashkari, like Barkin, is not an FOMC voting member this year;

* Chicago Fed President Austan Goolsbee speaks at the Wisconsin Bankers Association 2025 Midwest Economist Forecast Forum at 1200. This will be broadcast live on the Chicago Fed website. Goolsbee is a full-fledged FOMC voting member this year. He’s seen as rather dovish.

The Bottom Line

The market still doesn’t seem convinced enough to put together a sustainable rally. This may be due to the impeding inauguration of Donald Trump on Monday and the uncertainty that brings. But the lower producer prices reported yesterday were a welcome sign nonetheless.

For today’s CPI it looks like economist estimates might have been equally elevated, with a 0.4% headline print expected. The monthly CPI hasn’t been that high since March. Perhaps this is due to seasonal elements. Indeed the 0.3% anticipated for the Core CPI would be the fifth straight month of this figure. That will probably be more closely watched anyway.

If the number falls short of what’s expected we should get a rally. Whether this rally fizzles out like yesterday’s is another question entirely.

Occasional Fearless Prediction: President-elect Trump, in his inaugural address on Monday, will say something to cause a rally in stocks (and probably in cryptos).

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks dropped yesterday after hotter-than-anticipated economic data brought fears of higher-for-longer interest rates. As we eye our board of indicators for signs of direction at 0645, things are pretty quiet:

* Stock index futures are pointing to a slight uptick at the open. The Nasdaq and S&P 500 are up 0.3%;

* Cryptos are continuing to drop after giving up several percent in yesterday’s sell-off. Bitcoin is down 5% to trade below $96,000;

* Commodities are flat. WTI crude oil trades around $74.50/barrel, roughly unchanged. Copper prices are unchanged;

* Bonds aren’t doing anything either. The 10-year yields 4.69%.

Today’s Known Events

Some more economic data awaits before today’s open:

* ADP nonfarm payrolls at 0815. Economists who were surveyed expect 136,000 new jobs, down a bit from the 146,000 recorded last month. This ADP figure has little bearing on the government’s non-farm payrolls figure due on Friday. As such the market rarely reacts to it;

* Initial jobless claims at 0830. The expectation here is for 214,000 new claims, up a bit from the 211,000 recorded last week but well below the four-week average of 223,000. This is normally out on Thursdays but seeing how markets are closed tomorrow for the Carter funeral, it will be out today instead.

One Fed speaker this morning: Governor Chris Waller at 0830. Waller is a full FOMC voting member. He is seen as one of the more hawkish members of the FOMC.

Speaking of the Fed, minutes from the last FOMC meeting are due at 1400 this afternoon.

The Bottom Line

The Fed meeting minutes will be closely scrutinized thanks to these newfound fears of higher interest rates. Remember how we told you that the economist estimate for yesterday’s PMIs might be too ambitious? Turns out it wasn’t ambitious enough. Both PMIs and JOLTS — the other economic datapoint from yesterday — printed well ahead of estimates. This means the economy might be healthier than previously thought, which means the Fed may continue to have an inflation battle on its hands. And that means there could be higher interest rates a-coming.

Having said all that, the minutes capture a point in time that took place well before any of this data was available. That kind of makes it irrelevant. So if the market (over) reacts to this either way, chances are it will correct in due time.

That is, assuming it even gets a chance. Markets are closed tomorrow but important new information will be flying at us left and right come Friday morning. Non-farm payrolls but also several earnings. We’ll deal with that more on Friday.

Stocks on the Contrarian Radar©️

Henry Schein ($HSIC ), which supplies health care providers — mainly dentists — is the biggest loser in the S&P 500 overnight, down 3% for no reason that is immediately obvious. The Contrarian had admittedly never heard of this company before, but he is certainly familiar with some of the torture devices dental products it sells, as will anybody who has ever sat in a dentist’s chair.

Anyway, the stock has gone nowhere all year, missing out on the entire S&P rally:

At first glance, HSIC sounds like the kind of business that is enticing: easy to understand and supplies products to an industry with pretty inelastic demand features. True, when the economy sours so do some people’s dental care, and certain dental services will likely see a drop in demand. But overall, it’s a decent set-up.

The valuation seems to check out. HSIC trades at 22x forward earnings, below the health care sector median of 28x. The price/sales multiple, at 0.7x forward sales, is even more compelling. Less so the cash flows at 14x, though that too is below the sector median. The balance sheet is pretty clean with $3 billion in total debt versus a market cap of almost $9 billion.

One will need to look into this further to determine if it presents a legitimate buying opportunity. Who are the competitors? Who are the clients? What is the management team and its strategy? Etc. etc. The overnight sell-off is strange because there is no apparent catalyst. The most recent news appears to have been an analyst upgrade from Bank of America.

Bottom Line: Worth exploring at more depth. The Contrarian will add this to the watch list.

Housekeeping

* Markets in the US are closed tomorrow due to the state funeral for Pres. Carter. As a result, there will not be a briefing or podcast. We will return on Friday morning;

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Jan. 7. Today’s Stocks on the Contrarian Radar©️ segment, focused on consumer staples stocks (ETF $XLP ), can be read at the bottom of this page.

State of Play

Stocks advanced yesterday led by tech, with all things AI being bid up by investors ahead of the Consumer Electronics Show in Las Vegas. There Nvidia ($NVDA ) CEO Jensen Huang didn’t disappoint, unveiling a slew of new initiatives in robotics, gaming, and elsewhere. The stock continued to advance overnight, to fresh record highs.

As we eye our board of indicators for signs of direction at 0645, this has yet to translate to a broader move to risk-on. Things are pretty quiet:

* Stock index futures are effectively unchanged, with no major US index moving more than 0.2% from the break-even point;

* Cryptos are continuing to advance however. Bitcoin is up 1.5% to trade around $100,500;

* Commodities are moving a tiny bit higher, with WTI crude oil up 0.5% to trade around $74/barrel and copper up 0.4%;

* Bonds continue to move lower. The 10-year yield is up 2 basis points to 4.64%, its highest level in some nine months (yields move inversely to prices).

Today’s Known Events

A couple of economic data releases to tell you about:

* ISM Non-Manufacturing PMIs are out at 1000. Economists who were surveyed expect a reading of 53.2, which would be an improvement over the 52.1 recorded last month and still ahead of the 50 line that separates expansion from contraction;

* The Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, or JOLTS, is also out at 1000. The expectation here is for 7.77 million job openings, a small increase from the 7.74 million recorded last month. The quits levels were about 3.3 million last month, corresponding to 2.1% of the workforce. That’s a slight increase from the previous month when the quits level was 1.9%. There unfortunately isn’t an economist estimate for that.

After the close at 1600 we’ll get a few earnings reports:

* AAR Corp ($AIR ), which supplies the aerospace and defense industries (thanks to Threads user Teezlord for the tip on this);

* AZZ ($AZZ ), which provides metal coating services.

The Bottom Line

Economists appear to have set pretty high expectations for the PMI. Could that be set up for disappointment? It’s more likely to move markets than JOLTS, which provides dated information (we’re getting November data today).

Yesterday’s rally in tech stocks and cryptos tells us investors are still quite interested in the riskiest part of the market. So risk appetite is healthy. Failing any information to change the narrative, that could provide somewhat of a floor.

When might we get information to change the narrative? If today’s PMIs don’t do it, then FOMC meeting minutes tomorrow could. Otherwise earnings and non-farm payrolls on Friday will be the next hurdle.

Stocks on the Contrarian Radar©️

Staples stocks got beaten up yesterday for some reason. The Consumer Staples Select Sector SPDR® Fund ETF (XLP ) dropped 1%. It’s not entirely clear what caused this. It’s curious because growth stocks rallied. These don’t always move together, but they also don’t diverge this dramatically.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, Dec. 16. The Bottom Line segment of today’s podcast starts at (3:43) for listeners who want to skip ahead.

State of Play

Bitcoin had another big rally over the weekend and is now trading at fresh record highs, again! Exciting times for Bitcoin bros. As we eye our board of indicators for signs of direction at 0630, things are pretty quiet elsewhere:

* Stock index futures are unchanged with no major US index moving more than 0.2% from the break-even point;

* Commodities are moving a little lower after some disappointing data out of China. WTI crude oil is down 1.7% to trade around $70/barrel. Copper is down 0.4%;

* Bonds are unchanged. The 2-year yields 4.23% with the 10-year yielding 4.38%. Quick maths tells you that 15 basis points separates the 2-year from the 10-year, meaning that yield curve is moving further away from inversion;

* The crypto rally appears to have entered a new phase, with Bitcoin up 2% to trade close to $105,000. It broached $106,000 earlier.

Today’s Known Events

It’s a pretty busy week centered on the Federal Reserve’s interest rate decision on Wednesday. Today is mostly quiet though.

Purchasing Manager Indexes from S&P Global are the main data release of the day. This is the so-called ‘flash report’, the first one of the month that is more closely watched by investors.

Economists who were surveyed expect the Services PMI to come in at 55.7, a small decline from the 56.1 recorded last month. The Manufacturing PMI is expected to come in at 49.4 versus 49.7 last month.

State of Play

Stocks advanced yesterday led by tech after CPI matched economist estimates. As we eye our board of indicators for signs of direction at 0700, things are pretty quiet:

* Stock index futures are down a bit led by tech with the Nasdaq down 0.3%. S&P 500 futures are down 0.2%;

* Cryptos are advancing again. Bitcoin is up 2% to move north of $100,000 again;

* Commodities aren’t doing much. WTI crude oil is unchanged at $70.50/barrel and copper is up 0.6%;

* Bonds are dropping a bit. The 2-year yield is up 2 basis points to 4.18% whilst the 10-year is up 3bps to 4.30% (yields move inversely to prices).

Today’s Known Events

Yesterday we had consumer prices, today it’s the turn of producers. Also known as wholesale prices, this datapoint is arguably more important than the CPI under the premise that producers pass higher costs off to consumers.

Anyway here are the economist estimates for today’s PPI:

* Monthly headline PPI of 0.2%, the same as last month;

* Annualized headline PPI of 2.6 versus 2.4% last month;

* Monthly Core PPI of 0.2% (0.3% previous);

* Annualized Core PPI of 3.2% (3.1%).

Seeing how it’s Thursday we’ll also get initial jobless claims at 0830. The expectation here is for 221,000 new claims, effectively in line with the 224,000 recorded last week but ahead of the four-week average of 218,000.

There are some earnings but those aren’t until after the close at 1600: Broadcom ($AVGO ) and Costco ($COST ) are the highlights.

The Bottom Line

Inflation is a concern with consumer prices continuing to advance. They just didn’t advance more than economists had estimated, which was good enough for stocks to rally yesterday. What that tells us is that investors really want to take on risk and were itching for an excuse to do so.

Producers prices today should be able to bring the fear of God back, but this datapoint is rarely acted on by markets. Maybe today will be different? The move upward in bond yields — indicating selling in bonds — tells us that maybe all is not as rosy as tech stocks and cryptos indicate.

‘Fighter jets scrutinized by traders on stock exchange’ by author via Grok

Stocks on the Contrarian Radar©️

Defense contractors dropped yesterday and overnight led by Lockheed Martin ($LMT ) and General Dynamics ($GD ). The catalyst appears to have been a report by JPMorgan that said these companies could face Department Of Government Efficiency (DOGE) risks once Donald Trump and Elon Musk take office. There are clearly other things affecting LMT however as the stock is down some 12% over the last month:

At issue may be margin pressure, with gross margins down to 12% according to the last earnings report, versus a sector median of 32%. Well okay. How about valuations?

LMT trades at ~19x forward earnings, a bit below the sector median of 24x. Price-to-sales are 1.7x, which isn’t great. Price-to-cashflows are 15x, which isn’t great either. The latter two multiples are a bit worse than the sector median.

GD trades at ~20x forward earnings, 1.5x sales, and 15x cashflows, so in a similar range.

Add it up and these stocks are neither cheap nor expensive. If you zoom out a bit on the chart you can see that LMT has advanced by 10% this year, with GD up just 2.6%. So both trail their benchmark, the iShares Aerospace & Defense ETF ($ITA ):

Still, you can’t help but be a little tempted after the pullback. Frankly it sounds like any DOGE concerns are completely unfounded. Elon & Co. may be serious about cutting government spending — or think they’re serious — but nobody is going to cut defense budgets. In fact, they aren’t even going to slow the increase of defense spending. To do so would be political suicide — and they know it. Besides, Musk’s companies are direct beneficiaries of government contracts, especially from the defense department. Musk may be crazy AF judging by some of his social media posts and other evidence, but he’s not going to bite off the hand that feeds him.

Full disclosure: The Contrarian does not own LMT or GD and is not going to enter any orders to buy at this time. If it keeps dropping he will reconsider.

Not investment advice!

Previously In This Space…

This July we examined a sell-off in fashion stocks Estée Lauder ($EL ), and Lululemon ($LULU ), deciding they were probably best avoided.

…And What Happened

Both stocks have had a rough year but late July appears to have formed a bottom for LULU, which is up some 27% since while EL has continued to take on water:

The last month has been much better for both names:

Who knows, maybe both have now found their bottom? Unfortunately these are both (EL especially) proxies for the Chinese consumer, which is why The Contrarian was uninterested in getting involved last time.

Full disclosure: The Contrarian does have a position in EL due to poor decision-making on his part. He plans to jettison it as soon as it recovers its losses.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks dropped a bit yesterday on news of an antitrust probe by Chinese regulators into Nvidia (NVDA ) that sounds in no way to be politically motivated. As we eye our board of indicators for signs of direction at 0645, there isn’t an awful lot to go by just yet:

* Stock index futures are flat as a board with no major US index moving at all from the break-even point;

* Cryptos are moving a bit lower. Bitcoin is down 1% to trade around $97,500;

* Commodities are treading water. WTI crude oil is down 0.6% to trade around $68/barrel, basically where it’s been for weeks (or so it seems). Copper is down 0.5%;

* Bonds are selling off a bit. The 2-year yields 4.14%, up 1 basis point, with the 10-year yield up 3 basis points to 4.23% (yields move inversely to prices).

Today’s Known Events

Earnings are once again the story. The only story of the day, at least where known events are concerned.

Reporting before the open at 0930 are AutoZone ($AZO ), Olli’s Bargain Outlet ($OLLI ), and Designer Brands ($DBI ). So a pretty good selection of retailers.

After the close we’ll hear from GameStop ($GME ), Dave & Buster’s ($PLAY ), and Sportsman’s Warehouse ($SPWH ).

The Bottom Line

Looks like another dull day, then. The major event weighing on markets yesterday was the anforementioned move by Chinese regulators re: Nvidia ($NVDA ). The concern here isn’t so much about Nvidia but trade wars more generally. We saw this the last time Trump was in office. Lots of tits for tats interspersed with leaks from the Trump administration that they were making progress on a trade deal. This is all forgotten because in the end it didn’t matter and stocks rallied.

Could history repeat itself? Sure, and that’s why yesterday’s selloff wasn’t particularly dramatic. The issue is just the uncertainty of it all. Markets, if you’ll recall, hate uncertainty more than they hate bad news.

A little bit of selling is probably warranted anyway after the run-up of the last month. The Contrarian was happy to see some of his dip buys rally yesterday: Target ($TGT ), discussed here; Newell Brands ($NWL ) and Estée Lauder ($EL ) among them.

Stocks on the Contrarian Radar©️

The Contrarian has started to ask if Google ($GOOG /$GOOGL ) could be a buy at these levels. The stock has trailed its benchmark, the Nasdaq 100 ($QQQ ) most of the year:

Google has been under regulatory scrutiny. There has been noise about a forced breakup, with the latest being news it could be forced to sell the Chrome browser business. Despite the incoming Trump administration apparently being kind to companies like Google and their transgressions, this caused the stock to sell off.

In retrospect that may have been the best buying opportunity. But it’s impossible to time these things perfectly and there are indications the company is poised for growth. A lot of growth.

Self-Driving Cars

The main driver (pun intended) may just be the Waymo business, which positions Google/Alphabet as a big winner in autonomous driving. This is exciting. Driverless cars will eventually change everything. The Contrarian wants to be onboard for that transition (again, pun intended). He has been researching this technology for awhile. All signs point to this being ripe for adoption. One prominent critic of this technology has already had his come-to-Jesus moment. Some regulatory stuff needs to be cleared up but the incoming Trump administration is apparently on that already.

But enough about self-driving cars. Yesterday Google made a splash with its Willow chip, apparently a ‘mind boggling’ foray into quantum computing — another major growth area. This actually caused the stock to gain ground yesterday when the rest of the Nasdaq sold off, much to the chagrin of anybody who chose yesterday to start building a position.

That aside, the valuation at 23x earnings is actually below the S&P 500 average of ~27x, to say nothing of other tech stalwarts like Microsoft (36x). Apple (39x), Amazon (47x) or Nvidia (56x). Oh, and management is buying back stock.

Okay so maybe Google is losing some ground on the search engine side of things. Not just to ChatGPT and the like. A point of concern is with iPhones and whether Google is still the default search mechanism on these devices. That’s certainly fair. Google’s search engine business is, well, it’s literally a verb. Or was. If that changes it stands to reason the company will lose out on revenues. No way around that.

But let’s not forget that YouTube is a Google product. Is there a viable competitor to YouTube? Don’t think so. There’s also gmail and a bunch of other potential growth drivers that are under the radar. Take AlphaFold for example. This literally won Google a Nobel prize. In bio pharmacology.

So yeah, growth drivers are in place. The stock is cheap compared to peers. A drop in search engine revenue is already priced in. Looks like this thing is a buy at these levels. This thesis may not materialize overnight. But chances are Google will be worth a lot more in a few years’ time.

Full disclosure: The Contrarian has a limit order in to buy GOOGL, the A-shares version. He already owns a small position in his retirement account.

Not investment advice!

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, Dec. 9. The Bottom Line segment of today’s podcast starts at (4:00) for listeners who want to skip ahead.

State of Play

As we eye our board of indicators for signs of direction at 0650, things are pretty quiet:

* Stock index futures are flat with no major US index moving more than 0.2% from the break-even point;

* Commodities are seeing some signs of life however, with WTI crude oil up 1.5% to trade north of $68/barrel and copper up 1.8%. This is likely due to China pledging “more proactive” fiscal stimulus;

* Cryptos are down a bit with Bitcoin down 1% to trade around $98,200;

* Bonds are unchanged. The 2-year yields 4.11% with the 10-year yielding 4.17%.

Today’s Known Events

It’s a slow start to a pretty slow week, with Wednesday’s Consumer Price Index really the lone highlight. We do have some earnings to keep us interested:

* Rent the Runway ($RENT ) is due to report at some point before the open at 0930;

* After the close at 1600 we’ll hear from:

* C3.ai ($AI )

* Oracle ($ORCL )

* Casey’s General Stores ($CASY )

* Toll Brothers ($TOL )

* Vail Resorts ($MTN )

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Friday, Dec. 6. Saint Nicholas Day for those who celebrate. The Bottom Line segment of today’s podcast starts at (2:41), followed by Stocks on the Contrarian Radar©️ featuring Goodyear Tire & Rubber ($GT )at (6:13) for listeners who want to skip ahead.

State of Play

Stocks dropped yesterday with small caps seeing the worst of it as investors took a breath after a big rally on Wednesday. As we eye our board of indicators for signs of direction at 0540, things are quiet ahead of the crucial non-farm payrolls report:

* Stock index futures are flat as a board, with no major US index moving at all from its break-even point;

* Cryptos are dropping and Bitcoin has crested back below $100,000. Specifically, Bitcoin is down 4% to trade around $98,000;

* Commodities are mixed. Copper is up 1% but WTI crude oil is down 0.5% to trade below $68/barrel;

* Bonds are unchanged. The 2-year yields 4.18% with the 10-year yielding 4.20%. So the 2/10 yield curve is close to inverting again.

Today’s Known Events

First Friday of the month means non-farm payrolls, out at 0830. Economists who were surveyed expect 214,000 new jobs, a significant increase from the surprisingly soft 12,000 recorded last month. This would still raise the unemployment rate a tiny bit, to 4.2% from 4.1%.

At 1000 the University of Michigan releases its flash reading of the consumer sentiment report for December. There’s a number attached to this and even an economist survey for it: a reading of 73.1 is anticipated, which is a bit better than last month’s 71.8.

State of Play

Stocks advanced yesterday to close at fresh record highs. As we eye our board of indicators for signs of direction at 0650, things are quiet:

* Stock index futures are once again flat as a board with no major US index moving more than 0.1% from the break-even point;

* Commodities are showing some signs of life however. WTI crude oil is up 1% to trade close to $69/barrel. Copper is up 1%;

* Cryptos aren’t doing anything with Bitcoin sitting on $94,800, unchanged;

* Bonds are completely unchanged. The 2-year yields 4.18% with the 10-year yield sitting on 4.21%, both identical to yesterday at this time.

Today’s Known Events

The Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, or JOLTS, is out at 1000. Economists expect 7.49 million job openings, a small increase from the 7.44 million recorded last month. The quits levels were a little less than 3.1 million last month, corresponding to 1.9% of the workforce. That’s a slight decrease from the previous month when the quits level was an even 2.0%. There unfortunately isn’t an economist estimate for that.

(“JOLTS” graffiti by author via Grok AI)

The interesting earnings aren’t until after the close at 1600. Among the highlights:

* Salesforce ($CRM )

* Okta ($OKTA )

* Marvell Technology Group ($MRVL )

The Bottom Line

It’s unlikely that JOLTS will trip up all the good holiday cheer, seeing how this is a pretty dated metric (we’re getting October’s numbers today). Still, it’s worth watching just for the quits levels which are not tracked anywhere else.

Things have been uncharacteristically quiet from the Trump camp in several days. That won’t last. Actually, check that. The quiet is over already with the latest news that the new administration will block Nippon Steel’s bid for US Steel ($X ).

Stocks on the Contrarian Radar©️

Shares of US Steel dropped on this news. The stock is down 7% overnight to trade below $38/share. That’s a long way from Nippon Steel’s $55/share takeout price:

It sounds like that deal is likely dead at this point. Chances are it wouldn’t have gone through anyway seeing how the Biden administration was also opposed to it. The question is if this presents an opportunity now for one of the most iconic public companies in the US.

The valuation doesn’t exactly scream buy. US Steel is trading at 20x forward earnings and 10x forward cash flows. The price/forward sales multiple is the only cheap one at 0.6x.

The balance sheet is in good shape with no significant debt maturities until late 2026 and ample cash. But sales have been dropping, largely due to the price of steel also falling. Where the revenue run-rate is concerned, where is growth going to materialize? Can the US really become a major steel producer? Does anybody really want that?

To be sure there will probably always be some demand for this company’s product. You need steel for any construction project. At some point X (how much do you think Elon Musk wants that ticker by the way?) will be cheap enough to be a buying opportunity. It doesn’t look like that time has quite arrived yet trading at 20x forward earnings. So The Contrarian will be sitting this one out for now.

Not investment advice!

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, Nov. 27. The Bottom Line segment of today’s podcast starts at (4:59) for listeners who want to skip ahead.

State of Play

It’s Thanksgiving Eve in the US, which is normally a pretty quiet trading day ahead of the market holiday. However there is a big dump of economic data on the way this morning that will keep investors interested.

As we eye our board of indicators for signs of direction at 0650, it looks like risk-on is the mood:

* Stock index futures are flat with the exception of small caps, which are moving higher. The Russell 2000 is pointing to a gain of 0.4% at the open;

* The crypto rally appears to have resumed! Bitcoin is up 1% to move to ~$93,500. Could #Bitcoin100k be back on again?

* Commodities are moving higher as well. WTI crude oil is up 0.6% to trade north of $69/barrel with copper up 1%. Gold is up 1% as well;

* Bonds are seeing a few bids after yesterday’s FOMC meeting minutes indicated further interest rate cuts ahead. The 2-year yield is down 3 basis points to 4.22% with the 10-year yield down 3bps to 4.27% (yields move inversely to prices).

Today’s Known Events

Personal Consumption Expenditures at 1000 is the major economic data release of the day. The PCE Deflator, as the Fed’s preferred inflation gauge is known, is expected to increase by 0.2% month-over-month, the same as last month, which would raise the annualized number to 2.3% from 2.1%.

Core PCE prices, which exclude food and energy, are expected to print at 0.3% MoM, identical to last month, which would raise the annualized core PCE to 2.8% from 2.7%.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Nov. 26. The Bottom Line segment of today’s podcast starts at (5:44) for listeners who want to skip ahead.

State of Play

Stocks advanced yesterday, led by small caps again. Then came news of President-elect Trump’s ‘Day One’ tariffs on Mexico, Canada, and China, that appear to have upended the good cheer a bit. As we eye our board of indicators for signs of direction at 0640, things are quiet for the most part:

* Stock index futures are mostly unchanged. Only the Russell 2000, which tracks small small caps, is moving at all from the break-even point and that is lower by 0.5%;

* Cryptos are dropping pretty precipitously. Bitcoin is down almost 7% overnight to drop below $92,000. Maybe Bitcoin100k isn’t going to happen after all? (One can hope);

* Commodities are moving a bit higher with WTI crude oil up 1% to trade around $69.50/barrel. Copper is unchanged;

* Bonds are unchanged. The 2-year yields 4.26% whilst the 10-year yields 4.29%.

(‘Trump Tariffs’ by author via Grok AI)

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, Nov. 21. The Bottom Line segment of today’s podcast starts at (4:27) for listeners who want to skip ahead.

State of Play

Nvidia ($NVDA ) earnings after yesterday’s close were kind of blah, beating expectations but not by the margin that Wall Street has come to expect. The stock dropped a bit overnight.

(“Blah NVDA earnings” cartoon by author via Grok AI)

As we eye our board of indicators for signs of direction at 0645, things are relatively quiet other than in crypto land:

* Cryptos continue their advance into record territory. Bitcoin is up another 5% to trade close to $98,000;

* Stock index futures are flat as a board with no major US index moving at all from the break-even point;

* Commodities are rallying, for the most part. WTI crude oil is up 2% to trade north of $70/barrel. Gold and silver are up. Copper isn’t going along however, down 0.5%;

* Bonds are unchanged. The 2-year yields 4.30% with the 10-year yield 4.40%.

Today’s Known Events

Earnings are in focus, again:

* BJ’s Wholesale Club ($BJ ) reports were mixed but the company appears to have raised guidance and the stock is rallying in the pre-market, up 6%;

* Deere & Co. (DE ) beat top- and bottom-line estimates but the stock isn’t moving;

* Baidu (BIDU ) earlier reported mixed results and is down 2.5% at the time of this writing;

* Pinduoduo (PDD ) missed on top- and bottom-line estimates and is getting beat up a bit, down 9%;

* Warner Music Group ($WMG ) is also due before the open;

* After the close at 1600 we’ll hear from The Gap ($GAP ) and Ross Stores ($ROST ).

Initial jobless claims are out at 0830. Economists who were surveyed expect 220,000 new claims, effectively in line with the 217,000 recorded last week and in line with the four-week average of 221,000.

Existing home sales at 1000. The expectation here is for 3.94 million sales, an increase over the 3.84 million recorded last week.

One Fed speaker: Chicago Fed President Austin Goolsbee speaks at some event in Indiana at 1225. Goolsbee is just an alternate voting member this year.

The Bottom Line

Investors hate uncertainty more than they hate bad news. Right now there are three elements of uncertainty vexing the narrative, all tied to the incoming US president:

(“3-headed Trump monster” by author via Grok AI)

State of Play

Stocks advanced yesterday with tech the leader. As we eye our board of indicators for signs of direction at 0700, things are pretty quiet:

* Stock index futures are flat with no major US index moving more than 0.2% from the break-even point;

* Cryptos continue their ascent. Bitcoin is up another 2% to move north of $93,000 again;

* Not much going on in commodities land. WTI crude oil is up 0.5% to trade around $69.50. Copper is up 0.3%. Silver is down 1%. Gold unchanged;

* Bonds are selling off a tiny bit. The 2-year yield is up 3 basis points to 4.30% whilst the 10-year is up 5bps to 4.42% (yields move inversely to prices.

Today’s Known Events

More earnings!

* Target ($TGT ) just posted a major miss on analyst estimates and cut full-year guidance. The stock is down 16% (!) in the pre-market to drop to its lowest level of the year.

* Nio ($NIO ), the Chinese EV manufacturer earlier beat on top- and bottom-line estimates but investors still didn’t like what they see as the stock is dropping in the pre-market;

* Two other retailers TJX Companies ($TJX ) and Williams-Sonoma ($WSM ) are also due to report before the open at 0930.

After the close comes the main event with Nvidia ($NVDA ).

Snowflake ($SNOW ), Palo Alto Networks ($PANW ), and Jack in the Box ($JACK ) also report after the close.

(NVDA earnings on Watch’ by author via Grok AI)

The Bottom Line

Retailers are suddenly in the spotlight after that Target miss. What’s weird is at their last earnings report management raised profit guidance. That was now slashed and same-store sales are expected to be flat this quarter. Apparently the port strike affected things. So this very much appears to be a company-specific issue, especially after Walmart ($WMT ) blew away earnings yesterday.

But yeah TJX and Williams-Sonoma will now be closely scrutinized, even though neither is really a fair comparison to TGT.

We’ll see if this translates into any lingering skittishness for investors. Judging by cryptos, the answer would appear to be ‘no’ so far…

Stocks on the Contrarian Radar©️

This morning’s sell-off in Target ($TGT ) makes The Contrarian wonder if this is a buying opportunity. The drop was brutal and is not captured in the following chart that only goes through yesterday’s close:

The ‘Pre’ sign isn’t accurate either as TGT finds itself trading around $125/share at the time of this writing!

You have to go back to the middle of last year to see it that low. That was when the company was reeling from the trans-swimsuit issue. As you can see it eventually rebounded but never recaptured its lofty post-pandemic heights.

The valuation looks pretty promising: TGT was trading at 16x forward earnings coming into today, 0.7x sales, and 10x cash flows, all well below the sector median. Today’s numbers will make the stock look even cheaper. Unfortunately the company does rely on discretionary spending to drive a lot of its sales. That’s one advantage Walmart has here.

So from a cyclical perspective this is maybe not the right time to be getting long TGT. But if the economic expansion can continue for another year or two, then it certainly makes a lot more sense. Surely Trump tariffs will hurt margins some, but if Americans keep spending money you figure the valuation will adjust…

Full disclosure: The Contrarian is long TGT and is looking to add more at these levels. Indeed he just bought in at $126/share.

Borr Drilling ($BORR ) comes to us via reader/listener request. The closest ETF appears to be the iShares U.S. Oil & Gas Exploration & Production ETF ($IEO ) but that isn’t a perfectly fair comparison as it mostly contains large caps. So let’s add in the Invesco S&P SmallCap Energy ETF ($PSCE ). As you can see, BORR has trailed the two benchmarks this year:

Indeed BORR has diverged pretty widely from IEO and PSCE. This warrants a closer look at valuation.

BORR trades at:

* 13x forward earnings (in line with the sector median);

* 1x forward sales versus 1.5x for the sector at large.

That doesn’t really tell us much. When it comes to oil drillers, there are other things that determine the stock’s performance anyway. One of these is the number, age, and status of its oil rigs.

BORR will have 24 rigs in operation next year with no plans for expansion, according to its latest earnings. That latter point is important as it will cut down on next year’s capex (capital expenditures). Importantly, its fleet is the youngest in the industry at an average age of seven years, according to a company presentation from September.

So much for its equipment. What about demand? BORR was hurt by Saudi Aramco’s decision in January to halt production increases. It has since booked other contracts and apparently has 73% of its 2025 capacity contracted at a competitive rate, according to its Q2 earnings.

That’s nice, but what’s to keep clients from canceling projects like Aramco did? Presumably that work was technically ‘paused’ but it still hit BORR’s bottom line. The fact is that this company is likely very dependent on oil demand. If there is demand for oil, then companies will have incentive to drill for it, largely because nation-owned oil companies will make decisions to accelerate these efforts.

For now, BORR can certainly be an attractive hold due to its 9% dividend yield. That would appear to be safe as the balance sheet is in good shape with $200 million in cash and little short-term debt.

Still, there is a lot about this business that The Contrarian does not understand and therefore he will be sitting this one out.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, Nov. 18. The Bottom Line segment of today’s podcast starts at (4:06) for listeners who want to skip ahead.

State of Play

Stocks dropped on Friday to conclude a losing week. As we eye our board of indicators for signs of direction at 0640, things are pretty quiet:

* Stock index futures are pointing to small gains for tech. The Nasdaq is up 0.3%. Other US indexes are unchanged;

* Commodities are moving higher, led by precious metals. Gold and silver are up 1% each. WTI crude oil is up 0.6% to trade north of $67/barrel. Copper is up 0.2%;

* Cryptos are unchanged after a volatile weekend. Bitcoin trades around $91,000;

* Bonds aren’t doing anything. The 2-year yields 4.31% whilst the 10-year yields 4.47%.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, Nov. 14. The Bottom Line segment of today’s podcast starts at (4:18) followed by Stocks On The Contrarian Radar©️ at (6:05) feat $BBWI for listeners who want to skip ahead.

State of Play

Stocks moved sideways yesterday after the CPI came in exactly as anticipated. As we eye our board of indicators for signs of direction at 0640, it looks like the ‘Trump trade’ is back on:

* Cryptos are the main story again, with Bitcoin up another 4% to move close to $91,000. It earlier peaked north of $93,000. Seems $100k is just a matter of time for BTC;

* Stock index futures are unchanged with the exception of small caps. The Russell 2000 ($IWM ), which has been the biggest post-election winner on the equity side of things, is up 0.5%;

* Commodities are dropping, this too a continuation of the ‘Trump trade’ that has made its mark these last six trading days since the election: Copper is down almost 2% to move right to $4/pound, its lowest level since the first quarter. Gold and silver continue to drop, down 1% each. WTI crude oil at least is holding steady around $68.75/barrel;

* Bonds aren’t doing anything but the 2/10 yield curve has widened again. The 2-year yields 4.28% with the 10-year yield 4.46%.

Earnings

A busy morning of earnings is underway:

* Disney ($DIS ) is the biggest name to report before the open. The House of Mouse beat top- and bottom-line estimates and the stock is moving higher in the pre-market, to the tune of 5% at the time of this writing;

* Apple supplier Foxconn Technologies reported strong growth numbers overnight and the stock is moving higher in Taipei trading (its US listing FXCOF is very illiquid, from the looks of it). The Taiwanese company, which also supplies Nvidia ($NVDA ) doesn’t supply analyst estimates but did reiterate growth prospects for the quarter.

* Chinese online retailer JD.com ($JD ) earlier beat estimates but appears to have provided some information to irk investors as the stock is down 4% at the time of this writing;

* Another name out of China, Bilibili ($BILI ), the online games manufacturer, beat estimates but there too appears to have supplied something to disappoint investors as the stock is down 3% in the pre-market.

After the close at 1600, semiconductor manufacturer Applied Materials ($AMAT ) is the biggest name to report.

Economic Data

Yesterday we had the Consumer Price Index. Today we get the Producer Price Index, out at 0830. This is arguably a bigger deal than the CPI under the premise that producers pass higher costs off to consumers.

The numbers that are anticipated:

* Headline PPI of 0.2% month-over-month, which is two ticks worse than last month when no change was reported;

* That would move annualized PPI up to 2.3% from 1.8%;

* Core PPI, which excludes food and energy costs, is expected to come in at 0.3% MoM, a tick worse than the 0.2% recorded last month;

* That will move annualized PPI up to 2.9% from 2.8%.

Seeing how it’s Thursday we’ll also get initial jobless claims at 0830. Economists are anticipating 224,000 new claims, up a bit from the 221,000 recorded last week and below the four-week average of 227,000.

State of Play

Stocks dropped yesterday for the first time since the election. As we eye our board of indicators for signs of direction at 0630, things appear quiet:

* Cryptos appear to be stabilizing after dropping overnight. Or at least Bitcoin is, up <1% to trade around $87,800;

* Stock index futures are effectively flat with no major US index moving more than 0.2% from the break-even point;

* Commodities aren’t doing much either. WTI crude oil is up 0.8% to trade around $68.50. Copper is unchanged;

* Bonds are unchanged. The 2-year yields 4.35%. The 10-year yield is 4.43%. So the 2/10 gap is back up to 8 basis points.

Today’s Known Events

Inflation is back on the menu. No sooner had we thought the inflation dragon was slayed, that higher prices are suddenly back in focus. Part of this is also a reaction to political events as Trump’s policies (like Kamala Harris’, it’s worth pointing out) are expected to be inflationary. The data will be released at 0830, per usual.

Anyway, the numbers we’re looking for are as follows:

* Headline CPI of 0.2% month-over-month, the same as last month;

* This would raise annualized headline CPI to 2.6% from 2.4%;

* Core CPI, which excludes food and energy, is expected to print at 0.3% MoM, which would leave it at 3.3% YoY. Both of these are unchanged from last month.

One earnings of note: Cisco ($CSCO ) reports after the close at 1600.

The Bottom Line

Investors appear to be waiting out the inflation print. The overall figures are still not terrible, though core CPI is stubbornly persistent above 3%. A move higher into the mid-3% range could certainly unnerve some people.

You’re going to want to watch short-term bond yields and of course Fed fund futures. These are still, at this writing, pricing in another 25bps rate cut at the next FOMC meeting, which is Dec. 18, to the tune of 82%. If the CPI comes in hot, you can expect that number to drop, perhaps dramatically.

Overall, it is fair to say that inflation is once again a concern. For now. If today’s print comes in soft then it could unleash more animal spirits.

Stocks On The Contrarian Radar©️

Harley Davidson ($HOG ) dropped by almost 4% yesterday to its lowest level of the year. The stock is now down 12% year-to-date, which is particularly embarrassing if you hold it up against the S&P 500 ($SPY ):

The concern is apparently Trump tariffs, which hurt the company the last time around. The first Trump term was not good for Harley Davidson. It stock basically went nowhere for four years. Not that the last four years were much better. In fact, you have to go back to the Obama era to see HOG above $40 for any extended period of time:

That kind of set up looks like it could make for a contrarian buying opportunity. The valuation is pretty compelling. HOG trades at:

* 9x forward earnings;

* 1x forward sales;

* 3.5x forward cashflows

Cheap, cheap, and cheap! Management has also been buying back shares aggressively. Harley-Davidson is a very well-recognized brand with a loyal following. So why is the stock going nowhere and taking on more water as we embark on another ‘buy America’ Trump term?

(Meme by author via Grok)

Well for starters the sales multiple is not that compelling for a company like Harley Davidson as it’s hard to see where growth is going to materialize. The company does have an electrical motorcycle division, called LiveWire, but how much fun can electric motorbikes be? Do they even make any noise? Isn’t part of the point of owning these things to let the engine howl at unsuspecting civilians?

Indeed the company has, by its own admission, been losing market share. It doesn’t say to whom, but it’s evaporating pretty badly. Operating margins aren’t great either, at 28% (gross). HOG is a cyclical business and it’s clear we’re closer to the end of the economic growth cycle than its beginning.

Add it all up, and take the coming tariffs and it’s pretty hard to justify buying at these prices. However if it were to drop below $30, then it could be a lot more justifiable. Just don’t expect to recoup your investment anytime soon. But as a long-term trade, it may work out. You do get a dividend of 2% (at today’s prices) for your troubles.

Disclosure: The Contrarian owns a tiny slug of HOG in a retirement account.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Nov. 12. The Bottom Line segment of today’s podcast starts at (5:06) for listeners who want to skip ahead.

State of Play

Stocks rallied again yesterday, closing at fresh record highs once more. The rally was even more pronounced in cryptos, As we eye our board of indicators for signs of direction at 0640, things are a bit more nuanced (though not much):

* The crypto bull continues to rage, with Bitcoin up 7% to trade around $87,600. It briefly got close to $90,000 overnight;

* Stock index futures are quiet with just small caps moving from the break-even point and that move is lower. The Russell 2000 is down 0.6%;

* Commodities are mixed. WTI crude oil is up 1% to trade close to $69/barrel again. Copper is down almost 2%. Gold and silver are dropping as well;

* Bonds are selling off at the short end of the curve with the 2-year yield up 5 basis points to 4.31% (yields move inversely to prices). The 10-year yields 4.36%. So the 2/10 yield curve is almost back to inversion territory.

State of Play

Trump +2 saw another rally for stocks, this one even more broad-based. Major US indexes closed at fresh record highs again. The Fed’s interest rate decision (25 basis point cut, as expected) was overshadowed by the Trump trade hysteria, as anticipated.

As we eye our board of indicators for signs of direction at 0625, the picture is a bit cloudier:

* Stock index futures are mixed for a change, with tech leading a bit of a drop. The Nasdaq is down 0.4%. Probably earnings are weighing on this. Arista Networks ($ANET ), Rivian ($RIVN ), and Airbnb ($ABNB ) reported disappointing numbers. Other indexes are hogging the break-even point;

* Commodities are dropping again, with WTI crude oil down 1.5% to trade close to $71/barrel. Copper is down 2%, giving back yesterday’s gains. China did announce a stimulus package but that once again appears to have disappointed the market judging by these moves;

* Cryptos continue their ascent however, with Bitcoin up 2% to move north of $76,000 and within range of its all-time high of $76,837;

* Bonds are also seeing some bids. The 2-year yields is down 5bps to 4.17% with the 10-year yield down 4bps to 4.30% (yields move inversely to prices).

(Today’s cover image created by author via OpenArt.ai)

Today’s Known Events

Sony Group ($SONY ) reported earnings that appear to have impressed as the stock is moving higher in the pre-market.

The University of Michigan’s consumer sentiment survey is out at 1000. This is a pretty big survey that often moves markets. However this week it may be a non-event because the actual survey-taking likely predated Trump’s victory that appears to have inspired so much risk-taking. But just for fun, the number that is anticipated by a survey of economists is 71.0, an improvement over the 70.5 seen last month.

We also get our first Fed speaker now that the meeting has passed and the blackout period is over: Fed Governor Michelle Bowman speaks at the University of Mississippi School of Business Banking and Finance Symposium at 1100.

The Bottom Line

So would not expect the known events to factor into things here. Investors appear to still be bullish on this Trump stuff. To repeat what we said in the immediate aftermath of the election results, the only question is how long this lasts and whether any of the winners and losers switch columns…

Earnings are weighing on things in tech land. It remains to be seen whether that will carry the day or whether this Trump euphoria will ride in and turn things around. The losses in tech — individual companies aside — are not very big at all and you do have cryptos continuing their ascent, so…

Stocks On The Contrarian Radar©️

One company that is getting absolutely bludgeoned after reporting disappointing results last night is Pinterest ($PINS ). The stock dropped 15% immediately after reporting. It has since rebounded overnight but still finds itself in a precarious position, especially if you hold it up to the S&P 500:

Earnings themselves were fine but guidance is what led to the sell-off. The revised revenue expectations weren’t even that bad, in the midpoint of the previously-announced range. But a rise in anticipated operating expenses to the tune of 11-14% was enough for investors to dump the stock in the after hours.

One has to ask if that is an overreaction? Monthly-active users are still increasing, as are revenues per user. So the company is still growing, it’s just that expenses are rising as well. But well-managed companies can handle that and eventually produce more growth from the increased expenses. The fact that these are operating expenses versus capital expenses (for investment) is a significant detail however…

Still, the case can be made (and management has tried to make it. So far, apparently unconvincingly) that AI and partnerships (including with Amazon) will drive growth more. Apparently the site is also popular with younger users.

Pinterest has suffered earnings-related sell-offs before. The Contrarian took advantage of one of these during the pandemic and eventually sold for healthy long-term gains. If you zoom out a bit on the chart, you can see there were clear opportunities:

You can also see there has been a clear uptrend since around mid-2022 and also that PINS is a long way from recapturing its post-pandemic highs. A rising tide lifts all boats? If this Trump trade euphoria really gathers steam, you figure PINS will, in time, benefit…

Disclosure: The Contrarian does not have a position in Pinterest but is dangerously close to putting in a limit order to buy some.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

The election is over. Trump won. That is going to have broad impacts, not all of which are apparent yet. As we eye our board of indicators for signs of direction at 0630, the early move is clearly to risk-on:

* Cryptos are the biggest early winner, with Bitcoin surging 8% to trade around $74,000. That’s actually a bit off the high north of $75,000 from earlier;

* Stock index futures are pointing to major gains, led by small caps. The Russell 2000 ($IWM ) is up 6%. S&P 500 ($SPY ) futures are 2.3% to the good with the Nasdaq up 1.7%;

* Bonds are selling off. The 10-year yield is up 18 (!) basis points to 4.47% (yields move inversely to prices);

* Commodities are also moving lower. Copper down 2.8%. WTI crude oil down 1.4% to trade around $71/barrel. Gold and silver are down 1%+.

Today’s briefing is completely free. Sign up here to receive it every morning

Today’s Known Events

Some earnings are already in:

* Ozempic maker Novo Nordisk ($NVO ) appears to have raised guidance and that stock is up 6% in the pre-market at the time of this writing;

* Celsius Holdings ($CELH ), the beverage of choice of millennial anorexics, missed estimates and is down 4% in the pre-market;

* Toyota Motor ($TM ) results appear to have been mixed. The stock is down a bit;

* CVS Health ($CVS ) results were mixed but the stock is moving higher.

After the close at 1600 we’ll hear from:

* British semiconductor manufacturer Arm Holdings ($ARM );

* Wireless technology company — and AI technologist — Qualcomm ($QCOM );

* e.l.f. Beauty ($ELF );

* AMC Entertainment ($AMC );

* LatAm online marketplace MercadoLibre ($MELI ).

The Bottom Line

As noted, the immediate impact of Trump’s victory appears to be a broad move to the riskiest of risk assets. Cryptos being Exhibit A. Small caps are forging ahead. You also have Tesla ($TSLA ) soaring overnight. Meme stocks are up too, but less.

The losers include all things renewable energy, with solar stocks taking it on the chin overnight. The Invesco Solar ETF ($TAN ) is down 9% at the time of this writing. Big oil, on the other hand, is gaining ground with Exxon Mobil ($XOM ) and Chevron ($CVX ) up 3% each at the time of this writing.

Financials are winners as well. Not just big names like JPMorgan Chase ($JPM ) and Bank of America ($BAC ) (up multiple percentage points) but regional banks. The SPDR S&P Regional Banking ETF ($KRE ) is up 8% overnight.

Another loser: China. The iShares China Large-Cap ETF ($FXI ) is down 2%+. Names like $BABA , $JD , and $PDD are moving lower.

Just keep in mind that the immediate reaction to political events is not always the right one. In 2016 at this time there was a broad sell-off. One can expect things to be volatile, especially as retail investors take short-term gains…

Stocks Commodities On The Contrarian Radar©️

There has been a pullback in gold overnight, a likely result of the ‘strong dollar’ trade ushered in by this Trump victory. There are three problems with this trade, however:

* Trump has railed against USD strength;

* Trump’s policies are widely expected to be inflationary. You’ve seen the resulting sell-off in bonds. That means a weaker USD;

* The Federal Reserve is cutting rates, which is also bad for the USD.

One would expect all of this to, in time, be good for gold. During Trump’s first term the precious metal rallied by 55%. Past performance is not always a guide to future results, but gold tends to do well under Republican administrations (+215% in eight years of George W. Bush).

Make no mistake, though: gold has been on a massive tear all year and only recently pulled back from all-time highs:

Still, if gold keeps dropping it may present a buying opportunity keeping items 1-3 above in mind.

Full disclosure: The Contrarian owns some physical gold as well as SPDR Gold Shares ETF ($GLD ) in a retirement account.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Nov. 5. Happy Election Day in the US! The Bottom Line segment of today’s podcast starts at (3:10) for listeners who want to skip ahead.

State of Play

Stocks moved sideways yesterday in a quiet day of trading just as we had anticipated. As we eye our board of indicators for signs of direction at 0630, some modest risk appetite appears to be poking its head out:

* Stock index futures are pointing to small gains led by tech. The Nasdaq is up 0.4% With S&P 500 futures up 0.3%;

* Commodities are continuing to gain ground with the big move this morning in copper, which is up 1%. WTI crude oil is up 0.5% to trade close to $72/barrel. Gold and silver are unchanged;

* Bonds aren’t doing anything. The 2-year yields 4.18% whilst the 10-year yields 4.31%;

* Cryptos are flat as a board. Bitcoin is unchanged trading around $69,000.

Today’s Known Events

Obviously the US election is the main event today. This even though we won’t get definitive results for a few days in all likelihood — or maybe longer. The obvious tea leaf to watch is Trump Media & Technology Group ($DJT ). That stock rallied by 12% yesterday and is up 6% in the overnight session but after all that it’s still down substantially (27% or so) from where it was just one short week ago.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, Nov. 4. Start of a big week that sees US elections, Fed meeting, and more! The Bottom Line segment of today’s podcast starts at (2:39) followed by Stocks On The Contrarian Radar©️at (5:00) feat $PTON for listeners who want to skip ahead.

State of Play

As we eye our board of indicators for signs of direction at 0645, thing are pretty quiet:

* Stock index futures are flat as a board with no major US index moving more than 0.1% from the break-even point. Nvidia ($NVDA ) is moving a big higher just because it will replace Intel ($INTC ) in the Dow Industrials Average. That’s quite an upgrade for the Dow, which may also benefit (keeping in mind that the DJIA contains just 30 stocks and is therefore not a very good gauge of broader stock market movement. This is why we prefer the S&P 500);

* Bonds are seeing some bids. The 10-year yield is down 8 basis points to 4.29% with the 2-year yield down 4bps to 4.16% (yields move inversely to prices);

* Commodities are gaining ground with WTI crude oil up 3% to trade close to $72/barrel. Copper is up 0.7%;

* Cryptos are unchanged. Bitcoin trades around $68,800.

Today’s Known Events

Some earnings to start things off: Marriott International ($MAR ), Yum China Holdings ($YUMC ), Brookfield Asset Management ($BAM ), 21st Century Fox ($FOX ), and Chemours ($CC ) are some of the bigger names to report before the open at 0930.

Highlights after the close include Palantir ($PLTR ), Hims & Hers Health ($HIMS ), Wynn Resorts ($WYNN ), and NXP Semiconductor ($NXPI ).

Factory orders are out at 1000. Economists who were surveyed expect, on average, a decline of 0.4% month-over-month, which is twice the 0.2% decline seen last month. There’s also a gauge of factory orders ex-transport items but there is no economist estimate for that. Last month it was -0.1%, for what that’s worth.

State of Play

Microsoft ($MSFT ) and Meta ($META ) reported disappointing earnings after yesterday’s close and both stocks dropped overnight. That is clearly weighing on sentiment as we eye our board of indicators for signs of direction at 0645:

* Stock index futures are pointing to a lower open with tech leading the drop. The Nasdaq is down 1%. S&P 500 futures are down 0.7%;

* Cryptos appear to have followed tech and are now unchanged around $73,000;

* Commodities aren’t doing much. WTI crude oil is up 0.5%. Copper is unchanged. Silver is moving lower, to the tune of 1.3%;

* Bonds aren’t doing anything. The 2-year yields 4.16% whilst the 10-year yields 4.27%.

Earnings

Another busy day awaits.

The main event is once again after the close when we’ll hear from Amazon ($AMZN ), Apple ($AAPL ), and Intel ($INTC ).

This morning has some big names as well, however: Uber ($UBER ), MasterCard ($MA ), Roblox ($RBLX ), Norwegian Cruise Lines ($NCLH ), Altria ($MO ), ConocoPhillips ($COP ), and Estee Lauder ($EL ) are all due to report before the open at 0930.

Economic Data

It’s a busy day here as well:

The PCE Deflator, the Fed’s preferred inflation gauge, is out at 0830. Economists who were surveyed expect a monthly increase of 0.2% versus 0.1% recorded last month. Core PCE, which excludes food and energy, is expected to print at 0.3% month-over-month versus 0.1% at the previous reading.

At the same time we’ll get initial jobless claims. The expectation here is for 229,000 new claims, effectively identical to the 227,000 recorded last month and below the four-week average of 238,000.

The Bottom Line

So a lot of moving parts. Inflation is maybe not quite dead yet so that will be closely watched. Earnings will certainly have an effect as well. Perhaps some of the tech-y names like Uber and Roblox can salvage sentiment for tech here. More likely that will have to wait until Amazon and Apple earnings after the close.

The election is getting closer and we recorded the third in our three-part election special yesterday. That is available to you (premium subscribers) exclusively at this time. The guest had some disconcerting things to say about how this all might go down:

Stocks on the Contrarian Radar©️

Super Micro Computer ($SMCI ), at one point an AI darling almost on the level of Nvidia ($NVDA ), yesterday got bludgeoned to the tune of 33%. Quick maths tells you that corresponds to a third its stock value. The loss wipes out all of SMCI’s gains for the year:

The catalyst for yesterday’s sell-off was an announcement that the company’s auditor had resigned, citing ‘integrity’ concerns. There had been some rumblings around SMCI for awhile, with short-seller Hindenburg Research voicing concerns and management delaying its annual report.

Short sellers aren’t always right. But sometimes they are. This would appear to be one of those instances.

The auditor’s resignation on these grounds effectively makes the stock immediately uninvestable because it casts into doubt every single financial statement the company every produced. So it really isn’t even worth going through the valuation. Who knows how much of it is true? Is any of it? Worth pointing out that this was the second auditor to resign in the last 18 months…

Markets hate uncertainty more than they hate bad news. This latest development means there is nothing but uncertainty surrounding this company for the foreseeable future.

Might this all present a buying opportunity? Sure, but you’re going to need to be a better accountant than Ernst & Young (and have the same access) to work that out. To The Contrarian that looks an awful lot like playing Russian Roulette. With five bullets.

What this also does is shine an unwelcome spotlight on the accounting practices of other tech shops, especially those trafficking AI products. No surprise then, that AI chip stocks sold off yesterday as well. So did some (though not all) of our ‘undiscovered 7’. It also gives The Contrarian pause before adding to any of these names. A lot of that is surely unfair. These can’t all (or even most) be crooks. But it introduces uncertainty. And uncertainty, well, you know…

(Not investment advice. Do your own research. Make your own decisions).

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, Oct. 28. The Bottom Line segment of today’s podcast starts at (3:05) followed by Stocks On The Contrarian Radar©️ feat $MSM and $DJT at (4:00) for listeners who want to skip ahead.

State of Play

As we eye our board of indicators for signs of direction at 0640, it looks like risk-on is developing, oil markets notwithstanding:

* Stock index futures are pointing to gains, led by tech. The Nasdaq is up 0.8% with S&P 500 futures 0.6% to the good;

* Commodities are getting beat up. Well oil is. WTI crude oil is down 6% to trade around $67/barrel. Copper is down just 0.3%. The drop in oil is apparently due to the limited Israeli air strikes against Iran;

* Cryptos are gaining a bit with Bitcoin up 2% to trade around $68,600;

* Bonds are unchanged. The 2-year yields 4.11% whilst the 10-year yields 4.26%.

Today’s Known Events

Some earnings to kick things off:

* Philips ($PHG ) reported disappointing results, importantly lowering sales guidance due to deteriorating demand from China. The stock is down double-digit percent overnight;

* onsemi ($ON ) is out before the open at 0930;

* Ford ($F ) reports after the close at 1600.

That’s it for known events today. But don’t get too comfortable because…

State of Play

Stocks finished higher yesterday for the first time this week. As we eye our board of indicators for signs of direction at 0550, it looks like some risk-on could be developing:

* Stock index futures are pointing to gains with the S&P 500 and Nasdaq up about 0.3% each;

* Commodities aren’t doing much. WTI crude oil is up about 0.5% to trade around $70.50/barrel. Copper is down just 0.3%;

* Cryptos are gaining ground with Bitcoin up 1% to trade around $67,600;

* Bonds are unchanged. The 2-year yields 4.07% whilst the 10-year yields 4.20%.

Today’s Known Events

Durable goods orders are out at 0830. Economists who were surveyed expect a decrease of 1.1% month-over-month after no change the previous month. If you exclude transportation items, the core durable goods orders are expected to decline a lot less, by just 0.1% MoM after a 0.5% increase last month.

There are some earnings as well:

* Colgate ($CL ) is the biggest name to report before the open at 0930;

* AutoNation ($AN ) is also worth watching;

* Newell Brands ($NWL ) and New York Community Bancorp (NYCB ) are two portfolio holdings that also report. The Contrarian finds himself bullish on NWL after hating himself for buying it for years. The company trades at 0.4x sales and 4x cash flows and still finds itself stuck near multi-year lows.

The Bottom Line

The S&P and Nasdaq are on track to end the week with losses, which would mean the end of a six week winning streak. But it’s close as the two indexes down less than 1% on the week.

Figure earnings will be the driver here. It’s thanks to Tesla ($TSLA ) earnings on Wednesday that we aren’t down more — especially tech. There were some worrying signs from Southwest Airlines ($LUV ), which lowered guidance. Then there was Starbucks ($SBUX ) pre-earnings warning. Those are two pretty big names when it comes to tracking consumer spending…

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

As we eye our board of indicators for signs of direction at 0645, a mixed bag awaits:

* Stock index futures are pointing to a drop at the open, led by small caps. The Russell 2000 is down 0.8% with Nasdaq futures down 0.6% and the S&P 500 right behind (-0.5%);

* Commodities are continuing to rebound. WTI crude oil is up another 1% to trade close to $71/barrel. Copper is up 0.8%. Silver continues its rally, up 1%. Gold continues to set all-time highs, up another 0.5% this morning;

* Bonds are dropping a bit. The 2-year yield is up 2 basis points to 4.04% whilst the 10-year is up 2bps to 4.21% (yields move inversely to prices):

* Cryptos are dropping a bit with Bitcoin down close to 2% to trade around $67,000.

Today’s Known Events

It’s earnings season!

* 3M ($MMM ) beat estimates and importantly raised guidance and that stock is up in the pre-market, by ~2% at the time of this writing;

* General Motors ($GM ) also produced good news, with the company beating estimates and raising guidance. That stock is rallying in the pre-market, up >2%;

* GE Aerospace ($GE ) revenues fell short of estimates and that stock is moving lower in the pre-market, down by ~2%;

* Bad news also from Kimberly-Clark ($KMB ) which reported mixed results and is dropping in the pre-market;

* Verizon Communications ($VZ ) missed estimates and that stock is also down;

* Lockheed Martin ($LMT ), Freeport McMoran ($FCX ), and Philip Morris ($PM ) are also due to report out before the open at 0930.

Several companies report after the close at 1600. Highlights include Texas Instruments ($TXN ) and Seagate Technology ($STX ).

The Bottom Line

So sone good news from earnings. An automaker raising guidance is certainly a good thing where the state of the US consumer is concerned. You figure that should help risk assets.

Still, you get the sense we’re in a bit of a holding pattern until the election. One suspects it’s not so much whether we get Trump or Harris but how quickly it is decided and if the losing candidate agrees to go away quietly or raise a ruckus.

Coming podcast guests should supply more information about this:

* Flip Pidot of the American Civics Exchange records today;

* Marc Chandler, a political economist, joins early next week;

* Mike Blyth of S7risk late next week.

So a lot of content coming your way. Remember that you (premium subscriber) get it first — several days before free subscribers — and without annoying ads or announcements. Because premium membership has its privileges.

Stocks on the Contrarian Radar©️

Homebuilders and home building suppliers were among some of the worst-performing stocks yesterday:

* Builders FirstSource ($BLDR ) was in fact the worst-performing S&P 500 stock yesterday, dropping 5%, followed closely by Lennar Corp ($LEN );

* TopBuild ($BLD ), like BLDR a building materials supplier, was one of the worst-performing midcaps, down 5%+;

* Homebuilders D. R. Horton ($DHI ) and KB Home ($KBH ) also dropped multiple percentage points.

As you can see, these stocks have started to diverge from the S&P 500 benchmark in recent weeks:

As these are one of the most economically-sensitive areas of the market, it will make The Contrarian take notice. It’s not entirely clear what caused this. Most of these stocks are still at or near multi-year highs.

So probably not a buying opportunity. But again: why the sell-off? Does it portend something worse for the economy at large?

Something to keep an eye on, for sure…

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks closed at fresh record highs again on Friday. As we eye our board of indicators for signs of direction at 0650, things are a bit all over the place:

* Stock index futures are down a bit, led by tech. The Nasdaq is down 0.5% with S&P 500 futures down 0.3%;

* Commodities are gaining ground however. WTI crude oil is up 2% to trade north of $70/barrel again. Copper is up 1%. Silver is up almost 3%;

* Bond are dropping a bit. The 2-year yield is up 3 basis points to 3.99% whilst the 10-year is up 5bps to 4.13% (yields move inversely to prices);

* Cryptos aren’t doing anything. Bitcoin is unchanged, trading around $68,300.

Today’s Known Events

It’s a slow start to a busy week of earnings. IMF meetings kick off today. The Conference Board’s Leading Indicators Index for September is out at 1000. Economists who were surveyed expect a month-over-month drop of 0.3% after a 0.2% decline last month.

One Fed speaker this afternoon: Minneapolis Fed President Neel Kashkari is participating in a town hall with the Chippewa Falls (Wisc.) Chamber of Commerce at 1230. Kashkari is not an FOMC voting member this year.

The HLTH conference, an event focused on healthcare tech, takes place this week in Las Vegas. Nvidia ($NVDA ), Google ($GOOG ), and Microsoft ($MSFT ) are some of the companies presenting, apparently to tout AI tools and their role in healthcare. So more AI coverage in the media then? Yeah, probably.

The Bottom Line

It’s now been six straight weeks of gains for stocks. It’s hard to see how anything can upend this rally, which from a contrarian perspective means it’s time to pay very close attention.

Geopolitical events are still out there and nobody seems concerned about the US election, now just two weeks away. This latter topic will be discussed tomorrow with our next podcast guest, Flip Pidot of the American Civics Exchange, which has a trading platform dedicated to, apparently, trading political risk. Flip will certainly have a good idea of the kinds of things institutional investors are looking to hedge ahead of the election, which should allow for a fresh perspective. Stay tuned!

You can get your questions in now (including by commenting here) and if your question is read on the air you get a free Contrarian mug sent to you!

Stocks on the Contrarian Radar©️

Agricultural producers Bunge ($BG ) and Archer Daniels Midland ($ADM ) have been dropping since Friday as lower crop prices and and an analyst downgrade are weighing on the sector. As you can see both stocks have trailed the S&P 500 this year:

A lot of the recent news gets into harvest statistics (and expectations therefor), which is above The Contrarian’s paygrade. But he can tell you that from a valuation perspective, both stocks are cheap:

* BG trades at 12.5x forward earnings, 0.2x forward sales, and 6.5x forward cashflows;

* ADM’s multiples of the above are 10.7/0.3/8.1.

Bunge is in the process of an acquisition, which will hurt its stock price. ADM has no such issues. Both companies benefited from higher grains prices brought about by the 2021 to 2023 inflation scare. Now that that’s over they have returned to earth. They still trail the S&P if you zoom out to the five-year chart:

That kind of set up gets The Contrarian interested. BG is maybe not the best choice just because of the merger implications. But ADM could be positioned nicely. Ideally the earnings multiple would drop just a little more. At that point this thing might be screaming ‘buy.’

There is a catalyst on the horizon this week. ADM reports earnings on Friday before the open…

Full disclosure: The Contrarian purchased ADM in his retirement account after the stock plunged on first-quarter earnings. That has done nicely — even accounting for the latest sell-off. It was largely an income play (ADM has a 3.5% dividend yield at current prices), which The Contrarian does not like to do in his (taxable) brokerage account.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks advanced yesterday with small caps leading the charge (Russell 2000 +1.7%). Taiwan Semiconductor Manufacturing ($TSM ) just reported earnings that trounced estimates and that stock is rising in the pre-market. As we eye our board of indicators for signs of direction at 0645, things are pretty quiet outside of the TSM-fueled tech sector:

* Stock index futures are gaining ground led by tech. The Nasdaq is up 0.8% with S&P 500 futures up 0.4%;

* Commodities are mixed. WTI crude oil is unchanged trading around $70.50/barrel whilst copper is down 1%;

* Bonds are unchanged. The 2-year yields 3.95% whilst the 10-year yields 4.04%;

* Cryptos aren’t doing anything. Bitcoin is down 0.9% to trade below $67,000.

Earnings

Taiwan Semiconductor Manufacturing ($TSM ) as mentioned reported positive earnings. Demand for all things AI was strong and management raised guidance.

Netflix ($NFLX ) reports after the close.

Economic Data

US retail sales are out at 0830. The US being the key destination for global goods, this is potentially a pretty big deal. Usually a drop in retail sales is precipitated by a rise in unemployment. This set-up does not exist at present as the unemployment rate is 4.1%, which is pretty close to full employment.

Nevertheless, this figure is worth watching. If it deviates much from forecasts there should be a market reaction, perhaps even a violent one. The expectation is for an increase of 0.3% month-over-month, an improvement over the 0.1% recorded last month. If you strip out automobiles and look at the core retail sales figure, that is expected to increase 0.1% MoM, identical to last month.

On the topic of unemployment, we also get initial jobless claims at 0830. This figure did print hot last week, at 258,000, which was its highest level in months. This week it is expected to come in at 241,000, closer to the four-week average of 231,000.

The European Central Bank decides on interest rate policy at 0815. The ECB is expected to cut its key policy rate to 3.40% from 3.65%. This is mostly the domain of currency traders, but if there is a deviation the market will almost certainly react.

Industrial production is out at 0915. Economists who were surveyed expect a slight decline, of 0.1% MoM, after recording an increase of 0.8% last month.

The Bottom Line

TSM earnings should light a fire under the AI sector, which will drive tech higher. That should help other risk assets regardless of what happens with the economic data — possible caveat if the economic data is very bad. Then that could trump TSM earnings and risk assets could sell off.

If so that may be a buying opportunity simply because what TSM says about the AI economy on a quarterly basis is a bigger deal than what economic data points say on a monthly (retail sales) or weekly (jobless claims) basis.

Stocks on the Contrarian Radar©️

ASML Holding ($ASML ), which famously leaked its own earnings on Tuesday, dropped another 6% yesterday after reporting actual earnings. ASML is now below where it was at the start of the year.

The company lowered sales forecasts, initially leading to concerns for other chipmakers including some of our Big 7 (which does not include ASML) as discussed yesterday, though this has since reversed for most. But is it a buying opportunity for ASML? The company apparently has a near-monopoly on advanced lithography systems. Its customers are mostly other semiconductor manufacturers — so there is good reason these stocks usually trade in lockstep.

From a valuation perspective, ASML trades at north of 30x forward earnings, which is actually cheap for a growth stock. The price/sales and price/cashflow multiples (10x and 35x, respectively) are far less appetizing however.

Another cause for concern is that China accounted for 40% of ASML sales last year. That has caused issues before. It’s a bit of a ‘black box’ how much business China will be able to supply in the quarters and years ahead. Investors hate uncertainty more than they hate bad news so that goes a long way toward justifying the sell-off.

TSM earnings should certainly help ASML. Still, for all the aforementioned reasons The Contrarian is sitting firmly on the sidelines for this one.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Tomorrow there likely won’t be a briefing/podcast because there isn’t much on the calendar. If there’s a big move in stocks today/overnight and/or an unexpected event that is worth discussing, then there will be a briefing by necessity.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

China overnight reported trade balance statistics that fell short of estimates. That is weighing on commodities markets, as we eye our board of indicators for signs of direction at 0705:

* WTI crude oil is down 2.5% to trade below $74/barrel. Copper is down 1.5%;

* Stock index futures are effectively unchanged with no major US index moving more than 0.2% from the break-even point;

* Cryptos are showing some signs of life with Bitcoin up 3.5% to trade close to $65,000;

* The bond market is closed today for whatever Columbus Day is now known as.

Today’s Known Events

Another slow Monday. A couple of Fed speakers, the key one being Fed Governor Chris Waller, who speaks at a Hoover Institution conference on A 50-Year Retrospective on The Shadow Open Market Committee and Its Role in Monetary Policy, Stanford, Calif. It doesn’t appear there is any live coverage of the speech set up. Worth noting that Waller is seen as one of the more hawkish members of the FOMC.

It is a busy week of earnings. Banks report tomorrow and Wednesday, Netflix ($NFLX ) on Thursday, Procter & Gamble ($PG ) and American Express ($AXP ) on Friday.

The Bottom Line

For today we have China’s trade balance to worry about. Will investors take the opportunity to dump luxury goods names? Most of their growth is driven by China…

Stocks on the Contrarian Radar©️

Some of the biggest losers overnight are indeed China proxies: VFC ($VFC ), which is a luxury goods maker, and Caterpillar (CAT ) are down 3% each. China ADRs like Alibaba ($BABA ) and Pinduoduo ($PDD ) are down a little less. We’ve discussed the China ADRs before in this space, so not worth repeating that they are mostly uninvestable.

Caterpillar is more interesting just because it’s the world’s largest manufacturer of heavy equipment. It has a 100-year history and operates in many countries around the world, not just China. It’s just that China has supplied most of its growth this past decade. As you can see from the chart, this 3% pullback still leaves the stock close to all-time highs:

From a valuation perspective, the stock is not exactly screaming cheap either:

* Price/earnings (forward) of ~18x;

* Price/sales (forward): 3x

* Price/cashflows (forward): ~15x

So The Contrarian is going to sit this one out. There may come a time when CAT becomes more compelling as a buying opportunity. One suspects it may take a global recession to make that happen.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Friday, Oct. 11. The Bottom Line segment of today’s podcast starts at (4:26) and Stocks on the Contrarian Radar©️ feat $WBA at (6:59) for listeners who want to skip ahead.

State of Play

Stocks dropped a bit yesterday but finished off the lows. As we eye our board of indicators for signs of direction at 0700, there’s not an awful lot to go by quite yet:

* Stock index futures are a bit lower but bouncing after our first batch of earnings (more on that below). The Nasdaq is down 0.3%, barely enough to be statistically relevant;

* Commodities aren’t doing much either. WTRI crude oil is down <1% to trade around $75/barrel. Copper is up 0.5%;

* Bonds are unchanged. The 2-year yields 3.98% whilst the 10-year yields 4.10%. So the yield curve is uninverting, perhaps steepening?

* Cryptos are flat. Bitcoin is trading around $61,000.

Today’s Known Events

We are greeted with a trio of earnings from the financial sector:

* JPMorgan ($JPM ) beat estimates and that stock is rising in the pre-market, up 2% at the time of this writing;

* Wells Fargo ($WFC ) results were mixed, including a net loss on ‘repositioning of the investment securities portfolio’ (read: gambling trading) but also a modest decrease in loan loss provisions. The stock is down a bit, by about 1%, at the time of this writing;

* BlackRock ($BLK ) crushed estimates, with net inflows setting a new record. So retail investors, for whatever reason, are trusting Blackrock with their assets. The stock is moving higher on this news, up 2% at the time of this writing.

Producer prices are out at 0830. Inflation may no longer be an immediate threat but it bears watching. Producer prices are more of a leading indicator than consumer prices under the premise that producers pass higher costs off to consumers. Economists expect an increase of just 0.1% month-over-month to headline PPI, down from 0.2% recorded last month. Core PPI, which excludes food and energy, is expected to print at 0.2% after 0.3% last month. That would leave annualized headline and Core PPI at 1.6% and 2.7%, respectively.

We also get the first reading of Michigan consumer sentiment at 1000. Economists expect a reading of 70.9, up from the 70.1 recorded last month.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Oct. 8. The Bottom Line segment of today’s podcast starts at (3:15) and Stocks on the Contrarian Radar©️ feat casino stocks $WYNN , $LVS and $MGM at (5:05) for listeners who want to skip ahead.

State of Play

Stocks dropped yesterday with tech seeing the worst of it. The Nasdaq was down 1%. Bad news from the Asia overnight, as China announced a new bond but refrained from implementing new stimulus. Shares in Hong Kong are down almost 10% as a result.

Here in the US, as we eye our board of indicators for signs of direction at 0615, things are mixed:

* Stock index futures are pointing to a higher open, but not by much. The Nasdaq and S&P 500 are up 0.4% each;

* Commodities are dropping on this China news. Copper is down 2.5%. WTI crude oil is down 2% to trade around $75.50/barrel;

* Bonds are moving higher for a change. The 2-year yield is down 4 basis points to 3.97% whilst the 10-year is down 1bps to 4.02% (yields move inversely to prices);

* Cryptos are moving a bit lower. Bitcoin is down 1% to trade around $62,300.

Today’s Known Events

Another slow day awaits. We did just get Pepsi ($PEP ) earnings. These were mixed and management appears to have kept guidance unchanged. The stock is down just a bit (0.6%) at the time of this writing.

Other than that, US trade balance is out at 0830. The number that is anticipated by a survey of economists is -$70.6 billion, so a trade balance of almost $71 billion. That’s down a bit from the $78.8 billion recorded last month. Generally US trade balances are a good thing for the global economy because they mean the crucial US consumer is spending money to necessitate all those imports.

State of Play

The jobs report on Friday produced a welcome surprise, signifying continued strength in the US labor market. Stocks rallied as a result and bonds sold off. As we eye our board of indicators for signs of direction at 0655, it looks like we could be in for a little risk-off:

* Stock index futures are pointing to a lower open, led by tech. The Nasdaq is down 0.6% with S&P 500 futures down 0.5%;

* In commodities land, the major move is in oil, with WTI crude up 2.7% to trade north of $76/barrel. Copper is unchanged;

* Bonds are continuing to move lower. The 2-year yield is up 7 basis points to an even 4% whilst the 10-year is up 3bps to 4% as well. So the yield curve is once again flat. The reason for this spike in yields (and drop in prices, as the two more inversely to each other) is Friday’s jobs report. If jobs are plentiful, the Fed will not need to cut rates. That’s bad for bonds;

* Cryptos are moving a bit higher with Bitcoin up 1.5% to trade close to $63,000.

Today’s Known Events

There is very little on today’s calendar. Consumer credit at 1600. This is expected to print at $11.8 billion, which is well below the $25 billion from a month ago. This gauge is notoriously volatile and then it’s hard to take anything meaningful from it. Generally, Americans going into debt is good for the global economy because it means they are continuing to buy stuff (they don’t need). Until they take on too much debt and can’t keep up with the payments. Where are we on that scale? Nobody knows for sure.

Other than that just a couple of Fed speakers:

* Fed Governor Michelle Bowman is apparently participating in a discussion at the Independent Bankers Association of Texas, at 1300. Bowman is a full FOMC voting member;

* Minneapolis Fed President Neel Kashkari is apparently due to speak but your host could not find confirmation of this. Kashkari is not an FOMC voting member this year anyway so who cares;

* Atlanta Fed President Raphael Bostic is due to participate in some kind of discussion at 1800 tonight. Bostic is a full FOMC voting member but he has already spoken since the last Fed meeting.

The Bottom Line

So a quiet start to the week but don’t get too comfortable because we have the return of earnings season. Traditional curtain-raiser Delta Air Lines ($DAL ) opens the proceedings on Thursday morning. Friday we’ll get big banks JPMorgan ($JPM ) and Wells Fargo ($WFC ) and the world’s largest asset manager (right?) Blackrock ($BLK ).

You’ll probably hear a bit about Thursday’s inflation print as well but that can pretty much be safely ignored at this point. The Fed — and the market — have moved on from inflation. The inflation dragon has been slayed. The Fed won, inflation lost. The bigger question now is whether and by how much the economy is going to slow — or if we will have the ‘no landing’ scenario that appears increasingly priced in. Earnings, not inflation readings, should tell us more about that though any employment data is obviously crucial as well. Thursday’s initial jobless claims is the only reading we get on that front this week.

Stocks on the Contrarian Radar©️

Pfizer ($PFE ) is up 3% overnight on a Wall Street Journal report that activist investor Starboard Value has taken a stake worth ~$1 billion in the company. As you can see, Pfizer stock clearly needs the help. If you look at the five-year chart, PFE is back below its pre-Covid levels:

Pfizer’s performance is particularly awful if you hold it up to Novo Nordisk ($NVO ) and Eli Lilly ($LLY ), which have successful weight loss drugs Ozempic and Zepbound, respectively. Here’s the 12-month chart:

The reason is quite simply that LLY and NVO have successful weight loss drugs while Pfizer does not. Can an activist investor change that? One would think that it’s not lack of trying that has prevented Pfizer from developing a weight loss drug. Maybe a shake-up in the executive ranks can change that? Starboard’s plans are unclear beyond reportedly approaching up two former Pfizer execs.

The market reaction has been pretty muted overnight which begs the question if there is substantial upside in Pfizer stock that is waiting to be unlocked? From a valuation standpoint, PFE is not particularly cheap trading at 21x forward earnings, 2.7x forward sales, and almost 9x forward cash flows.

The Contrarian is long PFE and has been for awhile. But he sees no reason to add to his holding at this point. Not investment advice. Do your own research, make your own decisions.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, Oct. 3. The Bottom Line segment of today’s podcast starts at (2:57) and Stocks on the Contrarian Radar©️ feat $LEVI at (4:36) for listeners who want to skip ahead.

Read this month’s portfolio update letter here. Just published last nig…

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, Oct. 2. The Bottom Line segment of today’s podcast starts at (3:33) for listeners who want to skip ahead.

State of Play

Geopolitical tensions are arising anew after Iran bombed Israel yesterday and the two sides swapped threats of military escalation. As we eye our board of indicators for signs of direction at 0645, risk-off is creeping in though not as dramatically as you might expect:

* Stock index futures are down but not by much. Small caps are leading the drop, down 0.7%. S&P 500 and Nasdaq are treading water;

* Over in commodities land, oil is moving higher, up 3% to trade around $72/barrel. That’s the major move so far in reaction to the Middle East stuff, and it isn’t a very big one. Copper is up 0.6%;

* Cryptos are dropping with Bitcoin down 4% to trade around $61,000;

* Bonds aren’t doing anything. The 2–year yields 3.62% whilst the 10-year yields 3.77%.

Today’s Known Events

Iran-Israel is front and center of course. Even if the market reaction has so far been (very) subdued, this is something that is being closely watched for signs of escalation into a broader conflict. How much will the US get involved here? According to the New York Times, the Biden administration has gone from cautioning against a wider war toward managing it. Hold that thought.

When it comes to ‘traditional’ events, we have Tesla ($TSLA ) reporting sales at some point today. Deliveries are expected to rise 8%, helped in no small part by incentives supplied by the Chinese Communist Party.

We also have ADP Payrolls at 0815. Economists who were surveyed expect 124,000 new jobs, an improvement over the 99,000 recorded last month. The market doesn’t pay much attention to this number just because it doesn’t track the government’s ‘official’ figure very closely. But it is still an important data point in the labor market.

State of Play

As we eye our board of indicators for signs of direction at 0650, it appears that a little bit of retrenchment could be in store:

* Stock index futures are pointing to a lower open led by small caps. The Russell 2000 is down 0.7%. S&P 500 and Nasdaq are closer to the break-even point;

* Commodities are taking a bit of a breather with WTI crude oil unchanged at $68/barrel. Copper is down 0.8%;

* Cryptos also moving lower. Bitcoin down 3% to trade around $63,600;

* Bonds, too, selling off a bit. The 2-year yield is up 5 basis points to 3.61% whilst the 10-year is up 3bps to 3.78% (yields move inversely to prices).

Today’s Known Events

Fed Chair Jerome Powell returns to the limelight with a scheduled speech on the economic outlook at the National Association For Business Economics annual meeting in Nashville. Powell’s luncheon speech will be broadcast live on the NABE’s YouTube channel.

Carnival Cruise Lines ($CCL ) reports earnings before the open at 0930.

That’s all we got today. Pretty quiet day but don’t get too comfortable because we have a mess of labor market data coming this week:

* Tuesday: JOLTS

* Wednesday: ADP payrolls

* Thursday: Initial jobless claims

* Friday: Non-farm payrolls

The Bottom Line

Would not expect Powell to say very much just because this is not the forum to announce major policy changes. (That time would have been the Fed meeting two weeks ago and indeed Powell did take the opportunity to confirm the Fed is moving to looser monetary policy, even if it is just a recalibration. Plus Powell has already spoken once since that meeting, last Thursday where he said, well, very little).

Also, the Fed has already telegraphed their next move, which is another cut in interest rates at the next FOMC meeting on Nov. 7. At the time of this writing, Fed Fund Futures were pricing in a 53% chance of another 50bps rate cut at that meeting.

Stocks on the Contrarian Radar©️

Chinese stocks continue to surge. Electric vehicle manufacturer Nio ($NIO ) surged 13% overnight. Li Auto ($LI ) gained 8%. Online retailers Alibaba ($BABA ), JD.com ($JD ), and Baidu ($BIDU ) are also up multiple percentage points. It’s the latest in a remarkable recovery for Chinese equities:

As you can see these names have booked dramatic gains over the last month or two, to recapture all losses from the previous year — and then some. Indeed, NIO is up 67% over the last 12 months.

We know people like David Tepper are saying to pile in to Chinese equities and indeed these do seem to have a lot of momentum right now. But there are just as many reasons not to — and none of them are due to the fact that David Tepper also traded up to draft Bryce Young (American football reference). The main one is that these aren’t really Chinese stocks but so-called variable interest entities. This basically means they are a derivative of a derivative that allow US investors access to these stocks’ moves.

Okay, so US equity structure also gives you the junior-most tranche of the corporation with no recourse should there be an event like bankruptcy. Still, it’s actual ownership unlike what these Chinese ADRs offer. Then there is the little matter of valuation and the fact that these companies don’t follow GAAP but a Chinese version of it. Cynics will say this allows management to effectively make up numbers. They aren’t always wrong, either.

Finally there’s the matter that the individuals who make up the executive ranks at these Chinese companies are CCP apparatchiks. Inevitably a lot of China bulls are paid by the CCP in one form or another. So count us out on this emerging Buy China train.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

As we eye our board of indicators for signs of direction at 0650, things are very quiet:

* Stock index futures are flat with no major US index moving more than 0.2% from the break-even point;

* Commodities aren’t doing anything either. WTI crude oil is down 0.8% to trade around $71/barrel. Copper is down 0.5%;

* Even cryptos are quiet, with Bitcoin changing hands at $63,600, unchanged;

* Bonds are also flat. The 2-year yields 3.54% whilst the 10-year yields 3.76%, both effectively unchanged from yesterday.

Today’s Known Events

Micron ($MU ) earnings are the main event of the day, but that doesn’t happen until after the close at 1600.

We’ll get new home sales at 1000. Economists who were surveyed expect 700,000 new transactions, down a bit from the 740,000 recorded last month.

That’s all we got. Another boring day.

The Bottom Line

This is shaping up to be the most boring week of the year for stocks. There just isn’t any real movement. The S&P did close at a fresh record high yesterday, but it was by no means a large move (gaining 0.2%).

Micron earnings after the close could portend some movement for tech and AI chip stocks. Tomorrow at least we’ll get initial jobless claims. Friday brings the PCE Deflator, but nobody really cares about inflation anymore.

So yeah, boring.

Stocks on the Contrarian Radar©️

Visa ($V ) stock took a tumble yesterday, dropping 5% on news the company is being sued by the Justice Department over monopolistic practices. This has prompted the inevitable sleuthing about Nancy Pelosi trades on the social media. Apparently the California congressman sold $1 million-worth of Visa shares a month ago. Never mind that $1 million is not a lot of money for the likes of Pelosi, or that Visa’s stock has rallied over the last month — and is indeed still higher even after this news:

In the greater scheme of things yesterday’s sell-off is just a tiny pullback from all-time highs:

Visa is a terrific business and — full disclosure time — The Contrarian holds a bunch of it. But from a valuation standpoint it is not cheap, trading at 28x forward earnings, a whopping 15x forward sales, and 26x cash flows.

So as enticing as it is to buy Visa here — I mean what is the Justice Department going to do, really? — it is still expensive. So The Contrarian is going to sit this one out. Besides, he bought the dip after Visa missed earnings last month.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

As we eye our board of indicators for signs of direction at 0655 things are pretty quiet with the exception of commodities:

* Stock index futures are barely moving from the break-even point. The Nasdaq is up 0.3%;

* Commodities are showing some signs of life however, with WTI crude oil up 2% to trade around $72/barrel. Copper is up 2.5%;

* Bonds are selling off just a tiny bit with yield curve uninverting further: the 2-year is up 2 basis points to yield 3.59% whilst the 10-year is up 5bps to 3.79% (yields move inversely to prices);

* Cryptos are unchanged. Bitcoin trades around $63,600.

Today’s Known Events

It’s another quiet day. Some earnings to kick us off. AutoZone ($AZO ) just missed top- and bottom-line estimates and that stock is moving lower in the pre-market. KB Home ($KBH ) reports after the close.

Case-Shiller home prices are out at 0900. This is the most reliable gauge we have of home prices in the US, but it is a bit dated — we get July numbers today. The 20-city index, the most closely watched of Case-Shiller home price indexes, is expected to increase 5.9% year-over-year, below the 6.5% seen last month.

We’ll then get the Conference Board’s Consumer Confidence reading at 1000. The expectation here is for a reading of 103.5, effectively identical to the 103.3 seen last month.

One Fed speaker to tell you about: Michelle Bowman, a full FOMC voting member, is speaking at the Kentucky Bankers Association Annual Convention at 0900 local time (which appears to also be ET. Can Kentucky really be in the same time zone as the east coast?)

The Bottom Line

Copper’s rally is an indication that economic growth on global scale is set to continue. Copper is used in all major construction projects and for this reason is often seen as a gauge of economic activity. China is the major importer so it can often be seen as a gauge of construction demand in that country. China’s major home- and apartment-building spree is largely behind it but apparently they still need the copper if prices are continuing to rise.

Copper prices are still below their peak from May, but this month shows a clear uptrend to at least recapture July’s levels:

Stocks on the Contrarian Radar©️

BJ’s Restaurant ($BJRI ) is down 5% in the pre-market. This follows a drop of almost 3% yesterday. As you can see, the stock has diverged from its benchmark (or one of them), the AdvisorShares Restaurant ETF ($EATZ ) in recent weeks dating to its earnings in August:

There’s no clear catalyst for this move. The concern economically is that this is the start of a trend where consumers start to retrench. The first place this is often seen is in the casual dining sector, which includes companies like BJ’s. Another one, Red Lobster, recently exited bankruptcy.

This could of course also be due to mismanagement and changing consumer tastes. That certainly seems to have been what was behind Red Lobster’s demise. Restaurants are a notoriously tough business with paper thin margins so this could all be company-specific.

Either way, BJRI still doesn’t look cheap trading at 22x forward earnings. There is a divergence with the EATZ ETF, which often looks like an opportunity, but The Contrarian is going to sit this one out. More importantly, he is going to be watching this sector closely for signs of consumer pull-back.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

As we eye our board of indicators for signs of direction at 0655, things are pretty quiet though tilted to risk-on:

* Stock index futures are pointing to modest gains, led by small caps. The Russell 2000 is up 0.4%. Nasdaq futures 0.3% to the good, followed by S&P 500 futures (+0.2%);

* Commodities aren’t doing much. WTI crude oil is unchanged, trading around $71/barrel. Copper prices aren’t moving at all from the break-even point;

* Cryptos are up a bit with Bitcoin 1.5% higher to trade around $63,500;

* Bonds are flat. The 2-year yields 3.57% whilst the 10-year yields 3.75%. Looks like yield curve uninversion is for real.

Today’s Known Events

A flash reading of S&P Purchasing Manager Indexes are out at 0945. As this is the first look at this month’s PMIs, it bears watching — and could move markets (it has in the past).

Economists who were surveyed expect the Services PMI to print at 55.3 after coming in at 55.7 last month. The Manufacturing PMI is expected to come in at 48.6, which would be an improvement over the 47.9 recorded last month. The 50 line separates expansion from contraction, so according to this services are in expansion territory while manufacturing remains in recession.

We also have some Fed speakers:

* Atlanta Fed President Raphael Bostic speaks on the economic outlook at 0800. Bostic is a full FOMC voting member this year;

* Chicago Fed President Austan Goolsbee provides the keynote at the National Association of State Treasurers Annual Conference at 1000. Gooslbee is an alternate FOMC voting member this year.

The Bottom Line

Last week was a good one for stocks. Dow Industrials closed at a fresh record high. We know better than to follow the Dow, which contains just 30 stocks, preferring the S&P 500 as fairer gauge of the market at large. But those other indexes also had good weeks.

The Fed has cut rates and is expected to do so again at its next meeting on Nov. 7, judging by Fed Fund Futures. The latest escalation in the Middle East is being widely ignored. Investors don’t appear particularly plussed at who becomes president either. All systems go for the bull market to continue?

There isn’t much on the calendar this week. Plenty of Fed speakers to keep people’s interest in that. Micron ($MU ) and Costco ($COST ) report earnings. On Friday we have the latest PCE Deflator, the Fed’s preferred inflation gauge, but that is no longer the event it once was as inflation is no longer seen as a very serious risk.

Stocks on the Contrarian Radar©️

Intel ($INTC ) continues to gain ground as it looks increasingly like there could be a bidding war for the company’s assets — or maybe to take it over outright. Private equity is the latest to enter the fray, with Apollo Global reportedly looking to invest. As you can see, Intel’s stock has recaptured all the ground it lost over the last three weeks:

And there may be more upside ahead, if one judges where INTC trades compared to other AI chip names such as Nvidia ($NVDA ), AMD ($AMD ), Qualcomm ($QCOM ), Broadcom ($AVGO ), Taiwan Semiconductor ($TSM ), or Marvell ($MRVL ). Indeed, Intel is the only one of these to be negative over the last 12 months:

More importantly, healthy M&A speaks to a healthy capital market, which speaks to more healthy risk-taking by financial and corporate interests, which generally speaks to higher prices for stocks. But it’s important to follow these Intel divestitures to see what it says about AI chip assets. Chances are, these things are badly needed by corporations the world over — and especially in the US, which is keen to divorce itself from anything Chinese. As a US company — and military contractor to boot — Intel ticks a bunch of boxes there.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

The Federal Reserve slashed interest rates by 50 basis points yesterday. Markets liked this, then soured on it when Fed Chair Jerome Powell said it was a mere “recalibration” and that “we’re not going back” to a world of ultra-low interest rates. At the end of it the whole thing was a wash and stocks finished effectively unchanged.

As we eye our board of indicators for signs of direction at 0655 that is all in the rear view mirror and risk-on is in charge:

* Stock index futures are pointing to a huge move higher at the open. The riskiest part of the market, small caps, are leading things out. The Russell 2000 is up 3%. Nasdaq futures are 2% to the good, followed closely by S&P 500 futures (+1.8%);

* Commodities prices are showing the same thing, with copper up 1.4% and WTI crude oil up 0.7% to move north of $70/barrel again;

* The same in cryptos. Bitcoin is up 4% to trade up around $62,500;

* Bonds are the one outlier as these aren’t moving. The 2-year yields 3.59% whilst the 10-year yields 3.71%.

Today’s Known Events

Powell yesterday spoke again of how the labor market “bears watching.” We’ll get one data point for that at 0830 with the weekly initial jobless claims figure.

Economists who were surveyed expect 230,000 new claims, identical to last week and right in line with the four-week average of 230,750.

There are some earnings today as well. Darden Restaurants ($DRI ) and Cracker Barrel Old Country Store ($CBRL ) report before the open at 0930. After the close at 1600 FedEx ($FDX ) is the biggest name to report.

The Bottom Line

Is the move in futures a ‘delayed reaction’ to the Fed’s rate cut? It’s unclear what exactly is going on here. Maybe investors did their own recalibration, focusing more on Powell’s optimistic words about the state of the economy than on the fact that he won’t be injecting massive amounts of monetary stimulus for no reason.

As mentioned yesterday, the economy is the main driver of future market movement so this makes sense. It means we’re back to ‘no landing’ scenarios for the economic cycle.

How long before that leads to concerns about renewed hawkishness from the Fed? Well, let’s not ruin things right away…

Stocks on the Contrarian Radar©️

FedEx ($FDX ) is seen as a good gauge of the consumer sector seeing how much the company is tasked with delivering goods to Americans’ homes. It’s not the only company doing this — not by a long shot — but can still be a solid indicator. For this reasons, earnings this afternoon will be closely watched.

As you can see, FDX has tracked the S&P this year, albeit with a lot more volatility:

NB: Those huge moves in FDX were reactions to earnings. The last two quarters these beat estimates and the stock rocketed higher. Three-for-three today? Investors are clearly hoping for this, with the last eight trading days positive ones for FDX.

The bar is higher now after raised guidance. Could FedEx disappoint everybody and sell off? If so, might that be a buying opportunity? At 14x forward earnings, 0.8x sales, and 8x cash flows, the stock is not particularly expensive.

Of course, you need the economy to play along here. If Americans start losing their jobs they will not buy buying as much stuff from Amazon and elsewhere, which will cut into FDX’s business…

A final word of caution on that. FDX has in the past used ‘the economy’ as a straw man for its own shortcomings. Most notably in September 2022. Just because FedEx management blames the economy for earnings disappointments, doesn’t mean these are a realistic concern…

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, Sept. 18. Fed Day. The Bottom Line segment of today’s podcast starts at (3:46) for listeners who want to skip ahead.

State of Play

As we eye our board of indicators for signs of direction at 0645, all is quiet ahead of the Fed interest rate decision this afternoon:

* Stock index futures are effectively unchanged, with no major US index moving more than 0.2% from the break-even point;

* Commodities are mixed. WTI crude oil is down 1.3% to trade around $69/barrel. Copper is up 0.6%;

* Bonds are moving just a bit lower ahead of the Fed. The 2-year yield is up 3 basis points to 3.62% whilst the 10-year is up 2bps to 3.67% (yields move inversely to prices);

* Cryptos aren’t doing anything. Bitcoin is trading around $59,800.

Today’s Known Events

Happy Fed Day. The Federal Open Market Committee, or FOMC, concludes its meeting today and announces its interest rate decision at 1400 ET. This will be accompanied by a policy statement and ‘dot-plot.’ Hopefully you are smart enough to realize this 'dot-plot’ just captures FOMC members’ views on interest rates at one moment in time and is not binding.

Anyway, the Fed is all but guaranteed to cut its key policy rate from its current perch of 5.25% to 5.5%. The only question is if it will cut by 25bps or 50bps. As of last night, Fed Fund Futures were pointing to it being 50bps, but only by a 61% to 39% margin. At last check this figure was 65%.

State of Play

Stocks were mixed yesterday, mostly higher, in a quiet trading session. As we eye our board of indicators for signs of direction at 0645, things are pretty quiet perhaps tilted to risk-on:

* Stock index futures are pointing to gains led by tech. The Nasdaq is up 0.5% with S&P 500 futures up 0.3%;

* Commodities aren’t doing much. WTI crude oil is effectively unchanged trading around $68.80/barrel. Copper is up 0.3%;

* Bonds aren’t doing anything either. The 2-year yields 3.57% whilst the 10-year yields 3.62%;

* Even cryptos are quiet, perhaps the clearest indication that risk-takers are on the sidelines ahead of the Fed meeting tomorrow. Bitcoin is trading around $59,000, unchanged.

Today’s Known Events

Retail sales are out at 0830. This is a crucial reading on the state of the US consumer. It typically trails employment data however. Still, this is probably the biggest economic data release of the week outside of the Fed tomorrow.

Economists who were surveyed expect headline retail sales to have decreased by 0.2% month-over-month in August after a rise of 1% the previous month. Core retail sales, which exclude automobiles are expected to come in at 0.2% MoM after printing at 0.4% previously.

We’ll also get industrial production at 0915. The number that is anticipated here is 0.1% MOM after a drop of 0.6% last month.

Retail inventories are expected to increase 0.4% MoM after a 0.3% last month. That number out at 1000.

The Bottom Line

Twenty-five or 50? That is the question heading into the Federal Reserve Open Market Committee meeting that starts today and concludes tomorrow. Fed fund futures are now pointing to a stronger likelihood (65%) of a 50bps rate cut. Is that maybe too ambitious? The Fed has not really communicated much in the way of the size of its cut, only that it is due to begin easing.

The other question of course is what happens after this meeting. The next meeting on Nov. 7 is right now pricing in a target rate that is 75bps below the current one. That would imply an additional 25bps cut after the 50 we’re presumably getting tomorrow.

Either way, you get the sense the market is feeling rather optimistic after a month of fear. Glad you bought the dip?

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

As we eye our board of indicators for signs of direction at 0650 there is not an awful lot to go on:

* Stock index futures are quiet with the exception of small caps, which are moving higher. The Russell 2000 is up 0.6%;

* Commodities aren’t doing much. WTI crude oil is up 0.5% to trade around $68/barrel with copper up 0.3%;

* Cryptos are dropping a bit. Bitcoin is down 2% to trade around $58,700;

* Bonds aren’t doing anything. The 2-year yields 3.57% whilst the 10-year yields 3.65%. Yield curve uninversion appears to be sticking this time.

Today’s Known Events

The NY Empire State Manufacturing Index is out at 0830. Economists who were surveyed expect a decline of 4.1, a marginal improvement on last month’s -4.7.

There’s nothing else of interest on the calendar today.

The Bottom Line

It’s all gearing up for the FOMC interest rate decision on Wednesday. The Fed is widely expected to cut for the first time in years. The only question is by how much. Right now Fed fund futures are pretty much evenly split on whether it will be 25bps or 50bps that are chopped off the Fed’s key policy rate.

We won’t know that until Wednesday afternoon. Plenty of time to obsess over it.

Stocks on the Contrarian Radar©️

Intel ($INTC ) is up overnight after a report the company signed a $3.5 billion deal as a military contractor. Intel shares clearly needed the boost, as the stock chart illustrates:

We’ve spoken before about the clustering of AI chipmakers, almost all of which simply track Nvidia ($NVDA ). Intel was a notable exception. Maybe this means it can rejoin the herd. Last week was a good one for these names. Take the rest of our Big 7: AMD (AMD 0.00%↑), Broadcom (AVGO 0.00%↑), Marvell (MRVL 0.00%↑), Qualcomm ( QCOM 0.00%↑), and Taiwan Semiconductor (TSM 0.00%↑):

You can see that all seven are up multiple percent over the last five trading days, with AVGO leading the charge. That is a shift from the usual NVDA-driven behavior, but is due to Broadcom reporting earnings more recently.

Anyway, this is all good news for these AI chip stocks and the tech sector more generally. The only question is if this is a sign of more upside ahead or just a dead-cat bounce?

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

As we eye our board of indicators for signs of direction at 0655, the outlook would appear to be mixed:

* Stock index futures are pointing to a lower open, led by small caps. The Russell 2000 is down 0.4% with S&P 500 and Nasdaq futures down 0.2% each;

* Commodities are rebounding. Copper futures are up more than 1%. WTI crude oil is up 2% to trade around $67/barrel;

* Bonds are seeing a few bids after rallying yesterday. The 2-year yield is down 2 basis points to 3.59% whilst the 10-year is down 2bps to 3.63% (yields move inversely to prices);

* Cryptos aren’t doing anything. Bitcoin is changing hands around $56,500.

Today’s Known Events

The Consumer Price Index, or CPI, is out at 0830. The inflation battle has all but been declared over, with the Fed victorious. But inflation still needs to come down a bit.

Economists who were surveyed expect the headline CPI to come in at 0.2% month-over-month, the same as last month, which would drop annualized headline CPI to 2.6% from 2.9%.

Core CPI, which excludes food and energy, is also expected to print at 0.2% MoM, also the same as last month, which would leave annualized Core CPI at 3.2%.

The Bottom Line

CPI is not the must-see TV it was a few short months ago but it can still move markets. If it comes in hotter than anticipated it will potentially give the Fed less leeway to cut rates as aggressively as it might like. Of course the Fed can just declare that it’s a seasonal outlier and then do what it wants, but that’s the theory at least.

S&P and Nasdaq are quietly up two days in a row, so maybe this is the start of something:

Stocks on the Contrarian Radar©️

Trump Media & Technology ($DJT ), probably the closest thing to a proxy on the election, is down 15% overnight. What this tells you about the market’s opinion of Donald Trump’s chances of winning the election after last night’s debate is obvious:

As you can see this has Trump’s chances at their lowest level in a month. All political opinions aside, maybe a buying opportunity? Trump has shown himself to be pretty resilient and often bounces back in the polls.

Of course there are other issues with DJT stock, including the very real chances of shareholder dilution, that make this kind of uninvestable over the long term. But as a proxy on the election?

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks advanced yesterday on no news with S&P 500 and Nasdaq advancing more than 1% each. Good news from Oracle ($ORCL ) earnings after the close has that stock up 9% overnight. As we eye our board of indicators for signs of direction at 0655 there isn’t much to go by quite yet:

* Stock index futures are down a bit, with small caps off 0.4% judging by the Russell 2000. Nasdaq futures are down 0.2%. S&P futures thus far unchanged;

* Commodities are retreating a bit with WTI crude oil down 1% to trade around $68/barrel and copper down 0.4%;

* Cryptos are gaining ground however, with Bitcoin up 3% to trade north of $57,000;

* Bonds aren’t doing anything. The yield curve remains uninverted, with the 2-year yielding 3.69% and the 10-year 3.72%.

Today’s Known Events

China trade balance came in a little higher than anticipated thanks to exports increasing more than had been expected — typically a good sign for the global economy.

There’s nothing on the calendar today other than a few earnings of interest, all of them after the close: GameStop ($GME ), Dave & Buster’s ($PLAY ), and Petco Health & Wellness ($WOOF ).

The Bottom Line

With so little — okay, nothing — on the calendar it’s a good opportunity to take the pulse of investors’ base emotions. Judging by yesterday’s activity, this would appear to be one of greed versus the fear that we saw last week.

Today could be a different story, but it shouldn’t just because we haven’t gotten any new information other than Oracle earnings and China’s trade balance, and that was positive.

Stocks on the Contrarian Radar©️

AI chip names like Nvidia ($NVDA ), Arm ($ARM ), and Super Micro Computer ($SMCI ) were among yesterday’s big gainers:

Nice rebound, but these stocks are still down pretty big over the last five trading days, to the tune of almost 8% in SMCI’s case:

This all begs the question of course if this is just a dead-cat bounce or if the rally has staying power. If so, you figure it would extend to our ‘undiscovered’ AI chip names as well, right?

The damage here has been pretty bad over the past month, though our friend Photronics ($PLAB ) is somehow still positive over that period:

The point is that there is still a long way to go for all of these stocks (ex-PLAB) to recapture their levels of even a week ago. If the tech sector — and broader market — is rebounding, then it stands to reason that there is upside in these names.

Of course if this is all a dead-cat bounce/fake-out rally then maybe this is just an opportunity to short at better prices. You tell me.

Full disclosure: The Contrarian is long CAMT and PLAB and therefore has a vested interest in seeing these stocks move higher. This may have — and probably did — cloud his judgment.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks dropped again on Friday, with tech seeing the worst of it. As we eye our board of indicators for signs of direction at 0650, that seems to be long forgotten and risk-on appears to be in the offing:

* Stock index futures are pointing to gains, led by tech. The Nasdaq is up 0.8% with S&P 500 futures right behind it;

* Commodities are showing some signs of life as well, with copper up 1.7%. WTI crude oil up 0.5% to trade north of $68/barrel (still the lower end of the range it has been in the last months);

* Bonds are dropping just a bit in keeping with the risk-on theme. The 2-year yield is up 5 basis points to 3.70% and the 10-year is up 5bps to 3.75% (yields move inversely to prices. Yes, the yield curve has uninverted!

* Cryptos are effectively unchanged with Bitcoin up 1.5% to trade around $55,400.

Today’s Known Events

It’s a pretty quiet start of a pretty quiet week.

US Consumer Credit is out at 1500 this afternoon. Economists who were surveyed expect this figure to come in at $12.5 billion, a marked increase from the $8.9 billion recorded last month. That would place consumer credit at the highest level since March. But that doesn’t tell the whole story. US consumers taking on debt is not necessarily a bad thing because that means they can continue to buy stuff (they don’t need). Until, of course, it becomes too burdensome to service the debt and they are forced to scale back on spending.

On this topic, the Wall Street Journal had an interesting story yesterday about the state of Americans’ finances more generally. The TLDR of it is that Americans “have more money in the bank than they did in 2019, even after adjusting for inflation and just slightly less credit-card debt relative to income.”

One earnings report to tell you about. Oracle ($ORCL ) reports after the close this afternoon.

The Bottom Line

Last week was the worst one of the year for stocks. It looks now like we could get a little bit of a relief rally. Copper is particularly encouraging here. We often talk about how futures are a ‘head fake’ for what transpires during the regular session. Somebody should do a study holding this up to how copper futures trade in the pre-market. One suspects that if copper futures are up over 1% as they are today, the buying will persist through the regular session — unless of course acted on by an outside force such as news or new data.

News is always a wild card of course but we aren’t getting much in terms of new data this week. You’ll likely hear a lot about Wednesday’s CPI report but inflation is no longer the focal point it once was. The inflation dragon has effectively been slayed and the only question is if economic growth can continue or if it will fall off a cliff and enter recessionary territory. For that we have to look to the labor market. All we have there are initial jobless claims on Thursday.

Stocks on the Contrarian Radar©️

Insurance company Lowe’s ($L ), not to be confused with the retailer Lowe’s ($LOW ), is down almost 8% overnight. It’s not exactly clear what is causing this. A rudimentary Google search unveiled a bunch of stuff about the actor Rob Lowe.

Isn’t insurance Warren Buffett’s favorite business? A quick look at the year-to-date chart unveils this sell-off actually started last week, but is just a drop from the high-water mark of the year:

The stock trades at <12x earnings, 1x sales, and 6x cash flows, which would appear to make it cheap. Of course, you have to hold it up to peers’ performance as well. Most cited are The Hartford ($HIG ), Assurant ($AIZ ), and W.R. Berkeley ($WRB ), and you can clearly see that L has underperformed them YTD. Indeed all appear to have tracked Lowe’s downward this last week:

Meanwhile, who knew it had been such a great year for insurance stocks? That type of thing does not make The Contrarian particularly bullish about the sector, or about Lowe’s specifically, even after this sell-off. But it’s something to look at, especially if/when defensive sectors gain favor due to fear-based selling…

Disclosure: The Contrarian does not have a position in L or any of the other insurance stocks mentioned here.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, Sept. 5. The Bottom Line segment of today’s podcast starts at (3:36) for listeners who want to skip ahead.

State of Play

Stocks meandered around yesterday, not really moving much. As we eye our board of indicators for signs of direction at 0645, all is quiet ahead of some data releases about the labor market:

* Stock index futures are flat, with no major US index moving more than 0.2% from the break-even point;

* Commodities aren’t doing much either. WTI crude oil appears to have settled in below $70/barrel, trading around $69.50. Copper is unchanged;

* Cryptos also unchanged. Bitcoin is trading around $56,700;

* Bonds also flat. The yield curve has officially uninverted, with the 2-year and 10-year both yielding 3.77%.

Today’s Known Events

Some more data on the labor market is incoming.

ADP Nonfarm Employment Change is out first, at 0815. This is often ignored because it doesn’t have much of a relationship with the government’s official figure released tomorrow. But in times like these with the labor market as important as it is, investors are likely to react to any and all data points.

Economist who were surveyed expect 143,000 new jobs, an increase from the 122,000 recorded last month. This would put it right in line with the number required to keep the unemployment rate steady, according to our guest this week.

Then we’ll get initial jobless claims at 0830. The expectation here is for 231,000 new claims, identical to last week’s number and right in line with the four-week average which is 229,000. Continuing jobless claims are expected to remain steady at 1.87 million.

We also get ISM Non-Manufacturing PMIs at 1000. The expectation here is for a reading of 51.2, effectively unchanged from last month’s 51.4 and north of the 50 line that separates expansion from contraction. Speaking of employment, we can expect the employment figure from ISM’s survey to be closely watched as well. There’s no economist survey for this but last week it came in at 51.1.

There are some earnings. The interesting ones aren’t until after the close: Broadcom ($AVGO ), UiPath ($PATH ), Samsara ($IOT ), and DocuSign ($DOCU ).

The Bottom Line

Looks like we’re in a bit of a holding pattern, potentially until non-farm payrolls tomorrow morning. Ever since Monday’s sell-off things have gone absolutely nowhere.

A good opportunity to listen to the latest guest episode. This is timely as we discuss Friday’s payrolls number as well as other pertinent things. We recorded yesterday afternoon and the episode was quickly edited and published for you premium subscribers only:

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, Sept. 4. The Bottom Line segment of today’s podcast starts at (4:09) and Stocks on the Contrarian Radar at (7:00) for listeners who want to skip ahead.

State of Play

Stocks got beaten up yesterday. In fact, it was the worst day for major US indexes since the Aug. 5 debacle. As we eye our board of indicators for signs of direction at 0645, things are a bit mixed:

* Stock index futures are down again, but not as precipitously as yesterday. Small caps and tech are continuing their downward trend, with the Russell 2000 and Nasdaq both down 0.7%. S&P 500 futures are down 0.4%;

* Commodities appear to have stopped the bleeding for now, potentially a good sign. WTI crude oil is up 0.5% to trade around $70.50/barrel. Copper is unchanged;

* Cryptos are moving lower after managing to hold up most of yesterday. Bitcoin is down 4% to trade around $56,500;

* Bonds are seeing a few bids but the yield curve remains inverted, barely. The 2-year yield is down 5 basis points to 3.84% whilst the 10-year yield is down 2bps to 3.82% (yields move inversely to prices).

Today’s Known Events

Some earnings to kick things off:

* Dollar Tree ($DLTR ) missed top- and bottom-line estimates and appears to have lowered guidance. The stock is getting trounced, down 6% in the pre-market. This of course follows an earnings disaster from fellow bargain outlet Dollar General ($DG ) last week;

* Hormel Foods ($HRL ) earnings were mixed and that stock is moving lower in the pre-market;

* Dick’s Sporting Goods $DKS is also due before the open;

* After the close at 1600 we’ll hear from C3.ai ($AI ), Hewlett Packard Enterprise ($HPE ), and Casey’s General Stores ($CASY ), among others.

The Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, or JOLTS, is out at 1000. Economists expect 8.1 million (just about) job openings, a drop from the 8.18 million recorded last month. The quits levels were a little less than 3.3 million last month, corresponding to 2.1% of the workforce, a slight drop from the month previous. There unfortunately isn’t an economist estimate for that.

The Bottom Line

The news from Dollar Tree is certainly not good. It would appear the lower end of the US consuming public is seeing some hard times. Fortunately this does not appear to have affected the upper echelon — all those folks buying expensive gadgets, clothes, and trips (apparently to the consternation of Europeans living in or near tourist centers). As we’ve said before, as long as employment holds up so too should this segment consumer spending.

The question is if employment holds up. Manufacturing employment improved in July, according to yesterday’s ISM PMIs. That was just a survey however. More will be revealed in today’s JOLTS, tomorrow’s initial jobless claims and Friday’s non-farm payrolls.

For now we are left pondering the health of the stock market, investor risk appetite, and what this all means. Seeing how there was no real catalyst for all this selling, it stands to reason that it could reverse before too long - but our upside may be limited heading into these reports from the labor market.

Stocks on the Contrarian Radar©️

At risk of sounding like a broken record, the AI chip names have taken on water lately to the point where they may (may!) present a buying opportunity. On top of everything else, Nvidia ($NVDA ) is apparently being investigated by the Department of Justice on antitrust grounds. As you can see, the damage to NVDA has been pretty acute over the past week, with the stock giving up close to 20%.

Of course, if you zoom out a bit the whole thing is a lot less ugly. Year-to-date, NVDA is still up more than 2x, trouncing the S&P benchmark:

We’ve spoken before about the ‘uncoupling’ of other AI chip stocks from Nvidia. Looking at the last five days of trading, a quintet of these, namely AMD ($AMD ), Broadcom ($AVGO ), Marvell ($MRVL ), Qualcomm ($QCOM ), and Taiwan Semiconductor ($TSM ) are still tracking NVDA, but all have outperformed:

Nice win for all you relative value arbitrageurs out there. Where our ‘undiscovered’ AI chip names are concerned, here too a selection of these are beating Nvidia over the last week:

One of these, Photronics ($PLAB ) continues to behave like it is almost completely uncoupled. One possible explanation is that PLAB reported positive earnings in the middle of all this. Speaking of earnings, Broadcom reports tomorrow…

Where the uncoupling is concerned, this all begs the question if this trend could revert to form again? Will leave that to somebody else for now.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* The new monthly Contrarian Portfolio letter provides full transparency around The Contrarian’s positions. That’s July’s letter. August’s will be done shortly.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

It was a quiet, long holiday weekend in the US. Now September trading is about to get underway and with it the last month of the third quarter. As we eye our board of indicators for signs of direction at 0645, some risk-off is clearly developing in all but one area on our board:

* Stock index futures are dropping led by small caps. The Russell 2000 is down >1%. Nasdaq futures are down 0.6% followed closely by the S&P 500;

* Commodities are moving lower, with the major move in copper, down >3%. WTI crude oil is down almost 2% to trade around $72/barrel;

* Cryptos are holding up, however. Bitcoin is up 1% to trade north of $59,000;

* Bonds aren’t doing anything but the yield curve is about to un-invert. For real this time. The 2-year yield 3.93% whilst the 10-year yields 3.91%.

Today’s Known Events

ISM Manufacturing PMIs are out at 1000. There is only one of these each month. This is August’s. The expectation is for a reading of 47.5, an improvement over the 46.8 recorded last month but still below the 50 level separating expansion from contraction.

There is actually quite a bit in this report, including manufacturing prices (a good gauge of producer price inflation), employment, new orders, and more. The only one that has an economist estimate is prices and that is expected to print at 52.5 after 52.9 last month.

At the same time we’ll get figures on Construction Spending for July. The expectation is for an increase of 0.1% month-over-month, an improvement over the 0.3% decline recorded last month.

There are a few earnings of interest, but not until after the close. Zscaler ($ZS ), Gitlab ($GTLB ), and Sportsman’s Warehouse ($SPWH ) are the highlights there.

The Bottom Line

Not sure what all the selling is about this morning but cryptos holding up tells us it may not last. The premise here is that with no functional value to speak of (other than gambling and criminality) cryptos are a pretty perfect gauge of investor risk appetite. If cryptos are holding up, then so too must investor risk appetite. Unless cryptos are just slow to the party.

The Manufacturing PMIs could actually be pretty big seeing how this potentially a leading indicator for hiring. Indeed there is a hiring number that is extracted here. Just keep in mind that this whole thing is a survey and as such may not be binding. In fact, it may be completely irrelevant. But it is an indicator and often a reliable one so investors will be paying attention.

The rest of the week will be building to non-farm payrolls on Friday. Keep in mind that last month that was the catalyst for a nasty bit of selling. We’ve since rebounded but one can surmise that markets will be on edge a little bit leading up to Friday…

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* The new monthly Contrarian Portfolio letter provides full transparency around The Contrarian’s positions. That’s July’s letter. August’s will be done shortly.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks were unchanged yesterday except for tech, which dropped a bit. As we look at our board of indicators for signs of direction at 0645, things continue to be quiet:

* Stock index futures are unchanged with all major US indexes hogging the break-even point;

* Commodities aren’t doing much either. WTI crude oil is down 0.7% to trade below $77/barrel. Copper is unchanged;

* Cryptos are down a bit with Bitcoin 2.5% lower to trade in the low $62,000s;

* Bonds aren’t doing anything. The 2-year yields 3.95% whilst the 10-year yields 3.85%.

Today’s Known Events

It’s another slow day. We do have a few earnings of interest, but not until after the close. SentinelOne ($S ), Box ($BOX ), PVH ($PVH ), and Nordstrom ($JWN ) are among companies reporting.

Case-Shiller home prices are out at 0900. The 20-city index, the most closely-watched of the various indexes Case-Shiller put out, is expected to increase by 6.9% year-over-year, effectively identical to the 6.8% pace recorded last month.

The Conference Board’s consumer confidence reading is out at 1000. A print of 100.2 is anticipated, effectively identical to last month’s 100.3.

Neither of these is known to move markets. In fact, both may be summarily ignored, especially seeing how it’s the last trading week in August.

The Bottom Line

Looks like another slow day, then. It’s very likely we will continue to be in a holding pattern until some of the earnings tomorrow. And really those don’t get interesting until Nvidia ($NVDA ) after the close. That seems to be what’s on everybody’s mind…

Stocks on the Contrarian Radar©️

Tech stocks dropped yesterday, for no apparent reason. This is ahead of Nvidia earnings tomorrow afternoon. Indeed NVDA was a big loser yesterday, dropping 2.3%. Bank of America for its part has cautioned that investors “may be underpricing the risk of disappointment” when it comes to Nvidia’s earnings.

Judging by Nvidia’s historical earnings record, this fear is unfounded. NVDA has beaten earnings estimates the last six quarters and 10 of the last 12. This despite analysts continuously raising their targets. As you can tell from the chart, Nvidia has stagnated a bit in recent days, although right near its all-time highs set in July.

Also despite the last couple of days’ stagnation, NVDA has still bounced nicely off of the intermediate low of ~$100 set earlier this month. Quick calculation tells you it’s gained 26% in just a few weeks.

Could tomorrow’s earnings provide the catalyst for Nvidia to push higher? Again, the historical record is in its favor. But then historical patterns are made to be broken. It seems we say this every quarter, but NVDA just can’t keep beating these sky-high estimates for much longer. Can they?

Perhaps the bigger question is whether, and how much, this might impact other AI chip stocks. Take the rest of our Big 7 first: AMD ($AMD ), Broadcom ($AVGO ), Intel ($INTC ), Marvell (MRVL ), Qualcomm ( $QCOM ), and Taiwan Semiconductor ($TSM ). As you can see these have all tracked Nvidia with one notable exception, namely Intel:

Intel’s issues appear company-specific. While the others track NVDA, they certainly don’t match it in terms of performance! Might that gap be expected to narrow? AMD, for example, is up just 8% on the year. Or will Nvidia continue to hover over the sector like some kind of benevolent monarch?

Turning to our ‘undiscovered’ AI chip names shows very much the same story. These have mostly been tracking NVDA, but here too with less impressive results. Indeed there isn’t just one Intel-type outlier that is down for the year but precisely half of the eight names that are:

A few of these stocks appear to have almost completely uncoupled from Nvidia: Photronics ($PLAB ), down 23% year-to-date, Kulicke and Soffa Industries ($KLIC ), down 19%, and Ichor Holdings ($ICHR ), down 8%. Might these companies have a business that is actually divorced from Nvidia’s?

Quick research reveals these three are in fact suppliers to the semiconductor industry. Which realistically means they shouldn’t be uncoupled at all. KLIC and ICHR reported earnings recently that topped analyst estimates. (PLAB earnings were less recent and do not appear to have analyst estimates). This doesn’t speak to these companies being any kind of leading indicator to the ‘Big 7,’ either.

Assuming then that all this AI hype is real, might this be a buying opportunity for these three names? That could be especially true if Nvidia beats estimates and resumes its rally, but these three do not go along for the ride. Because again, as suppliers to the semiconductor industry, they realistically should.

Indeed PLAB’s primary business appears to be so-called photomasks, a key component in semiconductors. In fact it bills itself as the world’s leading producer of these things. The AI craze has helped its business. But not, apparently, its stock price.

The company is also cash rich, with almost $500 million cash on hand and negative net debt. It trades at just 12x forward earnings, <2x forward sales, and 5x cash flows. That all makes it sound like a screaming ‘buy’ — unless there is something else going on here that such superficial analysis will by definition overlook.

Or unless of course AI hype is not real. But at least then the drop shouldn’t be as pronounced as for the Nvidias and AMDs of the world…

Full disclosure: The Contrarian has a position in Camtek ($CAMT ), but not as of yet in PLAB or the other stocks mentioned above.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* The new monthly Contrarian Portfolio letter provides full transparency around The Contrarian’s positions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

The big news yesterday came from the Bureau of Labor Statistics revising its annual jobs growth downward by some 800,000 jobs, or almost 30%. The market didn’t seem too bothered by this and closed higher anyway. As we look at our board of indicators for signs of direction at 0700, things are pretty quiet:

* Stock index futures are flat, all hogging the break-even point;

* Commodities aren’t doing anything either. WTI crude oil is unchanged at $72/barrel, its lowest level of the year. Copper is down 0.5%;

* Cryptos are showing some signs of life, with Bitcoin up 3% to trade north of $61,000, the higher end of the range it has found itself this month;

* Bonds are dropping a bit. The 2-year yield is up 4 basis points to 3.96% whilst the 10-year is up 5bps to 3.83% (yields move inversely to prices).

Earnings

* Baidu ($BIDU ) earnings were mixed and that stock isn’t moving in the pre-market;

* BJ’s Wholesale ($BJ ) beat estimates and that stock is moving higher in the pre-market;

* Peloton Interactive ($PTON ) also report before the open this morning;

* Ross Stores ($ROST ), Workday ($WDAY ), and restaurant owner CAVA ($CAVA ) report after the close at 1600.

Economic Data

The BLS news from yesterday will only intensify the focus on the labor market, so initial jobless claims at 0830 are pretty big. Conspiracy theorists can point to the fact that the Department of Labor, which produces initial jobless claims, is the parent organization to the BLS. But for whatever reason these claims are not due to revisions.

Anyway the number expected by a survey of economists is 232,000 claims, a slight increase over last week’s 227,000 but still below the four-week average of 237,000. Continuing claims are expected to come in at 1,870k, also slightly higher than last week’s 1,864k.

We then get Purchasing Manager Indexes from S&P Global at 0945. The expectation here is for manufacturing PMIs to print at 49.5, identical to last month whilst services PMIs are expected to drop a bit, from 55.0 to 54.0. The 50 level separate expansion from contraction.

Existing home sales are out at 1000. Economists who were surveyed expect 3.93 million sales, a small increase from the 3.89 million recorded last month.

The Jackson Hole Symposium kicks off in Wyoming today. The title of this year’s conference is “Reassessing the Effectiveness and Transmission of Monetary Policy,” which truly sounds like the type of thing that only economists can get excited about. The full agenda drops tonight at 2000. Powell speaks tomorrow at 1000.

The Bottom Line

To repeat the refrain of what we’ve been saying all week: those recessionary fears that spooked markets for a 72-hour period earlier this month are now a distant memory. It seems we’re all systems go on the soft landing. That is the narrative coming in to today.

Initial jobless claims could change all that. Just keep in mind that this is just one report — and a weekly one at that. There are seasonal elements as well, such as this being the dog days of summer when probably not that many people will be bothered to file for unemployment. Or so the thinking goes.

Stocks on the Contrarian Radar©️

Tyson Foods ($TSN ) is down 2% overnight for no apparent reason. This caught The Contrarian’s attention as TSN was one of the best performing S&P stocks during the sell-off earlier this month. You can see the clear divergence between TSN and the SPY during the market meltdown:

It’s one of the biggest food companies in the US, with ~25% market share of foods — especially meat — produced for US consumption. This gives it solid defensive qualities probably for the same reason grocery stores (and Walmart) do. The premise is that Americans will shop at restaurants less and eat at home more during tough economic times (they probably won’t start eating less at any time, unless things get really tough).

Anyway, the valuation is pretty solid if you ignore the earnings multiple which is pretty rich at ~33x forward earnings. TSN trades at 0.4x sales at 9x cash flows. Management has a pretty aggressive stock buyback strategy and the dividend is 3% and growing. Maybe not the worst time to dive in to TSN?

There are certainly risks. Vegetarianism and veganism aren’t going anywhere. Nor is this Ozempic stuff. Margins are vulnerable to inflationary pressures. The stock is still trading near its high for the year.

Still, people have to eat. Diets usually don’t last long, especially in the US. Protein is back in favor in many diets anyway.

Full disclosure: The Contrarian does not own any TSN, but this makes him interested in buying some.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* The new monthly Contrarian Portfolio letter provides full transparency around The Contrarian’s positions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Yesterday was a quiet session as anticipated but the S&P 500 and Nasdaq did drop for the first time in nine trading days. As we look at our board of indicators at 0645, things are pretty quiet:

* Stock index futures are flat with the exception of small caps, with the Russell 2000 pointing to a gain of 0.5% at the open;

* Commodities are moving a bit higher. WTI crude oil is up 0.3% to trade around $73.50/barrel and copper is up 0.7%;

* Cryptos are taking a bit of a breather with Bitcoin down 2.5% to drop below $60,000 again — actually closer to $59,000;

* Bonds are unchanged. The 2-year yields an even 4% whilst the 10-year yields 3.81%.

Today’s Known Events

Retailer earnings are again the story. Target ($TGT ) just beat estimates and raised guidance and the market likes that very much, sending TGT up 14% at the time of this writing.

Macy’s (M ) is due at the top of the hour. Another retailer, TJX ($TJX ), which owns TJ Maxx and Marshall’s stores, is due at 0730.

After the close we’ll hear from Snowflake ($SNOW ) and Zoom Video Communications ($ZM ), among others.

FOMC Meeting Minutes are out this afternoon at 1400. The market sometimes cares about this even though it captures the FOMC’s view from several weeks ago and before the latest economic data points.

The Bottom Line

Target earnings reinforce the narrative provided by retail sales and Walmart ($WMT ) earnings last week, that consumers — especially the crucial American consumer — are still out there spending their money. This should only help the narrative in the market, that the US can avoid a hard landing. Of course consumer spending can fall of a cliff pretty quickly if the job market softens, but for now that is not likely to affect the outlook because the latest jobless claims haven’t been a cause for concern.

US consumers may not be slowing their spending, but they are certainly shifting it. That brings us to…

Stocks on the Contrarian Radar©️

Sherwin Williams ($SHW ) is down close to 5% overnight. The assumption is that this is tied to the home improvement trend, with Lowe’s ($LOW ) yesterday being to speak of slowing sales in that area. As you can see, SHW does track LOW and of course Home Depot ($HD ), though it has outpaced both over the last year:

This all begs the question if SHW is due for a return to earth? Gains of 31% over the last 12 months are better than not just HD and LOW, but the S&P 500 as a whole, which is up just 27%. The spread between SHW and HD/LOW is at its largest of the last year.

By almost all accounts, SHW is expensive:

* 31x forward earnings

* ~4x forward sales

* 23x forward book

* 28x forward cash flows

HD and LOW are trading at pretty rich multiples as well, but not as much as SHW. So for all you relative value arbs, this could be an opportunity to bet on convergence between these three stocks.

If you’re hunting for value, SHW is not compelling even after the overnight sell-off. Maybe once interest rates come down and the housing/home improvement market picks up that will change. But chances are that may have to wait until the start of the next business cycle — whenever that is.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* The new monthly Contrarian Portfolio letter provides full transparency around The Contrarian’s positions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Aug. 20. The Bottom Line segment of today’s podcast starts at (2:55) for listeners who want to skip ahead.

State of Play

Stocks rallied yesterday with the Nasdaq leading major US indexes to officially escape from the correction territory it entered two weeks ago. As we look at our board of indicators for signs of direction at 0640, all is quiet:

* Stock index futures are flat as a board with no major US index moving at all from the break-even point;

* Commodities aren’t doing anything either, with WTI crude oil unchanged at $73.70/barrel and copper up just 0.3%;

* Cryptos are rallying, with Bitcoin up 5% to trade around $60,700;

* Bonds are unchanged. The 2-year yields 4.06% whilst the 10-year yields 3.88%.

Today’s Known Events

It’s another slow day. The Dog Days of Summer are officially upon us. No economic data releases to speak of. Not much in the way of earnings either.

Lowe’s ($LOW ) just reported mixed results and lowered guidance but the stock is moving a bit higher in the pre-market, up 1% at the time of this writing.

That’s it for economically-sensitive stocks reporting earnings before the open. After the close we’ll hear from Toll Brothers ($TOL ), La-Z-Boy ($LZB ), and Coty ($COTY ), among others.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, Aug. 19. The Bottom Line segment of today’s podcast starts at (3:27) and Stocks on the Contrarian Radar at (6:18) for listeners who want to skip ahead.

State of Play

As we look at our board of indicators for signs of direction at 0700, all is pretty quiet:

* Stock index futures are mostly unchanged. Only the Russell 2000 which tracks small caps is moving at all from the break-even point, up 0.2%;

* Cryptos are dropping a bit, with Bitcoin down 3% to trade around $58,000;

* Commodities are mixed, with WTI crude oil down 1% to trade below $75/barrel while copper futures are up 1%;

* Bonds aren’t doing anything. The 2-year yields 4.05% whilst the 10-year yield is 3.87%.

Today’s Known Events

It’s a very slow start to a relatively quiet week with just Friday’s Jackson Hole kickoff looming on the calendar as a (potential) major catalyst. We do get some earnings scattered throughout the week, including from some big-box retailers.

For today, the only thing on the calendar are earnings:

* Estee Lauder ($EL ) just beat on top- and bottom-line estimates but appears to have delivered some unwelcome news in the outlook as the beleaguered stock is down 7% in the pre-market.

* ZIM Integrated Shipping Services ($ZIM ), which appears closely watched for some reason, beat on top- and bottom line estimates and is surging in the pre-market, to the tune of 12% at the time of this writing;

* After the close we’ll hear from cybersecurity company Palo Alto Networks ($PANW ) and Fabrinet ($FN ), which provides IT services of some kind to the manufacturing industry.

The Bottom Line

Stocks had their best week of the year last week. Who could have anticipated that after the previous Monday’s sell-off? Economic data certainly helped, with two straight jobless claims below forecasts and retail data showing the crucial US consumers continuing to spend like drunken sailors. Walmart ($WMT ) earnings also bore this out, even at the lower end of the socioeconomic spectrum.

You can expect to hear a lot about politics this week, what with the Democratic National Convention starting today. Vice President Harris’ economic plans are mostly (or entirely) out, with the key point being credits for first-time homebuyers. As with all things political, there are sure to be a lot of promises that have no hope of getting signed into law. A long with a lot of other BS that makes this mostly safe to ignore for our purposes.

Stocks on the Contrarian Radar©️

Advanced Micro Devices ($AMD ) announced a deal to acquire ZT Systems in a $5 billion cash and stock deal. ZT Systems is not public. It provides AI infrastructure of some sort. A $5 billion acquisition is hardly major news these days (AMD’s market cap is some $240 billion) but it does shine the focus back on the AI hardware industry, which had lost some limelight over the last couple of weeks.

A good opportunity to take a look at our ‘undiscovered’ AI chip names. ACM Research ($ACMR ), Camtek ($CAMT ), FormFactor ($FORM ) Ichor Holdings ($ICHR ), Kulicke and Soffa Industries ($KLIC ), Photronics ($PLAB ), Ultra Clean Holdings ($UCTT ) and Veeco Instruments ($VECO ). Who knows, maybe some of these will emerge as acquisition targets? That premise is a very bad one to build any investment case around, but it’s worth noting how these eight names have rebounded over the last fortnight:

As you can see these are all still down considerably over the last month, even after this recovery. Buying opportunity? You tell me.

Full disclosure: The Contrarian is long Camtek ($CAMT ).

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* The new monthly Contrarian Portfolio letter provides full transparency around The Contrarian’s positions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks put in a big rally yesterday, their second one in three days, after retail sales printed well ahead of forecasts and initial jobless claims showed no uptick in unemployment. We also had Walmart ($WMT ) earnings impress and management raise guidance. All in all, a very positive day. This would take its toll on the bond market, however…

As we look at our board of indicators for signs of direction at 0700, not an awful lot is going on:

* Stock index futures are quiet. Only the Russell 2000 which tracks small caps is moving at all from the break-even point, up 0.3%;

* Bonds are recovering a bit after yesterday’s sell-off. The 2-year yield is down 4 basis points to 4.06% whilst the 10-year is down 5bps to 3.89%;

* Commodities are moving lower. WTI crude oil is down 2.5% to trade around $76/barrel. Copper is down 1%;

* Cryptos are unchanged. Bitcoin trades around $58,300.

Today’s Known Events

Quiet summer Friday but we do get the first look at the University of Michigan’s Consumer Sentiment survey, out at 1000. Economists who were surveyed expect a reading of 66.7, basically in line with last month’s 66.4. Not sure if anybody has ever tracked this survey to see if it has any actual predictive power, but the market sometimes does pay attention.

We also get housing starts at 0830. The expectation here is for 1.34 million starts, in line with last month’s 1.35 million. Building permits are expected to come in a bit, to 1.43 million from 1.45 million. Part of this may be seasonal as nobody will want to start (or finish, or in any way be involved with) construction projects at the height of summer.

The Bottom Line

The S&P and Nasdaq have quietly (or not so quietly) closed higher for six straight trading days and are looking at the best week of the year (3% for the S&P, 5% for the Nasdaq). We’re still in a bull market, then. The sell-off we had two weeks ago appears to have been a blip. Mission ‘soft landing’ is back on and apparently more likely than ever.

This brings a brand new concern, which is that the Fed may not cut rates as aggressively as was initially believed. This is playing out in the bond market now. We’ll still get a cut in September, in all likelihood, but after that? If retail sales keep increasing from what was already a very high base and unemployment remains subdued, how can the Fed justify loosening monetary policy?

You’re going to want to keep an eye on Fed fund futures, which are still pricing in a 62% chance of an additional rate cut (after September’s) at the subsequent FOMC meeting, which is Nov. 7. That may not be very consistent with what the bond market is telling us.

We can worry about all that stuff at a later date. If the economy is strong and investors are buying risk assets, who needs rate cuts anyway?

Stocks on the Contrarian Radar©️

This all may be an opportunity to buy bonds and take out some insurance against another stock market freak out. There will be one at some point. Eventually one of these will stick and we’ll have a bear market.

For retail investors, the three main ETF proxies for bonds are iShares 1-3 Year Treasury Bond ETF ($SHY ), iShares 5-7 Year Treasury Bond ETF ($IEF ), and iShares 20+ Year Treasury Bond ETF ($TLT ), tracking short-term, medium-term, and long-term bonds, respectively. These have been on quite a ride the last month:

You can see a big spike coinciding with the Friday/Monday freakout from a few weeks ago, followed by a return to earth, re-ascent, and then drop yesterday. If you zoom out to the year-to-date chart, you can see a longer-term pattern of recovery dating to late April:

If you think there is pain ahead for the economy, that the soft landing will prove elusive, and that the Fed will have to cut rates aggressively, then this could be your chance to buy bonds. They’re more expensive than they were in April, but cheaper than they were just a few weeks ago. If this stocks recovery proves to be a head fake and therefore elusive, you will be sitting pretty when things do turn to 💩.

Full disclosure: The Contrarian holds some IEF in his portfolio.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* The new monthly Contrarian Portfolio letter provides full transparency around The Contrarian’s positions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Yesterday turned out to be a blah day after the CPI met estimates pretty square on the nose. As we look at our board of indicators at 0650, things are a bit all over the place with no clear and obvious signs of direction quite yet:

* Stock index futures are doing very little, with just the Russell 2000 which tracks small caps moving at all from the break-even point, and that lower by 0.3%;

* Commodities are gaining ground. WTI crude oil is up <1% to trade around $77.50/barrel. Copper is up 1.6%;

* Cryptos are moving in the opposite direction from commodities again, with Bitcoin down 4.5% to trade around $58,300;

* Bonds are unchanged. The 2-year yields 3.96% whilst the 10-year yields 3.84%.

Today’s Known Events

Walmart ($WMT ) earnings beat estimates and management raised guidance. That has caused a predictable pop in the stock this morning, to the tune of 4% at the time of this writing. That moves WMT to a fresh multi-year high. Other companies reporting:

* Alibaba ($BABA ) and JD.com ($JD ) reported mixed results. BABA is moving lower, JD higher as the company reported record net profits;

* Deere & Co. ($DE ) beat on top- and bottom-line and is moving higher in the pre-market, to the tune of 4% at the time of this writing;

* Applied Materials ($AMAT ), a big supplier to the semiconductor industry, reports after the close at 1600.

Initial jobless claims are out at 0830. Economists who were surveyed expect 236,000 new claims, little changed from last week’s 233,000. That’s below the four-week average of 241,000.

Retail sales are also out at 0830. The expectation here is for an increase of 0.4% month-over-month to the headline figure, which would be an improvement over last month when it was unchanged. Core retail sales, which exclude automobiles, are only expected at 0.1% MoM however, after 0.4% last month.

Industrial production is out at 0915. This is expected to drop by 0.3% MoM after a 0.6% increase last month. That would be the first negative print since February, so worth keeping an eye on that as well.

The Bottom Line

Consumer prices yesterday came in pretty much exactly as anticipated and markets were unmoved as a result. Probably producer prices the day before told us everything we needed to know about inflation anyway. As we’ve been saying for a week, the labor market is now the bigger game in town. So initial jobless claims could be big, even though it’s just a weekly report. Any sign of labor market softness could spook the market.

So could softer-than-anticipated industrial production or retail sales. One would think that these metrics usually trail employment trends but maybe not always. If the consumer did start pulling back in July then, well, it wouldn’t be good.

Where Walmart earnings are concerned, this is a positive sign for the lower end of the retail market. That is a relief as investors were concerned there after what McDonald’s ($MCD ) and others had been saying in their earnings.

Stocks on the Contrarian Radar©️

Google ($GOOG ) has taken on water lately, down 13% over the last month over regulatory concerns, with the latest now that the company could be broken up. As you can see from the blow chart, this has caused GOOG to diverge from the Nasdaq 100 ($QQQ ) benchmark:

Not being a legal expert, the Contrarian cannot really speak to the likelihood of this taking place. One would imagine Google has done enough lobbying over the years to guard against this uncertainty, but that’s not a legal opinion. Uh, right?

Even if the company is forced to break apart, it’s not like shareholders will be left with nothing. They will instead be left with the various parts that emerge from the break up. Apparently these could be Android, Chrome, and Google Ads. One could make the argument this would, over time, possibly be a better outcome than if the whole thing were allowed to continue as its own entity.

The concern is that Google will lose its competitive advantage if that takes place. Maybe those concerns aren’t entirely unrealistic. For now, the key metrics point to a stock that is not particularly cheap even after the recent sell-off: 21x forward earnings, 5.7x forward sales, 15x forward cash flows. That looks a lot like a growth stock (which Google has been historically) and not like a value play.

For this reason The Contrarian is going to sit this one out for now. It’s worth pointing out that the government last tried to break up a company in 2001 and failed pretty spectacularly. That company was Microsoft ($MSFT ). Lobbying and entrenched business interests have only increased in the 20+ years since then. It would seem to be a bit of a long shot if you’re betting on the likelihood of a breakup actually happening. (Again, not a legal view. Just one based on the money trail).

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* The new monthly Contrarian Portfolio letter provides full transparency around The Contrarian’s positions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks rallied yesterday after producer prices showed more signs of dropping inflation. As we look at our board of indicators for signs of direction at 0640, some risk-on appears to be developing ahead of the CPI at 0830:

* Stock index futures are flat with the exception of small caps, which are up a bit. The Russell 2000 is pointing to a gain of 0.4% at the open;

* Cryptos are rallying again, with Bitcoin up 5% to trade north of $61,000 again;

* Bonds are consolidating after yesterday’s PPI-fueled rally. The 2-year yields 3.93% with the 10-year yielding 3.84%;

* Commodities aren’t doing much. WTI crude oil is down 0.5% to trade around $78/barrel. Copper is unchanged.

Today’s Known Events

Yesterday we had producer prices. Today’s it’s the turn of consumers. The CPI is out at 0830. The numbers we’re anticipating:

* 0.2% month-over-month increase in headline CPI, after a drop of -0.1% seen last month;

* 3.0% year-over-year increase to headline CPI, identical to last month;

* 0.2% MoM increase to Core CPI (0.1% last month);

* 3.2% YoY increase to Core CPI (3.3%).

The Bottom Line

The Contrarian told you yesterday that producer prices would be a non-event. That turned out to be wrong. Apparently investors do still care about inflation. They weirdly never really cared about the PPI before. Only on certain occasions.

Maybe the market was just looking for a reason to rally? Either way, the ‘Black Monday’ from a week ago is already a distant memory. Tech is rallying again. Small caps are even rallying again.

All systems go for the bull market? Maybe not so fast. At risk of playing Debbie Downer, The Contrarian remains on alert about the state of the consumer. Home Depot ($HD ) earnings yesterday were just the latest. But then if people remain gainfully employed it stands to reason that they will keep spending money. Which brings us back to the labor market being the key thing to watch, rather than inflation. Initial jobless claims print tomorrow morning…

Stocks on the Contrarian Radar©️

Owens Corning ($OC ), a supplier of construction materials, dropped by 4% overnight, for reasons that remain elusive. It rose yesterday even after Home Depot earnings. OC’s own earnings were last week and they weren’t great, causing a sell-off at the time. Maybe that should have been the telling sign for HD earnings? Anyway, over the last month the stock is down 10% after a nice run year-to-date:

OC is a pretty obvious recession proxy as home construction (and home repairs) are one of the first things to go when there is a slowdown. And yet, the valuation is pretty compelling. OC trades at just 11x forward earnings, 1.2x forward sales, and 6x forward cash flows. True its outlook presented in last week’s earnings was not great and that can be expected to eat into those multiples next quarter. But if OC gets cheaper, and with interest rates coming down, could this be a buy?

There may be crazier ideas. The company is still working through an acquisition (Masonite) that carries some risk. It took on some debt to finance it but is making all the right noises about paying it down.

It’s interesting to hold OC up against Rocket Companies ($RKT ), a proxy for mortgage financing in the US. As you can see these two have tracked each other pretty closely over the last year. Except when they didn’t:

If relative value plays are your thing, this may be the bigger opportunity. Figure the price will converge again at some point, whether that is due to RKT dropping or OC rallying. But over the long term, OC may be interesting in its own right.

Full disclosure: The Contrarian has no position in Owens Corning. He does have a small position in RKT.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* The new monthly Contrarian Portfolio letter provides full transparency around The Contrarian’s positions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, Aug. 12. The Bottom Line segment of today’s podcast starts at (3:51) for listeners who want to skip ahead.

State of Play

It was a quiet summer weekend following a quiet Friday session following an anything-but-quiet week. But that’s all in the past now. As we look at our board of indicators for signs of direction at 0700, there appears to be a bit of a tug of war going on:

* Stock index futures aren’t really doing anything. Just the Russell 2000 which tracks small caps is moving at all from the break-even point, down 0.5%;

* Commodities are rallying with copper up another 1.4% to broach the $4/pound level again. WTI crude oil is up 1% to trade around $77.50/barrel;

* Cryptos are telling a different story with Bitcoin down 3% to trade below $59,000 again;

* Bonds are unchanged. The 2-year yields 4.06% with the 10-year yielding 3.96%.

Today’s Known Events

It’s a quiet day with nothing worth noting on the calendar. No earnings of interest, no economic data either.

We do get fresh inflation data this week but that may not be the must-watch event it has been in months past. The inflation battle is effectively over — inflation lost, the Fed won — and the more important question has become whether the economy will be able to stick the elusive ‘soft landing.’ For that reason, one suspects initial jobless claims on Thursday may again be the event to watch.

We also have earnings from Home Depot ($HD ) and Walmart ($WMT ) this week.

State of Play

Stocks bounced around yesterday, rallying big at the open then dropping into the close. As we look at our board of indicators for signs of direction at 0630, the mood seems to be one of caution:

* Stock index futures are pointing to a lower open, but the movement is less dramatic than it has been all week. Small caps are seeing the worst of it with the Russell 2000 down 0.4%. S&P 500 futures are down 0.2% with the Nasdaq effectively flat;

* Bonds are seeing a few bids for the first time in days, with the yield on the 2-year down 5 basis points to 3.95% and the 10-year down 4bps to 3.92%. So the yield curve right close to un-inverting again, like it did Monday;

* Cryptos aren’t moving with Bitcoin sitting on $57,400;

* Commodities aren’t doing anything either. Copper is unchanged. WTI crude oil essentially flat trading around $75/barrel.

Today’s Known Events

Initial jobless claims are out at 0830. This would normally be a blah event but after the freakout on Friday in reaction to non-farm payrolls, it’s safe to say that the labor market is front and center in investors’ minds. Therefore this suddenly because a very important datapoint.

Economists who were surveyed expect 241,000 claims, down a bit from the 249,000 recorded last week but still ahead of the four-week average of 238,000.

There are few earnings of note. Eli Lilly ($LLY ), Datadog ($DDOG ), Krispy Kreme ($DNUT ), and Papa John’s ($PZZA ) are out before the open at 0930. Papa John’s being a talking point on the Stocks on The Contrarian Radar a few weeks ago when it was deemed not cheap enough.

After the close at 1600 we’ll hear from Soundhound ($SOUN ), Unity ($U ), The Trade Desk ($TTD ), Paramount Global ($PARA ), and Expedia ($EXPE ), among others.

The Bottom Line©️

Told you we weren’t out of the woods yet! The weird thing is none of yesterday’s moves were precipitated by anything that can rightfully be deemed a catalyst. Instead this can be considered a textbook bear market rally, characterized by gains in the pre-market, which sometimes carry over into the regular session, followed by selling into the close. We were up so big yesterday morning that it looked like more than one of these headfakes. Safe to say now that that conclusion was erroneous.

Jamie Dimon of JPMorgan ($JPM ) told CNBC he is expecting a mild recession with chances around 40% the US escapes via a soft landing. As the CEO of the US’ largest lender, Dimon has as good a gauge of the economy as anybody so his comments are worth listening to. He pointed out that his comments were effectively unchanged from earlier in the year.

Fair enough. Just remember there is no such thing as a mild recession when you’re going through it. That label is affixed after the fact. When you’re going through it is painful and there are almost always unexpected events that upend the order of certain things.

Stocks on the Contrarian Radar

How about Disney ($DIS ), trading back near the lows of the year after earnings yesterday. DIS now trades at 18x forward earnings and <2x forward sales, well below historical averages. The earnings were actually mixed, with positive results from streaming. It was just the parks that were bad. Well that and some comments about possibly having to pay $5 billion more for the rest of Hulu, which would be a big outlay in cash.

Still, that’s a worst-case scenario. The whole thing will be decided in arbitration. Some may have concerns about Disney’s content and it’s true what they did to Star Wars is an abomination. The Contrarian cannot in good faith reward this with buying the stock, but it may very well be cheap. These are some of the strongest brands in the world, even assuming they end up completely destroying Star Wars (in fairness not all Star Wars content has been bad. The first season of the Mandalorian was great and Andor was awesome). Hard to see how DIS doesn’t have at least some value at these prices, right?

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* The new monthly Contrarian Portfolio letter provides full transparency around The Contrarian’s positions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, Aug. 7. The Bottom Line segment of today’s podcast starts at (4:16) for listeners who want to skip ahead. ‘Stocks on the Contrarian Radar’ is at the bottom of this page.

State of Play

Stocks recovered some ground yesterday after Monday’s epic selloff, but closed off the highs. After the close Airbnb ($ABNB ) and Wynn ($WYNN ) earnings disappointed, sending a potentially ominous sign for the travel sector and consumer discretionary spending. Supermicro ($SMCI ) earnings also missed.

As we look at our board of indicators for signs of direction at 0650, that all appears forgotten however and risk-on is the mood:

* Stock index futures are pointing to a higher open led by small caps. The Russell 2000 is up 1.6%. Nasdaq futures are 1.4% to the good, with the S&P 500 up 1.1%;

* Cryptos are going along with this, with Bitcoin up 4.5% to trade around $57,500;

* Commodities are mixed. WTI crude oil is up 1.2% to trade around $74/barrel but copper is down 1.3%;

* Bonds are down a bit. The 2-year yield is up 5 basis points to 4.03% with the 10-year up 4bps to 3.93% (yields move inversely to prices).

Today’s Known Events

Earnings are once again the main story. Make that the only story:

* Disney ($DIS ) earnings appear to have disappointed investors as the stock is dropping in the pre-market;

* Lyft ($LYFT ) earnings fell short on gross bookings and that stock is down 9% in the pre-market;

* Sony ($SONY ) and Clear Channel Outdoor ($CCO ) both raised guidance and are moving higher in the pre-market;

* CVS Health ($CVS ) earnings were mixed and that stock is dropping in the pre-market, down 5% at the time of this writing;

* Shopify (SHOP ) is also due out before the open at 0930;

* After the close we’ll hear from Robinhood Markets ($HOOD ), Monster Beverage ($MNST ), and others.

State of Play

Stocks got smacked around yesterday. It was a very ugly day across the board. After the close, earnings from Palantir ($PLTR ) impressed, helping sentiment. As we look at our board of indicators for signs of direction at 0640, risk appetite appears to be returning some:

* Stock index futures are pointing to gains, but are off of the highs set earlier in the session. Nasdaq and S&P 500 are up about 0.8%. The Russell 2000, which tracks small caps, is up a little less (+0.6%);

* Cryptos are rebounding as well and this more impressively. Bitcoin is up almost 8% to trade north of $56,000;

* Bonds are selling off for a change and the yield curve has re-inverted. The 2-year yield is up 8 basis points to 3.96% whilst the 10-year is up 5bps to 3.83% (yields move inversely to prices);

* Commodities aren’t doing much. WTI crude oil is up 0.5% to trade around $73/barrel. Copper is down 0.6%.

Today’s Known Events

Earnings kick things off again:

* Celsius Holdings ($CELH ), the beverage of choice of millennial anorexics, beat estimates and that stock is rising in the pre-market, up 9% at the time of this writing. This after a drop of some 60% over the last couple of months;

* Caterpillar ($CAT ) also beat on top- and bottom-line estimates and that stock is rising in the pre-market;

* Uber Technologies ($UBER ) is also out before the open at 0930;

* After the close at 1600 we’ll hear from Supermicro ($SMCI ), Rivian ($RIVN ), AirBnb ($ABNB ), Reddit ($RDDT ), and Wynn Resorts ($WYNN ), among others.

The US reports its balance of trade at 0830. Economists who were surveyed expect a trade deficit of $72.5 billion, down from the $75 billion recorded last month. As Americans are the single largest block of consumers in the world, a US trade deficit is generally a good thing because it means Americans are buying more stuff (they don’t need).

The Bottom Line©️

Was yesterday’s bloodbath an outlier? Or signs of things to come?

Worth keeping in mind that recessions very rarely materialize overnight. It happened with Covid just because the economy was literally forced to shut down overnight. If we weren’t in a recession on July 31, there’s no reason we would suddenly be in one now after a few lackluster economic data points. The likelihood of recession may have increased in the last week, but that just means the probability has increased (though frankly even that is debatable).

Stocks on the Contrarian Radar

Still, it may be worth playing along here if only to take out some hedges against future drawdowns. Because there will, with 100% certainty, be a recession at some point. It may not be for several quarters, perhaps even years, but it will eventually materialize. When it does, it will not be pretty. It never is. The term ‘mild recession’ is only affixed in aftermath. It’s never mild when you’re going through it. At that point, you will want a couple of things in your portfolio:

* Bonds and fixed income. After several years of horrible returns these have finally started to rebound in recent month, largely due to the Fed messaging that it would be cutting rates. The iShares 20+ Year Treasury Bond ETF ($TLT ) is still roughly flat over the last 12 months. That’s the so-called long end of the curve, the long duration Treasuries. Not as risk averse as the short end, but also pay a bigger coupon (that is historically. Not when yield curves are inverted. But the yield curve just uninverted, which may be another good catalyst to get this exposure now).

* Short exposure to stocks and other things like cryptos. This is more controversial and more difficult (and more costly) to obtain. There are ETFs that provide the exposure but they are a) expensive and b) engineered to drop over time due to something called time decay. Still, The Contrarian yesterday panicked and bought a couple small slugs of ProShares UltraShort S&P500 ETF ($SDS ), which is actually a levered inverse ETF. That means it’s even riskier than other inverse ETFs, though it does have a bigger payout.

Obviously, timing can be paramount. If you buy these things ahead of a big rally for risk assets then they will not do well. Now, after such a big selloff, may not be the optimal time for it. But if we get a relief rally today? If that’s what materializes, it could present a good opportunity to buy in. Assuming the economic data points are actually telling and we are in fact getting closer to recession, that is.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* The new monthly Contrarian Portfolio letter provides full transparency around The Contrarian’s positions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Futures are getting beaten to a pulp and the concern is suddenly very real that circuit breakers will come into play as they did during today’s trading session in Japan. The Nikkei had its worst trading day since 1987. As we look at our board of indicators for signs of direction at 0630, things look very ugly indeed:

* Stock index futures are sharply lower. The riskiest part of the market are seeing the worst of it — Russell 2000 and Nasdaq down 4% and change — but the selling is by no means isolated as S&P 500 futures are pointing to a loss of almost 3% at the open;

* Commodities are also getting beaten up. WTI crude oil is down 2% to trade around $72/barrel with copper down 2% as well. Gold and silver aren’t even holding up. Gold is unchanged and silver is down almost 3%;

* It’s the same story in cryptoland, only worse. Bitcoin is down 15% to trade around $51,500, its lowest level since January;

* Then you have the bond market, which is suddenly where everybody wants to be. Major rally here, with the 2-year yield down 11 basis points to 3.76% and the 10-year down 5bps to 3.73%. And yes, the yield curve is just about uninverted a just 3bp separate the 10- and 2-year.

Today’s Known Events

Economic data has suddenly become paramount, with recession concerns now front and center in the minds of investors.

To that end ISM Non-Manufacturing PMIs are out at 1000. Economists who were surveyed expect this figure to have rebounded in July, from 48.8 to 51.4. That would place it back into expansion territory as the 50 level is what separates expansion from contraction. There are separate readings of Non-Manufacturing Prices and Non-Manufacturing Employment but neither have economist estimates.

Non-manufacturing is just another word for services. If this can hold up then maybe all this recession talk is a little premature just yet.

We do have some earnings as well:

* Tyson Foods ($TSN ) and Carlyle Group ($CG ) report before the open at 0930;

* After the close at 1600 we’ll hear from Palantir ($PLTR ), Hims & Hers Health ($HIMS ), Avis Budget Group ($CAR ), and Yum China Holdings ($YUMC );

* Office REITs Realty Income ($O ) and Simon Property Group ($SPG ) also report after the close.

The Bottom Line©️

The narrative swiftly shifted last week, thanks to a more dovish Fed, disappointing PMIs, and then non-farm payrolls. Suddenly nobody seems to want any part of riskier assets like tech and growth. Bonds and defensive sectors like consumer staples stocks have rallied. At least last week. Judging by the action so far today consumer staples are not quite holding up their end of the bargain anymore.

Friendly reminder that at the end of 2022 everybody was also convinced we were entering recession. It didn’t happen then. It might still happen now, but you still need three main elements:

* A drastic slowdown in hiring, to the point where non-farm payrolls print negative numbers. The July figures released on Friday showed six figures-worth of jobs being created. That may not be enough to keep the country at full employment (and indeed the unemployment rate shot up to 4.3% from 4.1% as a result), but it is still positive especially during a traditionally slow month of hiring;

* Pullback in consumer spending. This logically follows point 1 as people get laid off and have to cut spending. Others may keep their jobs but fear of job losses creates the same effect;

* Negative GDP growth. This follows points 1 and 2 and is the final statistic needed to make the recession official. Specifically, two consecutive quarters of negative GDP growth. (Strictly speaking, even then it isn’t quite official yet as you need to have sign off from the National Bureau of Economic Research to officially make it official).

In other words, everything kind of hinges on the job market. This is why Thursday’s initial jobless claims will be very closely watched. Far more closely than before. Last week’s came in a little hot. If we have a repeat it could get ugly. But that is still three days away and things are already looking very ugly.

You also have the situation in the Middle East. But that isn’t really anything new as Israel and Iran have been at war through proxies for some time. Oil markets are certainly not treating it as anything new, judging by futures.

Stocks on the Contrarian Radar

The Contrarian move right here is quite clear, which is to buy stocks. Does anybody have the conviction to do it? Things could certainly get worse before they get better.

It might help if you zoom out a bit and keep in mind that where economic data is concerned we are still in expansion. That is unlikely to change from a few days of selling in the stock market. Yes, the market is a forward-looking indicator and what we’re seeing now are clearly concerns that the economy will fall off a cliff, and soon. But we aren’t there yet.

Maybe a time to take a punt on something like the van Eck Semiconductor ETF ($SMH )? Or maybe not because it holds Intel ($INTC ). One could certainly just buy Nvidia ($NVDA ) outright.

Those are all quite aggressive moves. For something a little more conservative you could look to something like JPMorgan Chase ($JPM ), which is down multiple percent in the pre-market. JPM may lose business in a recession, but it won’t go out of business. Too big to fail and all that.

The same holds true in certain international jurisdictions. The Swiss government will not let UBS ($UBS ) go out of business for example. Not after the engineered the takeover of Credit Suisse last year.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* The new monthly Contrarian Portfolio letter provides full transparency around The Contrarian’s positions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Friday, Aug. 2. The Bottom Line segment of today’s podcast starts at (4:27), ‘Stocks on the Contrarian Radar’ at (7:38) for listeners who want to skip ahead.

State of Play

Yesterday was an ugly one on Wall Street. Stocks dropped across the board, with the most risk-sensitive names (growth and small caps) hit the hardest. The bad news continued after the close as Intel ($INTC ) earnings were downright horrific. The company suspended its dividend and said it would cut 15% of its workforce in an effort to contain costs. The stock appears to be in complete free fall. Amazon ($AMZN ) for its part posted mixed results, which was excuse enough for investors to dump the stock overnight.

As we look at our board of indicators for signs of direction at 0645, things are not looking great:

* Stock index futures are pointing to further losses, led by small caps. The Russell 2000 is down 2.2%. Nasdaq futures are down 1.6% with the S&P 500 down 1.1%;

* Bonds are continuing to rally, making this look very much like classic risk-off. The 2-year yield is down 5 basis points to 4.12% whilst the 10-year is down another 4bps to 3.93%. Both are now at lows for the year;

* Cryptos are weirdly unchanged, with Bitcoin trading around $64,500. Remember cryptos can be a leading indicator for stocks…

* Commodities are mixed. WTI crude oil is unchanged at $76.50/barrel. Copper is encouragingly up 0.9%. Gold and silver are up 1% and 2%, respectively.

Today’s Known Events

Non-Farm Payrolls are the main event today. Economists who were surveyed expect 176,000 new jobs, down from the 205,000 recorded last month, which would leave the unemployment rate unchanged at 4.1%.

There are some earnings as well. We spoke about oil majors yesterday. Today they (the US oil majors that is) just reported earnings:

* Exxon Mobil ($XOM ) beat top- and bottom-line estimates but that stock is moving a bit lower anyway;

* Chevron ($CVX ) earnings were mixed and that stock is down 2% in the pre-market. The merger with Hess ($HES ) is also affecting things;

* Church & Dwight ($CHD ), not an oil major but a consumer staples producer that quietly had a good day yesterday (along with its peers as the $XLP ETF gained almost 1% on the day) , is also due before the open at 0930.

Before you go any further, please check out the brand new monthly newsletter on The Contrarian Portfolio©️, which provides a full list (and weight!) of portfolio holdings, outlook on future positioning, and more!

State of Play

Stocks rallied yesterday after the Federal Reserve came through with dovish commentary that speaks to rate cuts at the next meeting. After the close Meta ($META ) earnings beat estimates. This was tempered by Arm Holdings ($ARM ) earnings, which underwhelmed. As we look at our board of indicators for signs of direction at 0650, things are a bit all over the place:

* Stock index futures are pointing to small gains. Nasdaq and S&P 500 are up 0.4%. The Russell 2000 which tracks small caps is down 0.3%. Undoing of that rotation trade?

* Bonds are continuing their Fed-fueled rally. The 2-year yield is down another 6 basis points to 4.28% whilst the 10-year is also down 6bps to 4.05% (yields move inversely to prices);

* Commodities are mixed. The big move is from copper, which is down 1%. WTI crude oil is up 0.7% to trade around $78.50/barrel;

* Cryptos are dropping a bit with Bitcoin down 2% to trade around $65,500.

Today’s Known Events

Now that the Fed is out of the way, the focus can return to earnings:

* Apple (AAPL ) and Amazon (AMZN ) are the biggest names to report today, doing so after the close at 1600;

* Hershey (HSY ) just reported earnings that fell short of estimates;

* Shell ($SHEL ) reported an increase of earnings (no analyst estimate here) and that stock is up a bit in the pre-market. More on Shell and oil companies below…

* ConocoPhillips ($COP ) beat estimates and that stock is moving higher;

* Canada Goose (GOOS ) earnings weren’t great but management crucially maintained guidance;

* Wendy’s (WEN ) fell short of estimates but the stock is rising for whatever reason;

* Crocs ($CROX ), Roblox ($RBLX ), Ferrari ($RACE ), Wayfair ($W ), and Shake Shack ($SHAK ) are among other companies reporting before the open at 0930;

* Others reporting after the close include Intel ($INTC ), Coinbase ($COIN ), Roku ($ROKU ), Square ($SQ ), DraftKings ($DKNG ), Snap ($SNAP ), Cloudflare ($NET ), Twilio ($TWLO ), and DoorDash ($DASH ).

Seeing how it’s Thursday we’ll get initial jobless claims at 0830. Economists who were surveyed expect 236,000 new claims, effectively identical to last week’s 235,000 and right in line with the four-week average of 236,000.

The Bottom Line©️

All systems go for looser monetary policy then. The Fed still needs inflation to play along, but the message was pretty clear. Just be careful what you wish for. There are very rarely soft landings, recessions are almost never mild, and there are almost always unforeseen events that cause pain and dislocation.

Maybe the Fed can thread the needle and engineer this elusive soft landing. For now we’re just talking about returning interest rates to a normal level, not to anything below that. Or at least not yet. But if for any reason the Fed does have to reverse course and postpone rate cuts, that will with 100% certainty cause a massive market freak out.

Of course every dislocation brings opportunities in turn. That brings us to…

Stocks on the Contrarian Radar

It may be time to look at oil majors. The premise here is twofold:

* interest rate cuts raise the value of industrial commodities, of which oil is the key one. Oil majors can take advantage of this by passing these costs off to consumers;

* the Middle East once again faces regional instability. This has been ratcheted up in recent days, but oil prices (and oil stocks) have been slow to react.

There are really only two US oil majors: Exxon Mobil ($XOM ) and Chevron ($CVX ). Others are international. The same premise applies.

* XOM trades at 13.5x forward earnings, which is slightly below the historical median of 15x. It isn’t expensive on a price-to-sales basis, at ~1.3x. The price-to-book multiple (~2x) is less impressive.

* CVX is a tiny bit cheaper by those metrics: 13x forward earnings, 1.5x forward sales, 1.8x forward book. Chevron pays out a slightly larger dividend: 4% versus 3.2% for XOM.

CVX reports tomorrow so it may be worth waiting for that. The gamble is of course if they beat earnings, at which point the stock will rally and the buying opportunity will not materialize.

Perhaps a better option is BlackRock Resources & Commodities Strategy Trust ($BCX ), a closed-end fund that holds most international oil majors (including XOM and SHEL). This trades at a perpetual discount to net-asset value and offers a better yield of 6.7%. (Full disclosure: The Contrarian has a small position in BCX).

As you can see these three securities all track each other, with XOM the best performer this year:

There are of course any number ETFs to track oil, oil majors, oil minors, etc. Probably these are all beta plays. But as noted yesterday, beta can be quite powerful if timed right.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks bounced around a bit yesterday with tech selling off again. After the close earnings from AMD ($AMD ) and Starbucks ($SBUX ) impressed while Microsoft ($MSFT ) left a bit to be desired. As we look at our board of indicators for signs of direction at 0640, risk-on appears to be the story ahead of more earnings and the Fed meeting this afternoon:

* Stock index futures are jumping, led by tech. The Nasdaq is up 1.5% with S&P 500 ($SPY ) futures 1% to the good;

* Commodities are rebounding. WTI crude oil is up 2.5% to trade around $76.50/barrel, presumably due to the latest developments in the Middle East? Copper is up 1.5%;

* Cryptos are an outlier for now, with Bitcoin unchanged trading around $66,000;

* Bonds aren’t doing anything ahead of the Fed. The 2-year yields 4.37% whilst the 10-year yields 4.14%.

Today’s Known Events

Earnings kick off the proceedings again today:

* Boeing ($BA ), Norwegian Cruise Lines ($NCLH ), MasterCard ($MA ), Altria ($MO ), Wingstop ($WING ), and Kraft Heinz ($KHC ) are due before the open at 0930;

* After the close at 1600 we’ll hear from Meta ($META ), Arm Holdings ($ARM ), Qualcomm ($QCOM ), and Carvana ($CVNA ), among others.

The Federal Reserve announces its interest rate decision at 1400, to be followed by Jerome Powell’s press conference at 1430. The expectation is for the Fed to keep rates unchanged, but the market will be looking for commentary that points to a rate cut at the next meeting in September — and possibly beyond.

The Bottom Line©️

All eyes on the Fed, then. Earnings this morning are kind of blah anyway. Hopefully Powell & Co. don’t do another rug pull on interest rate cuts. In public statements he has sounded far more dovish than at any point since the Fed started its tightening cycle back in 2022. But the market will definitely be looking for some specific hints of a rate cut in September.

Fed fund futures are now pricing in an 85% chance of a rate cut at the Sept. 18 meeting. For the subsequent FOMC meeting on Nov. 7 chances of an additional rate cut are 60% right now. The meeting after that (the last one of the year, on Dec. 18)? Chances of yet another rate cut are currently at 56%, so a bit better than even odds. That’s three cuts before the end of the year. You’re going to want to keep an eye on those numbers today.

Stocks on the Contrarian Radar

At the risk of sounding like a broken record, our friends in AI chip land have had a hard time of it lately. That should be helped by $AMD earnings yesterday. Judging by Nasdaq futures this morning, that is indeed coming to pass.

Still, these stocks have taken on water lately. Take the ‘Big 7’ AI chip names: Nvidia ($NVDA ), AMD, Taiwan Semiconductor ($TSM ), Broadcom ($AVGO ), Marvell ($MRVL ), Intel ($INTC ), and Qualcomm ($QCOM ). As you can see the last month has not been very good at all for these stocks:

You could of course just buy an ETF to get this exposure. The VanEck Semiconductor ETF ($SMH ), perhaps the most widely-cited AI chip proxy, holds at least five of the seven. Competitors include SPDR S&P Semiconductor ETF ($XSD ), Invesco Semiconductors ETF ($PSI ), First Trust Nasdaq Semiconductor ETF ($FTXL ), and the iShares Semiconductor ETF ($SOXX ). Looking at their charts reveals the same story, as can be expected:

Of course let’s not forget about our ‘undiscovered’ AI chip names ACM Research ($ACMR ), Camtek ($CAMT ), FormFactor ($FORM ), Inchor Holdings ($ICHR ), Kulicke and Soffa Industries ($KLIC ), Photronics ($PLAB ), Ultra Clean Holdings ($UCTT ), and Veeco Instruments ($VECO ). The charts here reveals the exact same story, pretty much:

The point here is that it may not matter which AI chip name you choose, or if you choose to ‘diversify’ through an ETF. They all seem to follow Nvidia anyway. Sure, some are more volatile than others with The Contrarian’s one holding CAMT apparently the most volatile of the bunch.

More important is if you buy the AI hype story. If so, you will probably want to take an opportunity like this to get long. The Contrarian took the opportunity yesterday to buy more CAMT. That’s just him. You do you. Not investment advice. Do your own research, make your own decisions.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks rallied on Friday, recovering some ground from the previous trading days. As we look at our board of indicators for signs of direction at 0645, risk on seems to be the story:

* Stock index futures are pointing to a higher open, led by tech and small caps. The Nasdaq and Russell 2000 are both up 0.6%, with S&P 500 futures right behind them at +0.5%;

* Cryptos are rallying as well, with Bitcoin up 3% to trade around $69,500, its highest level in more than a month;

* Bonds are seeing a few bids, with the 2-year yield down 2 basis points to 4.37%, its lowest level of the year, whilst the 10-year yield is down 4bps to 4.16% (yields move inversely to prices);

* Commodities aren’t doing anything. WTI crude oil is unchanged at $77/barrel. Copper is down 0.3%.

Today’s Known Events

It’s a big week, with a bunch of earnings, the Fed meeting that concludes Wednesday, and non-farm payrolls on Friday. For today however, things are pretty quiet.

We do have some earnings, with McDonald’s ($MCD ) this morning the biggest name. This should be particularly interesting in light of what Lamb Weston ($LW ) said in its earnings about restaurant traffic.

onsemi ($ON ) is another name reporting before the open at 0930. After the close we’ll hear from Tilray ($TLRY ) and Sprouts Farmers Market ($SFM ).

The Bottom Line©️

So is last week’s selloff forgotten already? If we’re already looking ahead to earnings, the Fed, and payrolls, the logical conclusion is that whatever was troubling investors last week is no longer a key concern.

Maybe that will turn out to have been a buying opportunity. Maybe even for AI chip stocks…

Stocks on the Contrarian Radar

Has to be McDonald’s ($MCD ) and not just because of what they may say about restaurant traffic. This stock has taken on water lately and is down 15% year-to-date. This is particularly painful when you hold it up against the S&P 500, which is up 15% this year. It’s almost like MCD decided to diverge from the SPY and has gone its own way ever since:

Unfortunately, at >20x forward earnings (going in to today’s earnings) and almost 7x forward sales, MCD is not exactly cheap. But if earnings fall short today, and it drops further…

Also as McDonald’s goes, so go Wendy’s ($WEN ) and Burger King parent $QSR …

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks got bounced around yesterday, with tech selling off anew. Small caps rallied however. All of this on no apparent news, though second-quarter GDP did exceed estimates, which briefly helped sentiment yesterday morning. Afternoon trading was a lot more bearish into the close.

As we look at our board of indicators for signs of direction at 0640, risk appetite appears to be back on for no apparent reason:

* Stock index futures are pointing to gains, led by small caps. The Russell 2000 is up 1.6%. The Nasdaq is right behind it, up 1.1%. S&P 500 futures are 0.8% to the good;

* Commodities are quiet. WTI crude oil is unchanged trading at $78/barrel. Copper is up 0.5%. First time all seek we’ve seen any green numbers out of copper IINM;

* Cryptos are rebounding as well with Bitcoin up 5% to trade around $67,300;

* Bonds are unchanged with the 2-year yielding 4.43% and the 10-year 2.24%.

Today’s Known Events

We have earnings coming in again:

* 3M ($MMM ) just beat on top- and bottom-line estimates and the stock is moving higher in the pre-market;

* Colgate-Palmolve ($CL ), Bristol-Myers Squibb ($BMY ), and Newell Brands ($NWL ) are also due out before the open at 0930.

Personal Consumption Expenditures, also known as the PCE Deflator, is out at 0830. This is the Fed’s preferred inflation gauge. Economists who were surveyed expect the headline PCE to print at 0.1% month-over-month, while Core PCE, which excludes food and energy, is expected at 0.2%. Both of these would be 0.1 percentage points worse than the previous month. They would leave annualized headline PCE at 2.4% after printing at 2.6% last month whilst annualized Core PCE would be 2.5% after 2.6% last month.

Worth mentioning that we’ve already had a Consumer Price Index release this month. To recap, the headline CPI dropped 0.1% MoM whilst the Core CPI was up 0.1%. So basically, negligible amounts. For all intents and purposes, inflation is no longer a real threat.

The Bottom Line©️

So would expect the PCE Deflator today to be a bit of a non-event. The Fed has already effectively declared victory over inflation and telegraphed that their next move will be a reduction in interest rates, probably at the September FOMC meeting.

Where that leaves stocks is anybody’s guess. These seem to be doing their own thing this week, whipsawing all over the place with no clear cause for their movement. Guess they call that volatility. Small caps have quietly held up — as have consumer staples stocks, as discussed yesterday — but tech has gotten beaten up. The Nasdaq is down 3% on the week.

The fact that small caps have held up tells us investors are still interested in taking on risk. You figure that could bode well for the suddenly-beleaguered tech sector…

Stocks on the Contrarian Radar

Have AI chip stocks gotten cheap yet? Nvidia ($NVDA ) dropped another 1.7% yesterday. It’s still up more than 2x from the start of the year and trades at >40x forward earnings and 32x (!) forward sales. So no, that does not sound cheap. And as NVDA goes, so go other AI chip stocks.

None of this prevented The Contrarian from adding to his stake in Camtek ($CAMT ) yesterday. That stock got pummeled even more than NVDA, down 7% on the day. Suffice it to say The Contrarian now regrets this move. It is thankfully a very small position and not one he will add to at any point in the foreseeable future.

Thing is, valuations ultimately matter little when it comes to these growth stocks. It’s all about the story. Do investors still buy the AI story? Talk of AI is still everywhere, even if the stocks are well off the peaks. We’ve had tech selloffs before this cycle. Is this another one of those temporary blips? Again, small caps seem to be telling us that it is. So far, at least…

Newell Brands (NWL ) is another stock The Contrarian regrets buying but it has finally started to rebound. The valuation here is pretty compelling: 12x forward (as in today’s) earnings, 0.34x forward sales, 0.85x book, and 4x forward cashflows. The position is too large for The Contrarian to add to it should today’s earnings usher in another round of selling. Unless that is, it gets really cheap…

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks got beaten up yesterday, apparently in (over)reaction to earnings the previous evening from Google ($GOOG ) and Tesla ($TSLA ). Tech stocks saw the worst of it, but it was a bad session all around. Nasdaq and S&P 500 had their worst day since 2022. As we look at our board of indicators for signs of direction at 0655, risk-off appears to be in order:

* Stock index futures are pointing lower, with tech leading the drop again. The Nasdaq is down 0.4% with S&P futures down 0.2%;

* Commodities are dropping. WTI crude oil is down almost 2% to trade around $76/barrel, the lowest level in weeks. Copper is down 0.7%. Gold and silver are dropping as well, gold by 1.8%;

* Cryptos are selling off too. Bitcoin is down 3.5% to trade around $64,000. Ethereum, which just yesterday (right?) saw the launch of spot ETFs, is down 9%;

* Bonds are seeing bids. Flight to safety? The 2-year yield is down 6 basis points to 4.35% whilst the 10-year is down 7bps to 4.22% (yields move inversely to prices).

Today’s Known Events

Earnings are once again the major story. Some of these have already come in. The weird thing is that investors appear to be punishing stocks even after positive reports:

* Swiss chipmaker STMicroelectronics ($STM ) cut its revenue outlook and that stock is dropping in the pre-market, to the tune of 12% at the time of this writing;

* Hasbro ($HAS ) beat on top- and bottom-line estimates and that stock is rising in the pre-market, up 2%;

* Honeywell ($HON ) beat top- and bottom-line estimates and appears to have raised guidance but the stock is still being punished in the pre-market, down 7%;

* Royal Caribbean ($RCL ) beat estimates and reinstated its dividend. It also appears to have raised guidance but here too investors are punishing the stock, which is down 3%;

* Southwest Airlines ($LUV ) also beat estimates but here too the stock is dropping, down 4% at the time of this writing;

* American Airlines ($AAL ), RTX ($RTX ), Keurig Dr. Pepper ($KDP ), New York Community Bancorp ($NYCB ), and Harley-Davidson ($HOG ) are all due before the open at 0930.

We’re due to get a first look at second-quarter GDP at 0830. Economists who were surveyed expect growth of 2.0%, an improvement over the 1.4% seen in Q1. There are a bunch of numbers in this report, not least of which a reading on personal consumption expenditures. This is expected to increase 2.6% for the quarter, down from the 3.1% reading seen for Q1. There is a Core PCE figure as well, which is expected to come in at 2.7% versus 3.7% in Q1.

Seeing how it’s Thursday we’ll also get initial jobless claims at 0830. The expectation here is for 237,000 new claims, down a bit from the 243,000 recorded last week but north of the four-week average which is 235,000.

The Bottom Line©️

Chances are, the GDP report won’t impact markets much. It usually doesn’t because markets are forward-looking beasts and last quarter’s GDP is, well, for last quarter. Having said that, the rate of change is of course ever important when it comes to economic growth. So figure this will matter, even if there are probably other ways economists can extrapolate economic growth without depending on the official government data.

What the existing data around housing, employment, and retail activity tells us is there are no immediate signs of full-on economic retrenchment. Certainly not for the full three months ending June 30. Not that that has stopped doomers, of course. There’s already some talk of a possible rate cut at next week’s Fed meeting. This is in all likelihood premature. Fed fund futures, which are usually pretty good about predicting these things, are pointing to a 93% chance that the Fed leaves its key interest rate unchanged at the FOMC meeting that concludes on Wednesday.

It’s worth noting that consumer staples stocks held up well yesterday. Johnson & Johnson (JNJ ) actually gained 2.5% on the day. So did General Mills (GIS ). Hershey (HSY ) gained 1% with Kraft Heinz (KHC ) right behind it. Clorox (CLX ) and Colgate-Palmolive (CL ) finished green. Even Pfizer (PFE ) rallied, up 1.5%.

What that tells us is that for all the drama surrounding yesterday’s sell-off, it was not a liquidity event where investors sell everything to generate cash. As the movement in the above stocks demonstrates, investors were happy to put the cash into other risk assets. That in and of itself makes yesterday’s selloff look more like a blip than a secular trend. However, this morning’s movement looks suspiciously more like traditional risk-off, with bonds rallying…

Stocks on the Contrarian Radar

Might this be a buying opportunity for AI chipmakers? It might, if you buy the narrative that these things are going to fundamentally transform the order of things — and more importantly that corporations are going to keep ordering these things. Nvidia ($NVDA ), which is very much the poster child of this whole AI chip craze, is down 23% from its all-time high. That’s already bear market territory. Is that an overreaction? You tell me.

Camtek ($CAMT ), one of our ‘undiscovered’ AI chip names, has suffered a similar fate. This one is in the portfolio already. It’s very much a NVDA proxy, but The Contrarian may add to his (very small) position if it sinks more.

Lamb Weston ($LW ) was just discussed in this space on Monday. The Contrarian felt it wasn’t cheap enough then. Well, it reported earnings yesterday and those were awful. Management cautioned of “another challenging year” ahead. More disconcerting were the CEO’s comments about restaurant traffic:

“The operating environment has changed rapidly over the past 12 months as global restaurant traffic and frozen potato demand softened due to menu price inflation continuing to negatively affect global restaurant traffic.”

Lamb Weston CEO Tom Werner. Source: press release

Investors punished the stock, to the tune of a 28% (!) drawdown yesterday. Does that make it cheap? Maybe not if management expects these issues to “persist through much, if not all, of fiscal 2025,” as the CEO said.

But forget LW for a minute. If restaurant traffic is dropping, and this persists, then doesn’t that speak to consumers pulling back on discretionary spending? If only we had a major restaurant chain that just reported earnings? Wait, we do! Chipotle ($CMG ) reported yesterday and told a different story. (No, Chipotle doesn’t buy frozen potatoes, but it is certainly a restaurant chain that would speak to a drop in restaurant traffic if indeed there is one. And, well, CMG’s earnings were stellar. Same-store sales rose 11% for example. That doesn’t sound very recession-y).

So what’s going on here? Is this a company-specific issue? Remember that companies will blame macro factors for lousy performance. Sometimes these macro factors are indeed an overhang on the entire economy. Other times, it’s just an excuse for the company losing business. Which one is this?

The market for its part does not seem concerned about restaurants. The Chipotle news even sent other restaurant chains higher yesterday. Yes, even McDonald’s ($MCD ), which unlike Chipotle definitely purchases large quantities of frozen potatoes.

So either investors aren’t doing their homework (and didn’t read LW’s earnings report) or LW’s observations are misplaced, perhaps intentionally, to detract from company-specific issues. Either way, it doesn’t speak well for going long LW here. So The Contrarian will sit this one out. He will be watching restaurant chain earnings though. McDonald’s and Shake Shack ($SHAK ) report next week…

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Yesterday was pretty uneventful, though the Russell 2000 which tracks small caps did manage to rally by 1%, recapturing levels from last week. After the close Tesla ($TSLA ) earnings fell short of estimates, causing the stock to drop overnight. Google ($GOOG ) earnings beat estimates but that stock is down in the pre-market as well.

As we look at our board of indicators for signs of direction at 0640 there is little going on other than the drop in tech:

* Stock index futures are pointing to a lower open with tech leading the drop. Nasdaq futures are down 1% with the S&P 500 down 0.7%;

* Commodities aren’t doing much. WTI crude oil is up 0.8% to trade around $77.50/barrel. Copper is up 0.2%;

* Cryptos are unchanged. Bitcoin trades around $66,500;

* Bonds aren’t doing anything either. The 2-year yields 4.44% whilst the 10-year yields 4.25%.

Today’s Known Events

Several earnings today to kick us off again:

* Luis Vutton Moët Hennessy (LVMHF) reported first-half earnings that featured softer sales due to Chinese consumers pulling back. Never a good sign for luxury goods makers, of which LVMH is very much the poster child. LVMH is down 4% in Paris trading;

* AT&T ($T ) just reported mixed results and the stock is moving higher in the pre-market;

* Lamb Weston ($LW ) and General Dynamics ($GD ) also report before the open at 0930;

* The bigger names report after the close again: Ford ($F ), Chipotle ($CMG ), IBM ($IBM ), Las Vegas Sands ($LVS ), United Rentals ($URI ), Whirlpool ($WHR ), O’Reilly Automotive ($ORLY ), and Waste Management ($WM ) are the highlights.

We finally get some fresh economic data releases today. In chronological order:

* Purchasing Manager Indexes from S&P Global, out at 0945. This is the so-called flash reading, the first one of the month, which makes it more important as subsequent readings just confirm what’s in the first. Economists who were surveyed expect a reading of 51.6 for Manufacturing PMIs, identical to last month, while Services is expected to come in at 54.7, a bit lower than the 55.3 recorded at the last reading. The 50 level separates expansion from contraction.

* The Bank of Canada also decides on interest rates at 0945. The BOC is widely expected to cut its key policy rate to 4.50% from 4.75%.

* New home sales are out at 1000. The expectation is for 639,000 transactions, an increase from the 619,000 recorded last month.

The Bottom Line©️

Whatever had investors concerned last week appears to be forgotten and a sense of lethargy appears to have set in. The dog days of summer may be upon us. Earnings will drive individual stocks of course, but where the broader market is concerned things are pretty quiet.

Maybe Friday’s PCE Deflator will change that? We have the Fed next week, plus more earnings. In all likelihood earnings will continue to be the story here.

Stocks on the Contrarian Radar

* Luis Vutton Moët Hennessy (LVMHF) is now flirting with 52-week lows after the earnings sell-off. The stock is down 22% on the year. As an owner of some of the world’s finest fashion and wine/champagne brands (including Dom Perignon, Christian Dior, TAG Heurer and Tiffany, which it acquired a few years ago) this is the type of stock that could make for a solid addition to the Contrarian portfolio were it to get cheap enough. Unfortunately, that is not yet the case. LVMH trades at 23x earnings and almost 4x sales. More importantly, it has very much become a proxy for Chinese consumers, which is not the type of thing one wants to put money on (literally);

* Visa (V ) earnings yesterday disappointed, leading to a small sell-off and vindicating the power of Barron’s as a contrarian indicator. The stock is now down on the year. Results weren’t even that bad, with earnings meeting (though not surpassing) estimates and revenues falling short. This was uncharacteristic as V usually beats estimates, which may be why the market dumped the stock overnight. Management kept guidance unchanged. The Contrarian did take the opportunity (discussed yesterday in this space) to buy more V in the aftermarket — once at $259 and once at $256. The valuation is a little less rich now, but still by no means cheap. Still, The Contrarian would love an opportunity to add to the position. If it sinks below $255 he will set up a limit order to buy more.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, July 23. The Bottom Line segment of today’s podcast starts at (2:41) for listeners who want to skip ahead. Be sure to check out the new ‘Stocks on the Contrarian Radar’ segment at the bottom of this page and (4:08) on the podcast.

State of Play

Stocks rallied yesterday, led by tech. As we look at our board of indicators for signs of direction at 0640, all is quiet ahead of a major day of earnings:

* Stock index futures are basically flat with no major US index moving more than 0.2% from the break-even point;

* Commodities aren’t doing anything. WTI crude oil is unchanged trading around $78/barrel while copper is down 0.6%;

* Cryptos, too, are unchanged. Bitcoin is trading around $67,000;

* Bonds not doing anything either. The 2-year yields 4.51% whilst the 10-year yield 4.23%.

Today’s Known Events

No economic data releases to speak of again today. Earnings are the story. We’ve had several of these come in already so let’s get you caught up:

* United Parcel Service (UPS ) missed earnings across the board and that stock is dropping in the pre-market, down 6% at the time of this writing;

* Spotify ($SPOT ) earnings were more positive and that stock is rallying, up 13% in the pre-market;

* GE Aerospace ($GE ) earnings were mixed but that stock, too, although just a bit (1%);

* General Motors ($GM ) beat earnings and raised guidance as that stock is up 6% in the pre-market;

* Kimberly Clark ($KMB ) beat estimates and raised guidance;

* Coca Cola ($KO ), Lockheed Martin ($LMT ), Freeport McMoran ($FCX ), and Philip Morris ($PM ) are also due before the open.

After the close come the main events, in the form of Tesla ($TSLA ), Google ($GOOG ), Visa ($V ), and Texas Instruments ($TXN ), among others.

State of Play

President Biden finally quit the presidential race yesterday, endorsing Vice President Harris. This does not appear to have affected betting markets any. For our purposes it doesn’t have much of an economic impact either, seeing how a Harris administration would likely just carry on the lion’s share of Biden’s policies and Harris (like Biden) trails Trump in the polls. As we look at our board of indicators for signs of direction at 0645, risk appetite appears to be awakening a bit:

* Stock index futures are pointing to a higher open, led by tech — a welcome change over the past two weeks. The Nasdaq is up 0.9%. S&P 500 futures are 0.5% to the good. Small caps are largely unchanged with the Russell 2000 up 0.2%;

* Commodities are moving lower. WTI crude oil is down 0.3% to trade around $78.40/barrel. It was in the $80s all of last week. Copper is down 0.4%;

* Cryptos aren’t doing much, with Bitcoin up less than 1% to trade around $67,500;

* Bonds are unchanged. The 2-year yields 4.52% whilst the 10-year yields 4.22%.

Today’s Known Events

There are no economic data releases to speak of today, but there are a few earnings:

* Ryanair ($RYAAY ) reported disappointing numbers overnight after the European budget airline warned of a drop in revenues. That stock is down 12% in London trading;

* Verizon Communications (VZ ) reported mixed results but importantly reaffirmed full-year guidance. The stock is still down a bit in the pre-market, to the tune of 2% at the time of this writing;

* NXP Semiconductors (NXPI ) is the main draw after the close, due at 1610;

* Bank of Hawaii ($BOH ) is due to report before the open at 0930;

* After the close at 1600 we’ll also hear from Cleveland Cliffs ($CLF ), Nucor ($NUE ), and Logitech ($LOGI ), among others.

The Bottom Line©️

Last week was actually the worst for the S&P 500 since April. Damage was even worse to tech stocks. It will be interesting to see how things unfold this week. Earnings should be the major driver, with Tesla ($TSLA ) and Google ($GOOG ), two of the ‘Mag 7’ stocks, reporting tomorrow. We’ll get a first look at first-quarter GDP on Thursday and the always-important PCE Deflator, the Fed’s preferred inflation gauge, on Friday morning.

Would not expect the Biden/Kamala news to impact markets for the aforementioned reasons. Donald Trump remains the front-runner, which may have played a role in spooking investors a bit as reported last week.

Stocks on the Contrarian Radar

Is Ryanair ($RYAAY ) a buy after this earnings sell-off? The stock trades at <11x forward earnings. Airline stocks have had a rough time of it lately and Ryanair is just the latest here. It is not down as much as Delta Air Lines ($DAL ) or Southwest ($LUV ) over the last month, so there may be some catching up to do from a strict momentum basis. The guidance is not a great sign either. One suspects this thing might get cheaper still. The great travel consumer trend may have peaked this summer. We’ll see. The Contrarian is very cautious about any airline stocks due to the industry’s paper thin margins and general beta properties (trailing consumer spending) so he will not be looking to buy.

Lamb Weston ($LW ), which sells potatoes and other food stuff, is down 30% over the past year and now trades at 14x forward earnings. The Contrarian likes consumer staples companies a great deal, though a 30% drawdown may speak to something more secular affecting this stock. One suspects it is the slowdown in China, which has impacted other food staples and soft commodities like wheat and soybeans. There is also McDonald’s ($MCD ), a major purchaser of potato products which has taken on water lately. On a 1.7x price-to-sales ratio and 6x price-to-book, LW is not yet cheap. Nor does it appear to be much of a bargain when compared to peers Tyson Foods ($TSN ) or Dole ($DOLE ).

Finally, Verizon ($VZ ) is a late addition after the stock dropped due to earnings. This too is another staples stock that can be expected to outperform during a downturn (people are not going to cancel their cell phone contracts). At the time of this writing, VZ is down 6%. An overreaction to earnings? Management reaffirmed its outlook for the year. Revenue figures fell a little short of forecasts. Sounds like an overreaction. VZ trades at <10x forward earnings but is still relatively expensive for a staples stock on a price-to-sales basis, at 1.3x forward sales. Also, the stock is still positive for the year (barely, at +3.5% at the time of this writing). The 6% dividend yield is certainly enticing. The Contrarian will be watching this one very closely. It may just be worth adding to the portfolio…

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Friday, July 19. The Bottom Line segment of today’s podcast starts at (3:02) for listeners who want to skip ahead. Be sure to check out the brand new ‘Stocks on the Contrarian Radar’ segment at the bottom of this page and (5:06) on the pod…

State of Play

Stocks dropped yesterday as tech got beaten up. The Nasdaq fell by almost 3% for its worst day since late 2022. The selling was not broad-based however as Dow Industrials closed at fresh record highs. As we look at our board of indicators for signs of direction at 0640, it’s mostly risk-off:

* Stock index futures aren’t doing much but tech is encouragingly showing some signs of life with the Nasdaq up 0.4%. S&P 500 and Russell 2000 are unchanged;

* Commodities are dropping with copper down 1.3% and WTI crude oil down 0.3% to trade around $81/barrel;

* Cryptos are down a bit with Bitcoin off 1% to trade around $64,500;

* Bonds are seeing a little bit of selling as well, with the 2-year yield up 3 basis points to 4.46% whilst the 10-year is up 4bps to 4.18% (yields move inversely to prices).

Today’s Known Events

Earnings are once again the main story:

* Taiwan Semiconductor ($TSM ) beat earnings across the board, citing demand for AI chips, so maybe that story isn’t quite dead yet after all. However the stock is barely moving in the pre-market. This after dropping 8% yesterday;

* Domino’s Pizza ($DPZ ) reported mixed earnings and that stock is getting punished in the pre-market, down 8% at the time of this writing;

* D.R. Horton ($DHI ) and Snap-On ($SNA ) are due to report before the open at 0930;

* After the close at 1600 we’ll hear from Netflix ($NFLX ).

It’s Thursday so we’ll get initial jobless claims at 0830. Economists who were surveyed expect 229,000 new claims, an increase over the 222,000 recorded last week at this time, but still below the four-week average of 234,000.

Philly Fed Manufacturing Index is out at 0830 as well. The expectation here is for a reading of 2.7, which is an improvement over the 1.3 recorded last month.

The European Central Bank decides on interest rates at 0815. The ECB is widely expected to keep its key policy rate at 4.25%.

The Bottom Line©️

Is the move in tech a blip? Or signs of something more sinister? The fact that other parts of the market are doing well means this isn’t an all-out move to risk-off. It may be a ‘sector rotation’ but frankly that may be far-fetched as well. Two days do not a sector rotation make.

Remember that financial media will hop onto any narrative that is likely to get clicks, regardless if it is real or not. Not saying this ‘rotation out of tech’ story can’t turn out to be real, but it is certainly very premature at this point.

Stocks on the Contrarian Radar

AI chip names are still front and center after yesterday’s sell-off. ASML Holdings ($ASML ) was the worst offender, dropping 13% on the day, but Applied Materials ($AMAT ), Marvell Technology ($MRVL ), and Lam Research ($LRCX ) all declined by double-digit percentages as well.

The Contrarian did finally pull the trigger on one of his ‘undiscovered’ AI chip names, specifically Camtek ($CAMT ) at a price of $115.50/share. The stock is still quite expensive trading at >40x forward earnings and 12x sales. Its next earnings are due Aug. 8. As you can see this thing is effectively a Nvidia ($NVDA ) proxy:

Finally Domino’s Pizza ($DPZ ) also has The Contrarian’s attention after this beat down after earnings. But the stock still trades at 29x forward earnings, which is hardly cheap. However it may be added to the watchlist if this continues. Demand for lousy pizza may be limited, but it certainly has space for one leader. Plus Domino’s wings are pretty good and their deals are great. Yes, even a pizza connoisseur like The Contrarian has had to make good of Domino’s when he found himself in areas lacking the fare he is accustomed to.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, July 16. The Bottom Line segment of today’s podcast starts at (4:10) for listeners who want to skip ahead. Be sure to check out the brand new ‘Stocks on the Contrarian Radar’ segment at the bottom of this page and (6:06) on the podcast.

State of Play

Stocks rallied yesterday, led by small caps again, thus continuing the trend from last week. Jerome Powell said the Federal Reserve would not need to wait for inflation to return to 2% before cutting rates, the clearest indication yet that we are getting a rate cut in September. As we look at our board of indicators for signs of direction at 0630, risk-on seems to be the story again:

* Stock index futures are quiet other than small caps, which continue to surge higher. The Russell 2000 is up 1.3%. S&P 500 and Nasdaq are unchanged;

* Commodities are retreating a bit, with WTI crude oil down 0.7% to trade around $80/barrel and copper down 0.4%;

* Cryptos are gaining a bit of ground, with Bitcoin up 1% to trade around $63,300. Remember that Bitcoin bear market? Yeah, me neither;

* Bonds are gaining, buoyed by Powell’s comments. The 2-year yield is down 4 basis points to 4.42% whilst the 10-year is down 5bps to 4.18% (yields move inversely to prices).

Today’s Known Events

We have some earnings to kick things off:

* Bank of America ($BAC ) just beat estimates and the stock is rising, apparently shrugging off lower net-interest income and a rise in loan loss provisions;

* UnitedHealth ($UNH ) earlier beat top- and bottom-line estimates and appears to have reaffirmed guidance. The stock isn’t moving on this;

* Morgan Stanley ($MS ) and Charles Schwab ($SCHW ) are also due out before the open.

Retail sales are out at 0830. This is a crucial reading on the state of the US consumer and likely the biggest economic data release of the week. Economists who were surveyed expect a drop of 0.2% month-over-month to headline retail sales versus an increase of 0.1% last month. Core retail sales, which exclude automobiles, are expected to increase 0.1% after a drop of 0.1% last month. There was unfortunately no survey of the annualized figure but last month it was 2.3% for headline retail sales.

We also get import prices at 0830. The expectation here is for an increase of 0.2% MoM . There’s obviously a lot that goes into this figure, including central bank policies, supply and demand, etc. etc.

Retail inventories are out at 1000 and are expected to have held steady in May after an increase of 0.3% the previous month.

State of Play

‘Twas an eventful weekend in the US where some will say the election will have been decided (if it wasn’t already). As we look at our board of indicators for signs of direction at 0620, risk on appears to be the mood of the day:

* Stock index futures are pointing to gains led by small caps again, with the Russell 2000 up 1.1%. Nasdaq and S&P 500 futures are about 0.4% to the good;

* Cryptos are gaining ground as well with Bitcoin up 4% to trade around $62,700;

* Commodities aren’t doing much. WTI crude oil is trading around $81/barrel, unchanged. Copper is down about 0.8%, this likely due to overnight economic data out of China;

* Bonds are also flat. The 2-year yields 4.45% whilst the 10-year yields 4.22%.

Today’s Known Events

Some more earnings to start us off:

* Blackrock ($BLK ) just beat an top- and bottom-line estimates and that stock is moving a bit higher in the pre-market;

* Goldman Sachs ($GS ) is imminent

Fed Chair Jerome Powell returns to the spotlight today, this time at the Economic Club of Washington, D.C., where he will have a conversation with David Rubenstein. That will be broadcast live on the organization’s website here. Would not expect Powell to say anything groundbreaking here though you can certainly keep an eye on Fed fund futures, now pricing in a 90% chance of a rate cut at the Sept. 18 FOMC meeting.

The Bottom Line©️

Small caps continue to be the place to be for some reason. This time large caps are coming along for the ride. Earnings should be the driver though for today it looks like we have this Trump bounce also affecting things. The concept here is that the events of the weekend will help Trump’s popularity, leading him to be re-elected, which presumably is good for markets. Trump Media ($DJT ) is as good a gauge of that as anything, and that stock is up 50% in the pre-market.

Bears and permadoomers can point to an overnight report from Burberry ($BURBY), which just issued a profit warning while scrapping its dividend. That stock is down 15% in London trading. The counter-argument is that fashion is cyclical and when was the last time you saw somebody in a Burberry coat? So this could be company-specific rather than a more secular trend.

Don’t fight the tape. If investors want to take on risk then that is what investors are going to do. Cryptos are once again a good gauge of that. When it comes to earnings, these don’t really get interesting until the middle of the week when we get Johnson & Johnson ($JNJ ), Netflix ($NFLX ), Taiwan Semiconductor ($TSM ), and ASML ($ASML ).

Stocks on the Contrarian Radar

Guns and ammunition stocks, for reasons that should be obvious after the events of this weekend. There are about a dozen of these that trade publicly in the US, about half of which appear to be pure plays:

Storm Ruger ($RGR ) is a ‘pure play’ gun manufacturer and one of the most prominent names. The stock has gone nowhere in years so it could surely use the kick in the rear end. (Full disclosure: this is one of The Contrarian’s major portfolio holdings).

Smith & Wesson Brands ($SWBI ) and Vista Outdoor ($VSTO ) are two other ‘pure plays’ on weapons manufacturing.

Ammunition manufacturers are Olin (OLN ) and the appropriately-named AMMO Inc. (POWW ).

Then there are retailers like Sportsman’s Warehouse ($SPWH ), Big Five Sporting Goods (BGFV ), and Outdoor Brands ($AOUT ), which get lumped with guns and ammos just because they happen to sell, well, guns and ammo (along with a lot of other stuff. So hardly a pure play).

The rest are mostly ancillary. Axon Enterprises ($AXON ) is best known as a provider of Tasers, making it the only one of the bunch that can claim to have successfully morphed into a verb. National Presto Industries ($NPK ) manufactures some “defense products” but also does a bunch of housewares. SoundThinking ($SSTI ) is more of a security firm that detects guns and gunfire (wouldn’t gunfire kind of be obvious? Loud and smoky. Anyway…)

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks put in a broad-based rally yesterday, with major indexes surging into the close to gain north of 1% on the day. The S&P 500 and Nasdaq closed at fresh record highs yet again. As we eye our board of indicators for signs of direction at 0645, all is quiet ahead of the CPI at 0830:

* Stock index futures are doing nothing at all, with no major US index moving more than 0.1% from the break-even point;

* Commodities aren’t doing anything either, with WTI crude oil unchanged at $82.50/barrel and copper prices flat;

* Cryptos: also flat. Bitcoin changes hands around $58,200;

* Bonds are also waiting for the CPI. The 2-year yields 4.62%, the 10-year 4.28%.

Today’s Known Events

It’s all about the Consumer Price Index today, out at 0830. Economists who were surveyed expect headline CPI to increase 0.1% month-over-month, after no change at the last reading. That would drop annualized headline CPI to 3.1% from 3.3%.

Core CPI, which excludes food and energy, is expected at 0.2% MoM, the same as last month, which would keep the annualized figure at 3.4%.

It’s Thursday so we’ll also get initial jobless claims at 0830. The expectation there is for 236,000 jobs, effectively identical to the 238,000 recorded last week and right in line with the four-week average which is 238,500.

We have earnings as well but those are covered in the stocks section below.

The Bottom Line©️

Fed Chair Jerome Powell yesterday cited “modest further progress” in the battle with inflation. That may be a generous account of what’s been going on, seeing how annualized CPI is still advancing at a 3% clip. In fairness, the Fed’s preferred inflation gauge is the Personal Consumption Expenditures, which looks a little better than the CPI (around 2.6% annualized headline PCE).

The CPI prints first each month though, and usually sets the tone for the PCE. Which is why this report is more closely watched. Markets seem to be in a buoyant mood after yesterday’s rally, but a hotter-than-expected CPI can certainly put an end to that party, and quick. Just something to look forward to, despite all the Fed’s dovish talk.

Stocks on the Contrarian Radar

Airline stocks are getting beaten up in the pre-market after Delta Air Lines (DAL ) missed earnings estimates. DAL is down some 8% at the time of this writing. American Airlines (AAL ), Southwest (LUV ), and United (UAL ) follow close behind. This may be a bit of an overreaction as DAL reaffirmed guidance, but airlines are a tough business. Margins are paper thin and the smallest thing can cause the whole thing to get out of whack. DAL does boast the best credit card partnership in the business, which some have actually deemed more valuable than the airline itself. Now Delta does look cheap, trading at just 7x earnings and 0.5x sales. Buying opportunity? You tell me. The Contrarian will likely sit this one out just because of where we’re at in the business cycle.

PepsiCo (PEP ) just reported mixed earnings and importantly lowered part of their guidance and the stock is down in the pre-market. It was already taking on water and is down 11% over the last year. Pepsi is one of those consumer staples you always want to keep an eye on. It has never gotten cheap enough for The Contrarian’s taste. Is this an opportunity to jump in? It traded at 20x earnings and 2.4x sales before today’s announcement. It’s only down a bit in the pre-market so would not expect those valuations to jump very much.

Visa ($V ), one of The Contrarian’s favorite companies (and stocks) of all time, has been dropping lately, to around $260 from a peak of $290. There doesn’t seem to be any clear catalyst for this move, which would normally make for a good buying opportunity. Over the last year V has trailed the S&P 500, gaining just 10% while the S&P added close to 30%. Unfortunately this still hasn’t made V cheap. It trades at 27x forward earnings and almost 15x forward sales. As wonderful as this company is with its moat and everything else, that is still too rich for The Contrarian’s blood. He is proud to have bought with an average purchase price of $180 and wishes he owned more. But he can’t justify adding at these prices.

Papa John’s ($PZZA ) is trading right near multi-year lows. The pizza sucks, but if people keep buying it then the business must be steady, right? At 17x forward earnings it is not particularly cheap. The Contrarian will probably not buy this stock, probably ever, if for no other reason than he cannot justify bankrolling such a lousy maker of one of the world’s great foods.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, July 10. The Bottom Line segment of today’s podcast starts at (2:05) for listeners who want to skip ahead. Be sure to check out the new ‘Stocks on the Contrarian Radar’ section at the bottom of this page and starting at (4:31) in the podcast recording.

State of Play

Stocks did little yesterday as Fed Chair Jerome Powell again put forward the case for rate cuts. As we eye our board of indicators for signs of direction at 0635, it looks like there may be some risk appetite developing:

* Stock index futures are advancing, led by small caps. The Russell 2000 is up 0.4% with the Nasdaq up 0.3% and S&P 500 right behind that;

* Cryptos continue to recover, with Bitcoin up 1.5% to trade around $58,600;

* Commodities aren’t doing anything. WTI crude oil is unchanged at $81.50/barrel. Copper is unchanged;

* Bonds are flat. The 2-year yields 4.62% with the 10-year yielding 4.28%.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, July 9. The Bottom Line segment of today’s podcast starts at (1:55) for listeners who want to skip ahead. Check out the brand new ‘stocks on the contrarian radar’ section at the bottom of this page.

State of Play

Stocks did very little yesterday as anticipated, with the S&P 500 and Nasdaq closing at record highs again. As we eye our board of indicators for signs of direction at 0645, there is very little to go by:

* Stock index futures are gaining a bit of ground, led by tech. The Nasdaq is up 0.4% with S&P futures up 0.2%;

* Commodities are flat. WTI crude oil is unchanged at $82/barrel. Copper is unchanged;

* Cryptos aren’t doing anything either. Bitcoin sitting on $57,400;

* All is quiet in bond land as well. The 2-year yields 4.63% whilst the 10-year yields 4.29%.

Today’s Known Events

Just one, which is Fed Chair Jerome Powell’s testimony on Capitol Hill at 1000. It’s the first day of a two-day testimony with today’s being in front of the Senate Banking Committee. Tomorrow is likely to just repeat what was said today, though some of the questions tomorrow may be even more idiotic than the ones posed today. This because the House of Representatives, where tomorrow’s hearing takes place, are even less educated on these matters than their senatorial colleagues.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, July 8. The Bottom Line segment of today’s podcast starts at (3:41) for listeners who want to skip ahead.

State of Play

This weekend saw elections in France and cryptos enter a bear market. As we eye our board of indicators for signs of direction at 0645, there is not much in the way of clues:

* Stock index futures are unchanged with only small caps moving from the break-even point. The Russell 2000 is up 0.2%, others flat;

* If you’re curious about how the election results are being greeted in France, the CAC 40 Index in Paris is up 0.2%;

* Commodities are dropping a bit, despite news of that hurricane reaching land in Texas. WTI crude oil is down 1% to trade around $82/barrel. Copper is unchanged;

* Cryptos are catching their breath after a tumultuous couple of days. Bitcoin is unchanged trading at $57,400;

* Bonds are dropping a bit, with the 2-year yield up 3 basis points to 4.63% whilst the 10-year is up 4bps to 4.30% (yields move inversely to prices).

State of Play

Welcome back from the July 4 holiday. We had elections in the UK and Bitcoin enter a bear market after this latest turn for the worse. As we eye our board of indicators for signs of direction at 0555, there isn’t much action outside the aforementioned cryptocurrencies:

* Things are ugly there, with Bitcoin down another 5% to trade below $54,500. Ethereum is down 9%, Solana 6%;

* Stock index futures are so far unchanged with the exception of small caps. The Russell 2000 is down 0.6%;

* Commodities are mixed. Copper is rallying, up more than 2%. WTI crude oil is unchanged trading around $84/barrel;

* Bonds are unchanged. The 2-year yields 4.69% whilst the 10-year yields 4.34%.

Today’s Known Events

It’s all about non-farm payrolls, out at 0830. Economists who were surveyed expect 194,000 new jobs, which would be a pretty significant decrease from the 272,000 recorded last month. Private payrolls are expected to be even lower, at 160,000 after 229,000 last month. That would leave the unemployment rate unchanged at 4.0%.

As you can see, non-farm payrolls have been trending lower over the last 18 months:

The Bottom Line©️

After Powell’s comments on Tuesday and non-manufacturing PMIs on Wednesday, the market will be expecting more softness from today’s NFPs. If that happens, it should help bonds and stocks because it will further help the case for rate cuts in September. Fed fund futures are now pricing in a 67% chance of that happening, up from below 60% just a week ago.

Where Bitcoin is concerned, these have so far not worked as a leading indicator for stocks on the way down (it’s been a different story where uptrends in the stock market are concerned, going back to the bank failures last spring). The S&P and Nasdaq closed at record highs Wednesday even as Bitcoin dropped. Yes, BTC’s descent is more than a month in the making already. As you can see, the S&P has so far not only not played along, but actually moved inversely:

And so we must ask if this new Bitcoin bear market is just cryptos being cryptos or perhaps a sign of something more sinister. It makes sense that cryptos would be a leading indicator for stocks seeing how these are completely synthetic securities with no underlying value (sorry, it’s true. other than an algorithm) that literally trade on the whims of investors. Shouldn’t that be a reflection of the market’s broader psychological state? And shouldn’t that eventually impact other segments of the market?

So far it hasn’t. Time will tell if this logic holds up on the way down the same way it has on the way up. The Contrarian, for one, is nervous.

One Year Ago…

Fed fund futures were pricing in an 86% chance of a rate hike at last July’s FOMC meeting (Daily Contrarian, July 5, 2023).

…And What Happened

Indeed the Fed did hike rates, by 25bps as anticipated at the July 26, 2023 meeting. It would be the last time the Fed touched the interest rate dial. Every meeting since then has seen no change to the key policy rate. The same is expected for this month’s meeting, according to Fed fund futures.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, July 3. The Bottom Line segment of today’s podcast starts at (3:08) for listeners who want to skip ahead.

State of Play

Stocks finished higher yesterday after Fed Chair Jerome Powell provided some unexpectedly dovish comments. As we look at our board of indicators at 0630 things are a bit all over the place ahead of a holiday-shortened session (early close today):

* The major move is in cryptos and that is negative. Bitcoin is down 4% to trade around $60,000. BTC hasn’t been below $60k since late February;

* Stock index futures aren’t doing anything with no major US index moving more than 0.2% from the break-even point. Major moves from Tesla ($TSLA ), up almost 4% in the pre-market, and Paramount Global ($PARA ), the latter on news of a revised buyout;

* Commodities are showing some signs of life with copper up 1.4% and silver up 2.5%. WTI crude oil is unchanged at $82.70/barrel;

* Bonds are unchanged. The 2-year yields 4.76% whilst the 10-year yields 4.43%.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, July 1. Happy Canada Day! The first trading day of the third quarter. The Bottom Line segment of today’s podcast starts at (3:22) for listeners who want to skip ahead.

State of Play

The PCE Deflator came in exactly as anticipated on Friday but that didn’t really move markets. Seems there are other things going on, including a possible overhang of worry over peak AI already. As we look at our board of indicators at 0645, there are no clear signs of direction:

* Stock index futures are flat, with no major US index moving more than 0.1% from the break-even point;

* Commodities aren’t doing anything either. WTI crude oil is up 0.5% to trade close to $82/barrel. Copper is up 0.5%;

* Cryptos are showing a few signs of life, with Bitcoin up 2% to trade around $62,700;

* Bonds are dropping a bit with the 2-year yield up 3 basis points to 4.75% whilst the 10-year is up 6bps to 4.41% (yields move inversely to prices).

State of Play

Stocks didn’t move much yesterday, just as we had anticipated in light of the dearth of known events. After the close Nike ($NKE ) earnings disappointed and that stock sold off overnight to the tune of 15% at the time of this writing. We also had the little matter of the Presidential debate here in the US, which appears to have increased the likelihood of Donald Trump returning to the White House. As we look at our board of indicators at 0630:

* Stock index futures are pointing to gains, with the Nasdaq up 0.5% and S&P 500 up just a little less;

* Commodities are gaining ground, with WTI crude oil up 0.8% to trade north of $82/barrel. Copper is up 1.2%;

* Bonds are unchanged. The 2-year yields 4.73% whilst the 10-year yields 4.31%. The 10-year has actually moved higher this week. It was around 4.20% on Monday morning;

* Cryptos aren’t doing anything at all. Bitcoin is changing hands around $61,500.

Today’s Known Events

It’s all about Personal Consumption Expenditures, out at 0830. Also known as the PCE Deflator, this is the Fed’s preferred inflation gauge. We’ve been building to this all week.

The numbers we’re looking for:

* No change to month-over-month headline PCE after an increase of 0.3% last month;

* This would drop annualized headline PCE to 2.6% from 2.7%;

* Core PCE of 0.1% MoM versus 0.2% previous;

* Core PCE of 2.6% YoY versus 2.8% previous.

Each month we get two inflation readings: CPI and PCE, The CPI is first. This month those numbers were pretty soft, showing no change in monthly headline CPI. Maybe that’s why economists are expecting no change to today’s monthly PCE.

The core CPI figure came in at 0.2% MoM. Perhaps that’s where economists got their estimates?

The Bottom Line©️

Whatever the source, this is one number that economists usually get pretty right. It very rarely misses by more than 0.1 percentage points. Economic data from employment, retail, and housing point to growth softening a bit. That would lead to lower inflation. Maybe not right away, but eventually. Assuming the trend holds.

The Fed has already ruled out additional rate hikes this year and is telegraphing that the next move would be a cut. Futures traders are pricing in just a 10% chance of this happening at the next FOMC meeting, which is on July 31. For the subsequent meeting on Sept. 18 we are looking at better than even odds (58%) of a cut. Optimistic? Today’s inflation data could provide ore clues. The Fed is probably not going to cut with annualized inflation at 2.6%. But if it gets below 2.5%?

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, June 27. The Bottom Line segment of today’s podcast starts at (3:05) for listeners who want to skip ahead. Be sure to check out the new ‘One Year Ago Today’ segment at the bottom of this page.

State of Play

Stocks bounced around yesterday and finished marginally higher. After the close Micron ($MU ) reported earnings that beat forecasts but management crucially didn’t raise revenue guidance, which was enough for investors to dump the stock overnight. As we look at our board of indicators at 0630, all is quiet:

* Stock index futures are essentially flat, with no major US index moving more than 0.2% from the break-even point;

* Commodities aren’t doing anything. WTI crude oil is sitting on $81/barrel, unchanged, whilst copper prices are unchanged as well;

* Cryptos also flat as a board. Bitcoin not moving from the $61,200 level it has found itself the last couple days;

* Bonds, too, are unchanged. The 2-year yields 4.75% whilst the 10-year yields 4.33%.

State of Play

Tech stocks recovered yesterday, swapping roles with large caps, which dropped. As we look at our board of indicators at 0630, there are few clues to any kind of direction:

* Stock index futures are mostly hogging the break-even point. The Nasdaq is up 0.2% while the Russell 2000 which tracks small caps is down 0.3%. S&P 500 and Dow Industrials are stuck in the middle, unchanged;

* Some individual stocks are moving higher, led by Rivian Automotive ($RIVN ), which is up 37% (not a typo) overnight after announcing some deal with Volkswagen. FedEx ($FDX ) is up 14% after earnings impressed investors after yesterday’s close. Micron ($MU ), which reports earnings later today, is up 3%. Nvidia ($NVDA ) 2% to the good;

* Commodities are pretty quiet as well, with WTI crude oil up almost 1% to trade around $81.50/barrel and copper unchanged;

* Bonds are selling off a bit for some reason. The 2-year yield is up 5 basis points to 4.74% whilst the 10-year is up 4bps to 4.28%;

* Cryptos are flat with Bitcoin changing hands around $61,200.

Today’s Known Events

General Mills ($GIS ) and Paychex ($PAYX ) report earnings before the open at 0930. After the close the main event is Micron ($MU ) but we will also hear from Levi Strauss ($LEVI ). So the latest look into the chipmaker economy along with quite a bit in the way of consumer staples — processed foods (General Mills) and jeans (Levi' Strauss).

New home sales are out at 1000. Economists who were surveyed expect an increase of 636,000 sales in May, about equivalent to the previous month’s 634,000. This is not a very closely watched metric of the US real estate market and as such will probably have only limited or no impact on markets.

The Bottom Line©️

Just like that tech seems to have reclaimed the upper hand after a four day losing streak. Was that it, then? Is the intermittent low in Nvidia ($NVDA ) and other chip names already in? Likely Micron earnings tonight should go a long way toward determining the next move there.

The rest of us can watch other companies’ earnings for signs of economic malaise. FedEx certainly didn’t deliver anything on that front. FDX management said they anticipated continued growth in e-commerce. A lot of the positive news from earnings were due to cost cutting initiatives however.

One Year Ago Today…

A bizarre series of events in Russia failed to shock — or even impact — markets. This after a weekend where the Russian state seemed on the verge of implosion (Daily Contrarian, June 26, 2023).

…and What Happened:

A year later still nobody knows exactly what happened with the apparent coup attempt, march on Moscow, and quick cessation of hostilities. It turns out investors were right not to worry. Stocks and even commodities barely budged and continued on their merry way. A year on, nobody seems to even remember these events. Nor does Russia-Ukraine hold much in the way of investor interest.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, June 24: The start of the last trading week of the second quarter (and first half) of 2024. The Bottom Line segment of today’s podcast starts at (3:37) for listeners who want to skip ahead.

State of Play

As we look at our board of indicators at 0635, things are pretty quiet outside of AI stocks and cryptos, which are moving lower:

* The major move is in cryptos, with Bitcoin down almost 5% to trade around $61,300;

* Stock index futures are flat, with major US indexes hogging the break-even point. Among individual stocks, Nvidia (NVDA ) is down another 2% in the pre-market. NVDA dropped the last two days in a row and was down 4% the last week. Fellow AI darling Super Micro Computer ($SMCI ) is also down 2% in the pre-market;

* Commodities aren’t doing much either, with WTI crude oil up 0.5% to trade around $81/barrel. Copper is unchanged;

* Bonds are unchanged. The 2-year yields 4.74% whilst the 10-year yields 4.26%.

State of Play

Stocks got bounced around a bit yesterday after economic data gave further indications of slowing economic growth. The Nasdaq finished lower for the first time this week. As we look at our board of indicators at 0655, things are pretty quiet ahead of the first official weekend of summer:

* Stock index futures are flat as a board with no movement at all to report;

* Commodities are dropping again, or at least copper is, down 1.5%. WTI Crude oil is holding steady at $81/barrel;

* Cryptos are moving downward, with Bitcoin off 3% to trade just below $64,000;

* Bonds are seeing a few bids with the 2-year yield down 2 basis points to 4.71% whilst the 10-year is down 2bps to 4.23% (yields move inversely to prices).

Today’s Known Events

It’s triple-witching day, which means stock options, stock index futures, and stock index options expire at the close of trading today. This isn’t particularly unusual. It happens four times each year. It sometimes leads to heightened volatility in the previous trading days. That would certainly explain what happened yesterday. Otherwise it’s a bunch of hype and can be safely ignored.

We get purchasing manager indexes, or PMIs, from S&P at 0945. These come in two flavors: services and manufacturing. Services are expected to come in at 53.7, below the 54.8 seen last month. Manufacturing is expected to come in at 51.0 versus 51.3 at the last reading. There’s a consensus figure as well, which is just a combination of manufacturing and services.

We also get existing home sales at 1000. Housing starts yesterday showed an unexpected decline in May so worth keeping an eye on this. The number that’s anticipated is 4.08 million, which is only slightly below last month’s 4.14 million.

The Bottom Line©️

So far investors don’t seem particularly spooked by the softer economic data we’ve been getting. Perhaps for good reason as recent years have seen several ‘false positives’ when it comes to this data pointing to an incoming recession.

There was a notable shift yesterday, out of tech and into large caps. Let’s see if it has any kind of staying power, or if the AI party continues.

One Year Ago Today…

Bitcoin rallied after a number of mainstream Wall Street firms announced plans for spot Bitcoin ETFs (Daily Contrarian, June 21, 2023).

…and What Happened:

At the time Bitcoin was trading around $29,000, or less than half its value today. Not bad returns for a year! Almost as good as Nvidia ($NVDA ) stock and several multiples of the S&P 500 performance over the last year, as the chart below illustrates:

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, June 20. The Bottom Line segment of today’s podcast starts at (5:39) for listeners who want to skip ahead. Be sure to check out the new ‘One Year Ago’ segment at the bottom of this page.

0701: Updates with Bank of England interest rate decision.

State of Play

Welcome back after the mid-week holiday. As we look at our board of indicators at 0635, some risk appetite appears to be developing:

* Stock index futures are pointing to a higher open, led by tech. The Nasdaq is up another 0.7%. S&P 500 futures are 0.5% to the good. Even small caps are gaining a bit of ground, with the Russell 2000 up 0.4%.

* Worth pointing out that the biggest movers are once again AI names: Nvidia ($NVDA ), Super Micro Computer ($SMCI ), Jabil Circuit ($JBL ), Micron ($MU ), AMD ($AMD ). It may be worth checking in on our ‘undiscovered’ AI chip stocks at some point ;

* Commodities are mostly quiet. Mostly because silver is up 2.5%. WTI crude oil is unchanged trading around $80.70/barrel, which is higher than it was before the holiday. Copper is up 0.3%;

* Bonds are giving back some gains. The big move is in the 10-year, where the yield is up 10 basis points to 4.26%. The 2-year yield is up 4bps to 4.74% (yields move inversely to prices);

* Cryptos are uncharacteristically quiet. Bitcoin is changing hands around $65,600, the same level it’s been for days or longer.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, June 17. The Bottom Line segment of today’s podcast starts at (2:56) for listeners who want to skip ahead.

State of Play

Chinese industrial production came in below estimates overnight and that is taking a toll on industrial metals. As we look at our board of indicators at 0645 things are quiet elsewhere:

* Commodities are dropping led by copper, which is down 1.5%. Other industrial commodities are down a little less. Gold and silver are down about 0.5% each. WTI crude oil is holding steady for now, unchanged at $78/barrel;

* Stock index futures are pointing to a lower open with small caps leading the drop, continuing its move from Friday. The Russell 2000 is down 0.5%. S&P 500 ($SPY ) and Nasdaq 100 ($QQQ ) futures are unchanged;

* Bonds are down a bit with the 2-year yield up 2 basis points to 4.70% and the 10-year up 2bps to 4.24% (yields move inversely to prices);

* Cryptos are down a bit with Bitcoin off 1.5% to trade around $65,600.

State of Play

Stocks eked out another gain yesterday after softer-than-anticipated producer prices and initial jobless claims that surprised to the upside. Bonds gained on this data, which speaks to slowing inflation and labor markets. As we look at our board of indicators at 0640, some risk-off sentiment is emerging:

* Stock index futures are pointing to a lower open with small caps leading the drop. The Russell 2000 is down 1.5%. S&P 500 ($SPY ) futures are down 0.6% with the Nasdaq 100 ($QQQ ) down 0.3%;

* Over in commoditiesland, the most notable move is in precious metals and that is upward. Gold is up 1% with silver up 0.6%. WTI crude oil is unchanged trading around $78.50/barrel. Copper roughly unchanged;

* Bonds aren’t doing anything after yesterday’s rally. The 2-year yields 4.68% with the 10-year yields at 4.21%.

Today’s Known Events

The University of Michigan’s Consumer Sentiment Survey is out at 1000. There are two of these each month, with more emphasis on the first one, which is today’s. Economists who were surveyed expect a reading of 72.1, a substantial increase from the 69.1 recorded last month.

That’s for the overall survey. The University of Michigan also polls consumers on current conditions and their expectations. Current conditions are expected to come in at 71.0, versus 69.6 at the last reading. Expectations are earmarked for an even 70.0, a versus 68.8 last month. The survey also polls consumers on inflation expectations but there is no economist estimate for that, unfortunately.

The Bottom Line©️

Suddenly it looks like the Fed’s dovish stance may actually be justified. Not only are producer prices receding but you also have unemployment inching up, judging by yesterday’s initial jobless claims at least. That number printed at 242,000 yesterday, more than the 225,000 anticipated and the highest in almost a year — you have to go back to last August to see anything bigger.

Remember to be careful what you wish for. There are very rarely mild recessions. Usually rate cuts only help in accelerating the onset of the next economic expansion. They generally don’t do anything to cushion the fall. The 2020 Covid recession was one of those weird outliers only because it was so short. It was also unique in that it was caused by an exogenous shock — a worldwide pandemic — rather than an economy that overheated, grew old, and died. The last time that really happened was in 2007.

For now all this talk is still a bit premature. The economy is still humming along and AI stocks are still all the rage. Today’s Michigan survey could provide us some more information on the state of the consumer however.

One Year Ago Today…

The Fed kept its policy rate unchanged after raising rates the previous 10 meetings (Daily Contrarian, June 14, 2023).

…and What Happened:

It would be a one-month pause. At the next FOMC meeting the following month, interest rates were raised again, to the level where they currently find themselves. Maybe in retrospect the Fed shouldn’t have paused, given what we know now about inflation?

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, June 13. The Bottom Line segment of today’s podcast starts at (3:38) for listeners who want to skip ahead. Be sure to check out the new ‘One Year Ago Today’ segment at the bottom of this page.

State of Play

Stocks advanced yesterday after a softer-than-anticipated CPI reading, though the good cheer was tempered somewhat by Jay Powell and the Fed. After the close Broadcom ($AVGO ) earnings impressed. As we look at our board of indicators at 0640 all is pretty quiet outside of a few individual names:

* Stock index futures are mixed, with the Nasdaq continuing its advance, up 0.6%. Tesla ($TSLA ) and Nvidia ($NVDA ) are the big movers there, both up multiple percent. On the other side, small caps are dropping, with the Russell 2000 down 0.6%. The S&P 500 is caught in the middle, unchanged;

* Commodities are dropping a bit. WTI crude oil is down 0.8% to trade below $78/barrel. Copper is down 0.6%;

* Bonds aren’t doing anything are rallying yesterday. The 2-year yields 4.76% whilst the 10-year yields 4.31%.

State of Play

The Nasdaq and S&P 500 closed at fresh record highs yesterday, probably thanks to Apple ($AAPL ), which surged on reports of its AI software. This demonstrates that any focus on AI continues to work as a stock pump, which in turn means we can look forward to companies everywhere stuffing their earnings statements chock full of anything “artificial” and “intelligence.”

As we look at our board of indicators at 0625, all is quiet ahead of the latest inflation data reading and Fed meeting:

* Stock index futures are flat with no major US index moving more than 0.1% from the break-even point;

* Things are quiet in commoditiesland as well. WTI crude oil is up 1% to trade close to $79/barrel. Copper is unchanged;

* Bonds aren’t moving. The 2-year yield sits on 4.83% whilst the 10-year is 4.40%;

* Cryptos aren’t doing anything either with Bitcoin up just 1% to trade around $68,000.

Today’s Known Events

After two days of quiet, today is massive. Things get started early with the Consumer Price Index, out at 0830. Economists who were surveyed expect a 0.1% month-over-month increase to headline CPI, below the 0.3% recorded last month, which would keep the annualized figure at 3.4%.

Core CPI, which excludes food and energy and is therefore more closely watched by the Fed, is expected to run hotter than headline, at 0.3% MoM — the same as last month. That would still drop annualized Core CPI a bit, to 3.5% from 3.6%.

We then have the Fed interest rate decision at 1400. The FOMC is widely expected to keep its key policy rate at 5.5% again, which means the devil will very much be in the details — both from the policy statement, which is released at 1400, and Jerome Powell’s press conference that follows at 1430.

The Bottom Line©️

Friendly reminder that for all their (numerous) faults, economists usually get the inflation figures pretty right. The monthly Core CPI hasn’t missed their estimates by more than 0.1 percentage points since November 2022. So chances are the number will print at or extremely close to the forecasts.

Investors are wise to this and will likely (over)react to any minor deviation from the forecast — to the extent that there is one. But whatever happens there could be undone by Powell’s presser. If he says something — anything — dovish, then stocks and bonds will rally, regardless of what happens with the CPI.

That may all just prove the point that there is still too much liquidity sloshing around the system. Core CPI continues to grow at a pace beyond the Fed’s comfort level of 2% annualized. Recent months have showed a worrying upswing in this metric.

But then you figure Powell and the FOMC members (and others) will tailor their language to the CPI print, right? Or is that assuming too much competence of Fed officials?

One Year Ago Today…

We were gearing up for big week in central bank-land, with the Fed, European Central Bank, and Bank of Japan deciding on interest rate policy (Daily Contrarian, June 12, 2023).

…and What Happened:

The three central banks kept interest rates unchanged as expected. The BOJ has since raised rates once, in March. The ECB raised rates twice more, in July and September, and then cut at its meeting this month. The Fed raised once more, in July, and has kept its key policy rate unchanged since.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Non-farm payrolls printed significantly hotter than anticipated on Friday, leading to a selloff in bonds. Stocks were mostly unaffected other than small caps, which continue to sell off. As we look at our board of indicators at 0645, things are pretty quiet ahead of the new trading week:

* European elections seem to have impacted stocks trading on the old continent, especially in France where the CAC finds itself down 2% at midday. The FTSE in London and DAX in Frankfurt are less affected. Stock index futures in the US are moving lower led by small caps. The Russell 2000 is down 0.7%;

* Commodities are rebounding a bit. Copper is up 0.5%. WTI crude oil is unchanged trading around $75.50/barrel. Silver is up 1%. Natural gas up 2%;

* Bonds are unchanged. The 2-year yield is 4.88%, which is quite a bit higher than it was at this time on Friday morning. You can thank non-farm payrolls for that. The 10-year yields 4.45%.

* Cryptos aren’t doing anything, perhaps the clearest indication we will have a quiet day ahead. Bitcoin is changing hands around $69,300.

Today’s Known Events

It’s a pretty slow day. Apple ($AAPL ) hosts its Worldwide Developer Day, or WWDC, this week. The proceedings kick off at 1300 with the keynote by Apple CEO Tim Cook. You can expect a lot of talk about AI of course. CNET has a pretty good preview if you care about these things. It’s no secret that Apple’s stock could surely use a kick in the rear end, having underperformed major indexes for the past year. Hard to see how yet more talk about AI will supply that. There could be something else in Cook’s speech that will.

The Bottom Line©️

Tomorrow is a slow day as well but don’t get too comfortable because we have inflation and the Fed coming on Wednesday. Until then things may be in a holding pattern.

An Opportunity?

Toyota Motor ($TM ) is getting beaten up after the company was caught falsifying data. The stock is down 5% over the past week and 10% over the last month. That’s ugly, but how big of an impact will this really have on Toyota’s future? It’s the most popular automaker in the world (second in the US market). Will this really get consumers to stop buying Toyotas? Maybe a little? Is that already impacted in the share price?

As you can see Toyota is still above its levels from the start of the year and may not look particularly cheap from the above chart. Still, it’s fallen from its perch quite a bit and trades at just ~11x forward earnings.

The Contrarian does not hold Toyota shares but is intrigued by this latest movement and would certainly consider buying if it drops below $200. Unfortunately that may not happen as there are indications the low is already in. TM is up 1% in the pre-market.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

It’s Jobs Day which makes for a busy morning. Unexpectedly, GameStop ($GME ) just reported disappointing first-quarter earnings. This was not supposed to happen until next week and it does seem to have dented enthusiasm for the stock, which is down a bit in the pre-market. As we look at our board of indicators at 0645, things are quiet outside of commoditiesland:

* Commodities are getting bounced around. Copper has resumed its drop, down 2% this morning. Precious metals are dropping again as well, with gold down 1.5% and silver down 2.7%. WTI crude oil is holding steady close to $76/barrel

* Stock index futures are unchanged with no major US index moving more than 0.2% from the break-even point;

* Bonds are down a tiny bit with the 2-year yield up 2 basis points to 4.74% whilst the 10-year yield is up 2bps to 4.30% (yields move inversely to prices);

* Cryptos are unchanged with Bitcoin changing hands around $71,300.

Today’s Known Events

Non-farm payrolls will command the lion’s share of attention today. Economists who were surveyed expect 186,000 new jobs, an increase over the 175,000 seen last month. This would keep the unemployment rate at 3.9%. Private payrolls are expected to increase 170,000 versus 167,000 last month with average hourly earnings growing at a steady 3.9% on a year-over-year basis, the same as last month.

Roaring Kitty is doing a livestream at 1200 on YouTube for all you meme stock bros. This is only interesting if he has a new position to unveil that is not a meme stock. And what are the chances of that, exactly? Not very large.

Finally you have the 10-for-1 Nvidia ($NVDA ) stock split happening after the close at 1600. It’s too late to get in on this — you needed to be a holder of record as of yesterday’s close — and for all intents and purposes this does nothing but drop a zero from the company’s stock price. Still you can expect to hear a lot about this. There is surely something out there that can slow up Nvidia. What it is remains a mystery.

The Bottom Line©️

The drop in commodities is a little disconcerting especially where copper is concerned seeing how this is a proxy for economic growth globally. This has resurfaced as a concern this week and bears monitoring.

Where non-farm payrolls are concerned, these are closely watched but can easily turn into a non-event. It can be a pretty erratic report and if the number deviates too much from what was anticipated then investors will write it off as a one-off and carry on their merry way. So the number can’t be too good or too bad or the market will ignore it.

You really have to zoom out a bit to see if there is a broader trend. Doing so, you can clearly see that jobs are not being produced as plentifully as they were in 2021 and 2022:

Three of the last four months have been lower than the month before it and last month’s 175,000 was the fifth time in the last 10 months that the number has come in below 200k. We haven’t been below 100,000 since the darkest days of Covid. Might this be the month?

A miss of that magnitude would not be big enough to qualify as an outlier given that 186,000 are anticipated. If that happens the news hedlines would write themselves. It would likely move up expectations of a Fed rate cut, especially in light of cuts from the Bank of Canada and European Central Bank this week.

One Year Ago Today…

The S&P 500 ($SPY ) was on the verge of entering a new bull market. “The market seems to want to move higher,” The Contrarian wrote (Daily Contrarian, June 7, 2023).

…and What Happened:

The S&P crossed 4,292, the level that corresponded to a 20% rise from the recent low and therefore a bull market, the following day. The market did indeed move higher for another six weeks, then started a descent that lasted until November. Over the last 12 months, the SPY chart is still quite pleasing to the eye:

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, June 5. The Bottom Line segment of today’s podcast starts at (4:37) for listeners who want to skip ahead. Be sure to check out the new ‘One Year Ago Today’ segment at the bottom of this page.

State of Play

Stocks eked out gains yesterday even as the JOLTS report showed slower job growth than anticipated. After the close we had strong earnings from Hewlett Packard Enterprises ($HPE ) and CrowdStrike ($CRWD ). As we look at our board of indicators at 0640, some risk appetite appears in place:

* Stock index futures are pointing to gains, led by tech after those earnings. The Nasdaq 100 ($QQQ ) is pointing to a gain of 0.5% at the open. S&P 500 ($SPY ) futures are 0.2% to the good;

* Commodities are flat. WTI crude oil is unchanged trading around $73.50/barrel. Copper is unchanged;

* Cryptos are ascending again. Bitcoin is up 3% to trade around $70,700;

* Bonds are unchanged after putting in another rally. The 2-year yield is 4.79% whilst the 10-year yields 4.34%.

State of Play

The manufacturing survey we spoke of yesterday came in below estimates, leading to fresh concerns about the economy and a rally in the bond market. We also got a bad report from the FDIC on regional banks, but for all the dramatizing on Xitter the SPDR S&P Regional Bank ETF (KRE ) is not moving in the pre-market. As we look at our board of indicators at 0650, risk appetite is clearly retrenching however:

* Stock index futures are pointing to a lower open led by small caps. The Russell 2000 is down 1.1% with S&P 500 ($SPY ) and Nasdaq 100 ($QQQ ) futures down 0.5% each;

* The damage is far worse in commodities land. WTI crude oil is down 2% to trade below $73/barrel for the first time since January. Copper prices are down 2%;

* Bonds are continuing to gain, with the yield on the 2-year down 2 basis points to 4.80% whilst the 10-year yield is down 2bps (yields move inversely to prices);

* Cryptos are flat. Bitcoin trades around $69,000.

Earnings

A couple of retailers to start us off this morning: Bath & Body Works ($BBWI ) and Designer Brands International ($DBI ), formerly known as Discount Shoe Warehouse, are out before the open at 0930.

After the close at 1600 we’ll hear from CrowdStrike ($CRWD ), Hewlett Packard Enterprises ($HPE ), PVH ($PVH ), and others.

Economic Data

The Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, or JOLTS, is out at 1000. This is a little dated so we’re getting April’s data today. Economists expect 8.4 million job openings, slightly less than the 8.49 million seen the previous month. The quits levels were 3.3 million at last month’s reading, corresponding to 2.1% of the workforce. There unfortunately isn’t an economist estimate for that.

Factory orders are also out at 1000. The expectation here is for an increase of 0.6% month-over-month, which is a drop from the 1.6% recorded last month. If you strip out transport items, the number is expected to come in at 0.4% MoM, slightly lower than the 0.5% from the previous reading.

The Bottom Line©️

Suddenly economic concerns are back in focus. The ISM figures didn’t miss by that much but the prices survey was well below estimates, which speaks to demand being soft. The action we’re seeing in commodities is a logical result.

This could be a sign the economy is turning or it could be another false positive. We’ve had several of these in the last couple of years. Ultimately the US consumer will drive things. Yes, if manufacturing activity dries up Americans will lose their jobs and that will crimp consumers. But manufacturing is just part of the US economy. A growing part for sure, with this resharing from China stuff, but still just part. Services are the larger part and those are holding up fine.

Our most recent podcast guest Bob Elliott points out that the link between ISM Manufacturing PMI and actual industrial production is, well, non-existent. So there’s also that.

A buying opportunity then? If you believe this is all overblown then it may make sense to get long cyclicals. Commodity names may present an opportunity as well. Oil majors maybe, though these are still trading near highs even after selling off a bit.

The Contrarian added to his stake in copper miner Taseko Mines ($TGB ). This information is provided for transparency purposes and is not intended as investment advice.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Roaring Kitty is back! Posted another cryptic meme last night and accompanying Reddit post revealing a large position in GameStop ($GME ) that caused those shares and other meme stocks to surge overnight. As we look at our board of indicators at 0645, risk appetite appears healthy:

* Stock index futures are pointing to a higher open led by small caps. The Russell 2000 is up 0.9% with Nasdaq 100 ($QQQ ) futures up 0.5% and S&P 500 ($SPY ) futures 0.2% to the good;

* All is quiet in commoditiesland, with WTI crude oil down 0.2% to trade around $77/barrel. Copper is up 0.7%;

* Cryptos are gaining ground with Bitcoin up 2% to trade north of $69,000. The biggest move in cryptoland was from the GameStop memecoin, which has more than quadrupled overnight;

* Bonds are seeing a few bids with the yield on the 2-year down 3 basis points to 4.87% whilst the 10-year yield is down 4bps to 4.47% (yields move inversely to prices).

Today’s Known Events

ISM Manufacturing PMIs are out at 1000. This is the second reading which would normally not warrant our attention. But the report includes manufacturing prices, which were not in the flash reading. Economists who were surveyed expect this figure to print at an even 60.0, which is a tad below the 60.9 recorded last month. As this is a key input to inflation — at least wholesale inflation, which ultimately will be passed on to consumers — it is worth watching.

At the same time we’ll get construction spending for April at 1000. The expectation here is for an increase of 0.2% month-over-month, an improvement over the 0.2% decline recorded for the previous month. This can be a good gauge of housing construction in particular, which is a decent bellwether for US economic growth.

We’ll also get vehicle sales at 1000. The expectation here is for 15.8 million transactions, effectively in line with the 15.74 million recorded the previous month.

The Bottom Line©️

The main event this week isn’t until Friday with non-farm payrolls. We do have several earnings before then, though nothing particularly groundbreaking — Crowdstrike ($CRWD ), Lululemon ($LULU ), and DollarTree ($DLTR ) are highlights. Also JOLTS tomorrow.

It’s a pretty slow start to the week, which will allow Roaring Kitty and meme stock bros to have the floor. This should make for a bullish Monday. Obviously if you weren’t long these meme names before, it’s too late to do so now. But really you should know better than to even think about speculating in meme stocks, much less meme coins. Right?

One Year Ago Today…

The Contrarian thought he spotted an opportunity in value stocks, which had started the year a lot worse than their tech brethren (Daily Contrarian, June 2, 2023).

…and What Happened:

Value stocks have continued to underperform not just tech, as measured by the Nasdaq 100 Index ($QQQ ) but also the broader S&P 500 Index ($SPY ), as the chart below illustrates:

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks sold off yesterday with tech seeing the worst of it but small caps rebounded from their drop the previous day. As we look at our board of indicators at 0640, things are quiet ahead of the PCE Deflator at 0830:

* Stock index futures are pointing to a lower open, with the Nasdaq ($QQQ ) down 0.5% and S&P 500 ($SPY ) futures down 0.3%;

* Commodities are relatively quiet. WTI crude oil is unchanged trading around $78/barrel. Copper is down 0.7%;

* Bonds are unchanged. The 2-year yield is 4.95% whilst the 10-year yields 4.56%;

* Cryptos aren’t doing anything. Bitcoin trades around $68,100.

Today’s Known Events

Personal Consumption Expenditures, the Fed’s preferred inflation gauge also known as the PCE Deflator, is out at 0830. That’s the only game in town today.

The number we’re looking for is 0.3% month-over-month increase for headline and core PCE, identical to last month. That would leave the annualized headline PCE at 2.7% and year-over-year core PCE at 2.8%. Very simple numbers this month.

The Bottom Line©️

It’s the same old game with the inflation data, with investors hoping for results that come in below forecasts so it can increase expectations of a Fed rate cut happening sooner rather than later. If the numbers exceed estimates it will move out expectations of a rate cut and result in risk-off, especially for bonds. That’s the traditional playbook at least.

It’s been a lousy week for stocks, with S&P and Nasdaq heading for their first losing week in five weeks. But the damage hasn’t been terribly with the S&P down 0.9% and Nasdaq down just 0.3%. We could make all that back if the PCE data comes in soft.

One Year Ago Today…

Disappointing PMIs from China led to a drop in oil prices, with WTI crude oil trading around $68/barrel (Daily Contrarian, May 31, 2023).

…and What Happened:

The drop would be short-lived as oil hasn’t been that low since. A rally in the late summer actually had crude prices north of $90/barrel before a drop into year end. Things have been a bit smoother this year, as the chart below illustrates:

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, May 29. The Bottom Line segment of today’s podcast starts at (3:00) for listeners who want to skip ahead.

State of Play

Stocks bounced around a bit yesterday, with the Nasdaq finishing at a fresh record close. The S&P 500 ($SPY ) was unchanged. Then after the close American Airlines ($AAL ) slashed its sales outlook, which seems to have affected investors’ moods. As we look at our board of indicators at 0640, risk appetite appears to be retrenching a bit:

* Stock index futures are pointing to a lower open, with small caps leading the drop. The Russell 2000 is down 1.2% with Nasdaq 100 ($QQQ ) and S&P futures down 0.6%;

* Commodities are mixed. WTI crude oil is up 0.8% to trade north of $80/barrel for the first time in awhile. Copper is down 0.8%;

* Bonds aren’t doing much a day after selling off. The 2-year yield is 4.96% whilst the 10-year yield 4.56%;

* Cryptos are unchanged, with Bitcoin trading around $68,000.

Today’s Known Events

Earnings are back in focus, but these don’t get interesting until after the close: Retailers Abercrombie & Fitch ($ANF ), Chewy ($CHWY ), Dick’s Sporting Goods ($DKS ), and Advanced Auto Parts ($AAP ) provide a pretty good cross-segment of that market, focused (in order) on clothes, pets, sporting goods, and auto parts.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, May 28. The Bottom Line segment of today’s podcast starts at (2:57) for listeners who want to skip ahead.

State of Play

Stocks advanced on Friday led by tech. The long weekend was quiet in terms of new news. As we look at our board of indicators at 0630, things are predictably pretty quiet (outside of commoditiesland at least):

* These are advancing, with WTI crude oil up 1.5% to trade close to $79/barrel. Copper is up 1.2%. Precious metals are rallying led by silver, which is up 4%. Gold is up 0.5%. Soft commodities wheat, coffee, sugar, all up over 1%;

* Stock index futures are pointing to gains led by tech. The Nasdaq 100 ($QQQ ) is up 0.5% with S&P 500 ($SPY ) up about 0.3%;

* Bonds are unchanged. The 2-year yield is 4.93% whilst the 10-year yields 4.46%;

* Cryptos are unchanged with Bitcoin changing hands around $68,700.

Today’s Known Events

The Conference Board’s consumer confidence reading for May is out at 1000. The expectation is for a reading of 96.1, down a bit from the 97.0 recorded last month. That would be lower than at any point since July 2022.

State of Play

Stocks sold off yesterday as Nvidia ($NVDA ) earnings failed to carry the rest of the market. Reasons for the sell-off were not immediately obvious. Purchasing Manager Indexes came in well ahead of forecasts, which may have created ‘higher for longer’ Fed fears. Bonds sold off as well as stocks, so there may have been something to that. As we look at our board of indicators at 0640, it’s a bit of a mixed bag:

* Stock index futures are pointing to modest gains with S&P 500 ($SPY ) and Nasdaq up about 0.3% each;

* Commodities are down. WTI crude oil is down 1% to trade around $76/barrel, which is the lowest it’s been in a couple of weeks. Copper is unchanged;

* Bonds are unchanged after selling off. The 2-year yields 4.92% whilst the 10-year yields 4.48%;

* Cryptos are dropping, with Bitcoin down 3% to trade around $67,500.

Today’s Known Events

It’s the first unofficial Friday of summer ahead of a long holiday weekend here in the US. For this reason one would expect things to be quiet.

Indeed there’s very little on the calendar. Durable goods orders are out at 0830. These are expected to decline by 0.9% month-over-month after increasing by 2.6% last month. Core durable goods orders, which exclude transportation items, are expected to increase by 0.1% after a 0.2% rise last month.

Slim pickings in the earnings department: Booz Allen Hamilton ($BAH ) and Mesa Laboratories ($MLAB ) are the only ones with any analyst coverage.

The Bottom Line©️

So a quiet summer Friday then? Yesterday’s sell-off gives The Contrarian pause in making such a prediction. He was clearly wrong with his view yesterday that “there isn’t anything on the calendar that can change” the bullish direction for stocks. (In fairness, he completely missed the fact that PMIs were even on the calendar).

Might yesterday’s market move have been an overreaction? We were due for a pullback and the ‘higher for longer’ Fed fears are absolutely nothing new. It seems every now and then investors decide to worry about this. It’s all a bit silly. Even if the Fed does have to hike rates again, will that necessarily be a bad thing where the long term health of the US economy is concerned? One could certainly argue that cutting rates would be the bigger policy mistake.

Sure, eventually the economy will grind to a halt and roll over. That will bring its own set of challenges, but also its own set of opportunities. We aren’t there yet. Who knows how close we might be. The point is that for now, the argument can be made that pullbacks should be viewed as opportunities.

One Year Ago Today…

Debt ceiling concerns were front and center. The Contrarian considered the Fed and the AI narrative more powerful narratives for the medium term (Daily Contrarian, May 24, 2023).

…and What Happened:

The Contrarian was right, though a debt ceiling relief rally would soon give way to selling that lasted most of the summer and into the fall. Finally in November risk appetite re-emerged and that has been the narrative ever since.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Monday is a national holiday here in the US (Memorial Day) and stock exchanges will be closed. For that reason there will not be a briefing on Monday. We’ll be back here again on Tuesday morning.

* Please take the new readership/listenership survey right here in Substack! You will be entered into the drawing for a free Contrarian™️ coffee mug.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Investors were briefly spooked by Fed meeting minutes yesterday, sending stocks lower. Then after the close Nvidia ($NVDA ) earnings came through again, blowing away estimates (again) and upgrading guidance (again). The stock moved higher overnight, predictably enough. As we look at our board of indicators at 0650, risk-on is the mood, especially for tech stocks:

* Stock index futures are pointing to major gains, led by tech. The Nasdaq is up another 1% with S&P 500 ($SPY ) futures up 0.6%;

* Commodities are mixed. WTI crude oil is up 0.8% to trade around $78/barrel but copper is down 0.7%. Gold and silver are getting dumped, with the latter down 2.5%;

* Bonds aren’t doing anything. The 2-year yields 4.87% whilst the 10-year yields 4.43%;

* Cryptos are unchanged with Bitcoin trading around $70,000.

Today’s Known Events

A few earnings to tell you about: Ralph Lauren ($RL ) and BJ’s Wholesale Club ($BJ ) report before the open at 0930. After the close at 1600 we’ll hear from Intuit ($INTU ) and Ross Stores ($ROST ), among others.

It’s Thursday so we have initial jobless claims at 0830. Economists who were surveyed expect 221,000 new claims, in line with last week’s 222,000 and ahead of the four-week average of 217,000.

New home sales are out at 1000. The expectation here is for 677,000 new transactions, down from the 693,000 recorded last month.

The Bottom Line©️

Nvidia to the rescue again. Just when markets were starting to worry about the Fed, NVDA earnings reclaimed the narrative. It helped that Snowflake ($SNOW ) was positive as well. There isn’t anything on the calendar that can probably change that. Maybe jobless claims will put a dent in it but these have been so predictable for so long. New home sales? Boring, but you never know…

If you’re wondering how this has affected our ‘undiscovered’ AI chip names, six of the eight rode Nvidia earnings to rally overnight. The two outliers were Photronics ($PLAB ), which reported disappointing earnings of its own yesterday and is down multiple percent, and Ichor Holdings ($ICHR ), which is flat for whatever reason.

The other six, if you must know:

* ACM Research ($ACMR )

* Camtek ($CAMT )

* FormFactor ($FORM )

* Kulicke and Soffa Industries ($KLIC )

* Ultra Clean Holdings ($UCTT )

* Veeco Instruments ($VECO )

This would lend credence to our suspicion voiced yesterday that these stocks are all Nvidia proxies.

The Contrarian did buy some Target ($TGT ) yesterday, getting a favorable price of $140/share.

One Year Ago Today…

There were longer-term concerns about the US economy after earnings from Home Depot ($HD ) and Target ($TGT ) cited lower discretionary spending on behalf of US consumers (Daily Contrarian, May 23, 2023).

…and What Happened:

Safe to say the concerns were short-lived as the US consumer continued to increase spending. As for HD and TGT:

Neither stock has kept pace with the S&P 500, as the chart above illustrates. Target is now down for the last 12 months after yesterday’s sell-off. The company continues to lament US consumers pulling back spending on big-ticket items (they sang the same tune again on yesterday’s earnings call). While this may be true in Target’s experience, it has not (as of yet) translated to a pullback in consumer spending, at least according to any official statistic (retail sales, etc).

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Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* There is a good chance we will skip tomorrow’s briefing as there is nothing on the calendar and it’s a three-day weekend in the US.

* Monday’s briefing is definitely canceled as markets in the US are closed.

* Please take the new readership/listenership survey right here in Substack! You will be entered into the drawing for a free Contrarian™️ coffee mug.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Stocks rallied again yesterday, to close at fresh record highs (again). After the close earnings from Urban Outfitters ($URBN ) and Toll Brothers ($TOL ) kept the party going. As we look at our board of indicators at 0640, it looks like markets are taking a bit of a breath:

* Stock index futures are down a bit led by small caps. The Russell 2000 is down 0.3% with Nasdaq and S&P 500 ($SPY ) down 0.2% each;

* Commodities are dropping with copper down 2% and WTI crude oil down 0.5% to trade around $78/barrel;

* Cryptos aren’t doing much. Bitcoin is changing hands around $70,000;

* Bonds are dropping a bit. The 2-year yield is up 3 basis points to 4.87% whilst the 10-year is up 3bps to 4.44% (yields move inversely to prices).

Earnings

The main event of course is Nvidia ($NVDA ). The chipmaker reports earnings today but not until after the close.

* In the meantime we just had Target ($TGT ) miss estimates and that stock is moving lower in the pre-market by about 8% at the time of this writing;

* Pinduoduo ($PDD ) had better results, beating top- and bottom-line estimates and that stock is moving a bit higher (+2%);

TJX Companies ($TJX ), Williams-Sonoma ($WSM ) and Analog Devices ($ADI ) also report before the open at 0930.

After the close at 1600 we’ll also get Snowflake ($SNOW ) and e.l.f. Beauty ($ELF ).

Economy

Existing home sales are out at 1000. Economists who were surveyed expect 4.21 million sales for April, effectively identical to the previous month’s 4.19 million.

Minutes from the Fed’s last meeting are out at 1400. These often move markets. Fed Governor Chris Waller has been making the rounds repeating the mantra that further interest rate hikes are unnecessary and more progress is needed on inflation to cut rates. Presumably anything that deviates from this party line — or shows discussions of deviation — could be enough to throw markets. Whether that will last beyond Nvidia earnings is another question.

The Bottom Line©️

The bull market is still in effect. That means pullbacks may be buying opportunities. Could Target ($TGT ) be one such example? It’s worth a look. The company cited lower sales in discretionary items, which is the same issue they’ve been complaining about for at least a year. The stock is up 3% over that period, which isn’t great compared to the S&P. Yet it reaffirmed full-year outlook and at ~16x forward earnings is at least not expensive.

Full disclosure: The Contrarian holds some TGT in a retirement account but is unlikely to add unless it drops below $135/share (currently $144).

‘Undiscovered’ AI Chip Stocks

The Contrarian has been looking into his ‘Undiscovered’ AI chip names a little closer. As discussed yesterday, there are eight of these:

* ACM Research (ACMR -0.21%↓)

* Camtek (CAMT 1.07%↑)

* FormFactor (FORM 1.32%↑)

* Ichor Holdings (ICHR 0.05%↑)

* Kulicke and Soffa Industries (KLIC -0.38%↓)

* Photronics (PLAB -2.35%↓)

* Ultra Clean Holdings (UCTT -0.77%↓)

* Veeco Instruments (VECO -0.02%↓).

Looking at these stocks’ performance over the last year makes for an interesting exercise:

CAMT is a major outlier. That stock has had a great month. ACMR has also bucked the trend recently, in the opposite direction. Then there’s KLIC, which has had a rough time and is actually down over the last year. Maybe that is the buying opportunity? It appears the company recently lowered their outlook so maybe not…

Taken as a whole, the ‘Undiscovered AI Index’ (UNAI for short) does track Nvidia, even if its returns over the past year are still dwarfed by NVDA, as the below chart illustrates:

Still, there is less volatility in these eight stocks collectively than there is in Nvidia (which makes perfect sense seeing how it’s a basket of eight stocks and Nvidia is just one stock). There may be other names to be added to the list. Maybe readers have some ideas?

One Year Ago Today…

Fears over the debt ceiling negotiations in Washington were front and center. It looked suspiciously like a lot of noise over nothing and possibly a buying opportunity (Daily Contrarian, May 22, 2023).

…and What Happened:

Indeed the debt ceiling discussion was kicked down the road for another day and the whole thing was quickly forgotten. Markets rallied a bit then entered a summer doldrum and sold off most of the autumn. The bull market returned in force in November. Nasdaq and S&P 500 have since rallied to new all-time highs.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Please take the new readership/listenership survey right here in Substack! You will be entered into the drawing for a free Contrarian™️ coffee mug.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

State of Play

Things were quiet yesterday as expected. The Nasdaq did close at fresh all-time highs on the back of another rally by Nvidia ($NVDA ). As we look at our board of indicators at 0645 things are a bit all over the place, though cryptos are rallying:

* Stock index futures are flat as a board with the exception of small caps, which are down. The Russell 2000 is off about 0.3%;

* Commodities are giving back some gains. WTI crude oil is down 1% to trade around $78/barrel. Gold and silver are dropping. Copper is unchanged;

* Cryptos are rallying. Bitcoin is up 6% to trade north of $71,000. That’s almost within striking distance of the all time high of $73,741. Ethereum is up 20%, presumably on news of a spot ETF receiving regulatory approval;

* Bonds are unchanged. The 2-year yields 4.83% whilst the 10-year yields 4.43%.

Today’s Known Events

Lowe’s ($LOW ) just reported earnings, beating top- and bottom-line estimates and crucially reaffirming guidance. The stock is up 3% in the pre-market at the time of this writing.

Macy’s ($M ) and AutoZone ($AZO ) are up intermittently.

After the close we’ll hear from housing developer Toll Brothers ($TOL ) and another retailer, Urban Outfitters ($URBN ).

There are some Fed speakers today as well but these are all the usual suspects who have already spoken multiple times in the last week or two. As such, they can be safely ignored. If the Fed is going to use these guys to signal a change in policy (itself highly unlikely. Usually that’s the domain of the Fed chair), it will not do so after they’ve been shooting off their mouths for weeks already.

The Bottom Line©️

Friendly reminder that cryptos have been a leading indicator for stocks — especially tech stocks — going back more than a year now. There may be a clear catalyst for this with the Ethereum spot ETF, but that doesn’t mean investors aren’t risk happy.

Indeed it seems investors can’t wait until Nvidia ($NVDA ) earnings tomorrow to bid up AI chip names. Marvell Technology ($MRVL ) was one of the biggest winners on the day. Smaller AI names like Soundhound AI ($SOUN ) also put in strong rallies as did the usual suspects AMD ($AMD ), Super Micro Computer ($SMCI ), Broadcom ($AVGO ), and Taiwan Semiconductor ($TSM ).

‘Undiscovered’ AI Chip Stocks

Here’s an idea for an ETF: small AI hardware names. Limit it at, say $5 billion market cap companies. The focus on hardware would (presumably) allow for a margin of safety. It would also weed out names like the aforementioned Soundhound, C3.ai ($AI ), FARO Technologies ($FARO ), and others including companies that just plaster the term ‘AI’ all over their marketing materials to attract attention.

Unfortunately, this doesn’t leave much. The Contrarian did a preliminary search and found just a few companies, almost all of them suppliers to the semiconductor industry:

Names include ACM Research ($ACMR ), Camtek ($CAMT ), FormFactor ($FORM ), Ichor Holdings ($ICHR ), Kulicke and Soffa Industries ($KLIC ), Photronics ($PLAB ), Ultra Clean Holdings ($UCTT ), and Veeco Instruments ($VECO ).

It’s likely the AI hype story is already priced in to these stocks (didn’t check). But it may be worth putting these names in an index to track them, to the extent that somebody hasn’t done it yet. If nothing else this could give us an idea of stocks to buy when (if) there is a pullback in AI chip names.

There are obviously private companies as well, including Anthropic (OpenAI rival), Graphcore, Cerebras, SambaNova, Groq.

The Contrarian does not hold any of these stocks.

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

* Please take the new readership/listenership survey right here in Substack! You will be entered into the drawing for a free Contrarian™️ coffee mug.

* This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.

* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, May 20. The Bottom Line segment of today’s podcast starts at (2:41) for listeners who want to skip ahead.

State of Play

It was a quiet weekend following a quiet trading session on Friday. As we look at our board of indicators at 0640, things are quiet with the exception of commodities:

* Stock index futures are unchanged with no major US index moving more than 0.1% from their break-even points;

* Commodities are moving higher, with copper up another 1%. Gold and silver are up 1% each. WTI crude oil is unchanged trading around $79.50/barrel;

* Bonds are unchanged. The 2-year yields 4.82% whilst the 10-year yields 4.42%.

Today’s Known Events

Earnings season is winding down but we still have a few big names to get to this week. The highlight is Nvidia ($NVDA ) after the close on Wednesday.

Today we’ve already gotten a couple from overseas: Li Auto ($LI ) missed top- and bottom-line estimates and is moving lower in the pre-market. Ryanair ($RYAAY ) is moving lower in London trading.

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, May 16. The Bottom Line segment of today’s podcast starts at (3:20) for listeners who want to skip ahead. Be sure to check out the new ‘One Year Ago Today’ segment at the bottom of this page.

0720: Updated with Walmart ($WMT ) earnings (not reflected in the podcast).

State of Play

Stocks rallied yesterday after the Consumer Price Index came in almost exactly as anticipated. Investors hung their faith on the fact that monthly headline inflation printed 0.1% lower than estimates and used it as an excuse to buy stocks and bonds. Major US indexes closed at record highs. As we look at our board of indicators at 0635, things are pretty quiet:

* Stock index futures are unchanged with the exception of small caps, which are headed a bit lower. The Russell 2000 is down 0.3%;

* Cryptos are advancing, with Bitcoin up 6% to trade around $66,200;

* Commodities are quiet. Copper is unchanged and WTI crude oil up just 0.4% to trade around $78.30/barrel;

* Bonds are unchanged. The 2-year yields 4.74% whilst the 10-year is 4.34%.

Earnings

We’ve already had a few come in:

* Walmart (WMT ) beat estimates and adjusted guidance toward the high end of its previously-announced range. The stock is moving higher to the tune of ~5% at the time of this writing;

* JD.com ($JD ) and Baidu ($BIDU ) beat estimates and are moving higher in the pre-market;

* Deere & Co (DE ) also beat estimates but appears to have lowered guidance as that stock is moving lower, to the tune of ~6% at the time of this writing;

* German industrial conglomerate Siemens (SIEGY) reaffirmed guidance but is moving lower in Frankfurt trading.

State of Play

Stocks advanced yesterday as investors shrugged off hotter-than-anticipated producer prices. The Nasdaq closed at a new record high. As we look at our board of indicators at 0630, things are quiet outside of Dr. Copper:

* In commodities land the aforementioned copper continues to gain ground, up 3% this morning to trade at a fresh record high. Talk about producer prices. Apparently demand for electric vehicles and data centers is what’s behind this, though that explanation appears insufficient because it’s not like those things just materialized last week. WTI crude oil is unchanged at $78/barrel;

* Stock index futures are dead quiet again with the exception of small caps, which are advancing a bit. The Russell 2000 is up 0.3%;