/ May 20
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Tuesday:
N/A
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Wednesday:
N/A
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Thursday:
S&P Global Services PMI Flash (50 exp.)
Existing Home Sales (4.1M exp.)
Initial Jobless Claims (230K exp.)
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Friday:
New Home Sales (0.69M exp.) -
Tuesday:
Home Depot
Keysight Technologies
Palo Alto Networks
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Wednesday:
Target
Canada Goose
Lowe's
Snowflake
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Thursday:
Ralph Lauren
Advance Auto Parts
Deckers Outdoor
Intuit
Workday
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Friday:
N/A
Daily Briefing
Thank you for your patience during the account migration process. We are still resolving some bugs related to the upgrade, but everything should be running smoothly soon. The Legacy website no longer requires any login, links work directly from the “Legacy Tools” folder in V2.
*After the close on Friday, Moody's announced a downgrade of its U.S. credit rating to Aa from Aaa due to the increase in government debt and interest payment ratios that are significantly higher than similarly rated sovereigns; this initially set up a drop in S&P 500 futures which translated into a lower open;
*That headline shock precipitated a spike in longer-dated Treasury yields as well, including a -1.0% decline in the U.S. Dollar Index; the Dow, Nasdaq, S&P 500, and Russell 2000 had been down as much as -0.7%, -1.4%, -1.1%, and -1.5% at the start of trading;
*SPY advanced +0.11% despite the negative start; yesterday’s session was a show of resilience from the broad market, as buy-the-dip interest has materialized for all of the main factors;
*The MACD signal continues to remain elevated, as the benchmark index notches a 6’th consecutive higher close;
*Institutional buyers were still on the fence about chasing this rally; the average index for yesterday was 43%, just shy of the 45% needed for a “Neutral” reding;
*Some notable risk-on stocks did get picked up: TSLA and NVDA, as well as both consumer oriented credit card stocks - Visa (V) and Mastercard (MA); battered UNH was still in distribution mode yesterday, but saw a notable pickup in buying activity;
*The majority of Mag 7 stocks (GOOG, MSFT, AMZN, META and AAPL) were distributed rather than accumulated during yesterday’s session;
*Once the headline shock of the Moody's downgrade wore off, participants settled into the notion that it wasn't really a "surprise," given that Standard & Poor's and Fitch Ratings had downgraded their U.S. credit ratings years earlier; that thinking presumably fostered some short-covering activity in the Treasury market that also extended to stocks, which saw the S&P 500 record its sixth straight winning session;
*To be fair, any kind of downgrade of US debt should have minimal real impact; among the developed nations of the world, the US still enjoys “Monopoly Money” status, as the Fed can never default on its USD obligations; with the USD being the main reserve currency of the world, there is more external demand than there is supply of greenbacks;
*The USD itself can come under pressure, however, especially versus assets like Gold, which bounced slightly yesterday (+1.29%);
*Besides that, there wasn't much corporate news governing yesterday’s trade, which had a technical feel to it (algo-driven mostly);
*JPMorgan Chase (JPM, -1.0%) slightly increased its FY25 net interest income guidance; Walmart (WMT, -0.1%) garnered a rebuke from President Trump that it should "eat the tariffs;" the CEO and CFO of UnitedHealth Group (UNH, +8.2%) collectively bought stock worth approximately $30 million; and JPMorgan downgraded Netflix (NFLX, +0.01%) to Neutral from Overweight;
*Seven S&P 500 sectors finished higher; the health care sector (XLV, +1.0%) led the way; the next biggest gainer was the consumer staples sector, which gained a modest +0.4%; the energy sector (XLE, -1.6%) was in the losing category and was the only sector down more than -0.3%;
*Market breadth improved as the session continued but still favored decliners by a narrow margin at the NYSE and Nasdaq when the closing bell rang;
*The day’s economic data was limited to the Leading Economic Index for April, which registered a -1.0% decline (-0.7% expected) versus a downwardly revised -0.8% decline (from -0.7%) in March;
“The U.S. LEI registered its largest monthly decline since March 2023, when many feared the US was headed into recession, which did not ultimately materialize,”
“Most components of the index deteriorated. Notably, consumers’ expectations have become continuously more pessimistic each month since January 2025, while the contribution of building permits and average working hours in manufacturing turned negative in April. Widespread weaknesses were also present when looking at six-month trends among the LEI’s components, resulting in a warning signal for growth. However, while the six-month growth rate of the LEI went deeper into negative territory, it did not fall enough to trigger the recession signal. The Conference Board currently forecasts US real GDP to grow by 1.6% in 2025, down from 2.8% in 2024, with the bulk of the impact of tariffs likely to hit the economy in Q3.”
—Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board
*What yesterday’s LEI update basically says is “lower growth ahead” — not an entirely surprising conclusion;
*On a different note, one of the most crowded trades has now become “short TLT”;
*Short positions in TLT, the popular 20-year US Treasury Bond ETF, have spiked to over 130 million shares, up from 107 million last month; TLT has 541 million shares outstanding; consequently, the short interest has risen from 20% to 24% of the float; furthermore, TLT’s days to cover ratio (short position/average trading volume) is nearly 3.5 days;
*As the graph below shows, that is far and away the most prominent short position in the ETF in at least the last 15 years;
*Conclusion: if yields fall, economic conditions weaken, or the narratives around inflation and government spending change, this entire asset class is primed for a gargantuan short-squeeze; GEX for TLT is currently positive and Dark Pools are accumulating the instrument;
*TLT declined -0.29%, but has shown resilience in yesterday’s session, climbing from a -1.0% at the open; it is still trading sideways, at great entry prices in our opinion;