Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Sept. 24. The Bottom Line segment of today’s podcast starts at (3:32) and Stocks on the Contrarian Radar©️ at (5:06) for listeners who want to skip ahead.
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 0.00%↑) just missed top- and bottom-line estimates and that stock is moving lower in the pre-market. KB Home (KBH 0.00%↑) 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 0.00%↑) 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 0.00%↑) 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).
Home Prices, Consumer Confidence, Some Earnings