Monday was a quiet day in the market with the S&P flat, NASDAQ -0.04% and Russell +0.45%. NYSE + NASDAQ breadth was slightly negative and volume was down 13% from a week ago. I think the market was essentially in a holding pattern ahead of big earnings reports from Home Depot (HD) and Walmart (WMT) coming up shortly this morning.
That said, there were some important developments beneath the surface. $60 billion cybersecurity darling Crowdstrike (CRWD) got a downgrade to underweight from Morgan Stanley. What stood out was the magnitude of the reaction: down 10.6% on almost 4x average volume. At more than 40x current year revenue guidance, CRWD is another example of a growth stock being taken to the woodshed of late.
On the other side of the coin was food maker Tyson (TSN) which produces roughly 1 of every 5 pounds of chicken, beef and pork in the US (“Tyson Foods Raises Meat Prices As Costs Escalate” [Subscription Required], WSJ B1, Tuesday 11/16). TSN reported a solid quarter and at 10x trailing earnings was rewarded with 3.55% pop on 3x average volume. Also of note in TSN’s report was meat inflation. Beef prices were up 35.2% year over year, pork 40.9% and chicken 20.2%. The October CPI report said inflation is up 6.2% year over year but this suggests – as I’ve said many times – that the CPI significantly understates inflation.
The Inflation Trade that has taken on steam in the wake of Wednesday mornings October CPI Report – and which I wrote about Monday morning – also continued Monday. Even though the Invesco Dollar ETF (UUP) was up 0.55% – a big daily move for a currency – long term treasuries (TLT) sold off in a big way – down 1.26% – and the precious metals continued to move higher with GDX +0.37%. I believe the October CPI Report was the catalyst to kick The Inflation Trade into high gear and Top Gun’s portfolios are heavily positioned to profit from this.