FOMC Week

Earnings notes for tomorrow

FOMC week and with all the Trump v Powell news and the spectacle of a show at the FOMC construction site, that’s about as noteworthy as things will get. We suspect Powell will finish out his term and we suspect the FOMC will do nothing this meeting and stick to their data dependency as far as the future of rate cuts. We think the FOMC has the time to be patient and all these calls for Powell’s head on a platter for not cutting rates are well, unfounded. Its people looking for cheap financing, but as we proved in our prior posts, the last 15 years pre 2022 spent in ZIRP, were an anomaly and not something we should try to ever recreate. This would exacerbate a deflationary move at a time where our debt is already a massive problem given that for every $1 of new debt we create, we generate less than $0.90 cents in GDP. That is not how the ratio is supposed to work! So expect the FOMC to continue to tow the line on its higher for longer!

We love this picture by the way its like Daddy pointing to his kid saying you added wrong because you didn’t carry the 1! But hey when your spending $3Bln on a renovation, does call into question a lot of things now doesn’t it?

On the earnings front, we have Visa and Starbucks after the close earnings wise tomorrow. Visa has some decent open interest on the $340 put expiring this week, but with Visa trading $355 that would be a 4.2% move and the atm options straddle is priced near $12 indicating a 3.4% move. So it would take some decent bearish news to print that. As far as Starbucks, well the atm options straddle is indicating a 6.7% move with the $96 and $92 strikes with some decent interest. The $92s offset a bit with calls and put OI evening out and some decent put interest at $89 and down at $75. As far as any chance of a move, the chart structure doesn’t look great, so we would lean a bit bearish and look at the $90/85 put spread for $1 for a max 4:1 payoff structure.

Before the open keep an eye on Generac (GNRC) might be one to watch, the $165/$175 call spread for 8/15 expiry was trading around $2.10. This stock has traded very well since the April lows and it may not be done yet:

In other news the US Dept of Treasury announced their quarterly refunding and expects to borrow $1.007Tn in Q32025 and today’s 2s and 5s auction was a tail of two different stories with the 2s seeing solid demand while the 5yr tailed and did not. As far as the US Govt 5 yr we are smack in the middle of no mans land for now, we aren’t going with any direction here till we are > 4.25% or < 3.25%

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