New highs are here. The stock market interpreted the “positive” CPI data as a sign for lower interest rates down the line and the market took off global unrest seemingly of no concern to investors. 
depositphotos Wednesday the S&P 500 closed at 5,308, up 61 points, the Dow closed at 39,908, up 350 points and the Nasdaq Composite closed at 16,742, up 231 points. 
Chart: The New York Times Most actives were led by Kenvue (KVUE), down 0.4%, followed by Tesla (TSLA), down 2% and Amazon (AMZN), down 0.6%. 
Chart: The New York Times In morning futures action S&P 500 market futures are up 3 points, Dow market futures are up 26 points and Nasdaq 100 market futures are up 28 points.TalkMarkets contributor Mark Vickery says Record Closing Highs Amid Interest Rate Catch-22.”This CPI report put the domestic inflation trajectory back on the “soft landing” path, where it had veered away from somewhat over the previous two months, and now the Dow, Nasdaq, and S&P 500 are at their highest closing levels in history. Only the Russell 2000 still has some room to make up.On the day, the Dow grabbed another +350 points, +0.88%. The blue-chip index is now up more than +5% for the month of May so far. The S&P rose +1.17% today, climbing over 5300 on the index as of the session’s close for the first time. The Nasdaq has gained more than +7% over the past month, including today’s +231 points, +1.40%. The Russell 2000, while having grown +8% from its mid-April lows, is still 15 points away from its all-time high close set in late March of this year.We may not be seeing any interest rate cuts for a while. With such robust market activity with rates at historically high levels for the past 10 months, there’s no clear path toward cutting from our current +5.25-5.50% that wouldn’t re-ignite elements in our economy, like the housing market. Yet the prospect of lower interest rates is precisely the reason for this latest bullish market appetite. It’s actually a Catch-22 of sorts, albeit one that enriches market participants in the near term.” 
The unwinding of the hedging flows dominated the market today as noted by the crush in implied volatility from the VIX1D to the VIX Index, with them all falling. The VIX index’s OPEX comes next Wednesday, which is obviously after this May OPEX on Friday. I’m not all that sure that there is much to be gained from the VIX going lower than 12, though, and I would say, at least based on next week’s OPEX, we could be nearing a floor.
Switching gears, we take a look at some of the particulars. TM contributor Marc Lichtenfeld discusses Energy Transfer: Could The Popular Partnership Cut Its Distribution Again?“…pipeline companies generally don’t care about the price of oil or gas. They get paid according to fixed contracts – kind of like a toll booth. They make just as much money when oil is at $80 per barrel as they do when it’s at $60 or even $40.Many pipeline companies are master limited partnerships (MLPs), which pay a special kind of tax-deferred dividend called a distribution. These distributions are not taxed in the year they’re received, but they do lower the investor’s cost basis, which increases the capital gain and the amount that will be owed in taxes when the stock is sold…Energy Transfer (ET) is a popular MLP that operates more than 125,000 miles of pipelines and offers a big 8% yield. But can it continue to pay such a large distribution?The company generated $9.5 billion in distributable cash flow in 2023. That figure is projected to grow by more than $1.1 billion this year and by another $550 million in 2025.
Last year, Energy Transfer paid out $4.2 billion in distributions for a payout ratio of just 45%. The payout ratio is forecast to rise to 51% this year and then dip back slightly below 50% next year.For MLPs, I like to see payout ratios of below 100%, so Energy Transfer can very easily afford its distribution.The company has raised its distribution for the past 10 quarters in a row, but it did cut the distribution in half during the pandemic…The company’s financials look pristine, and it should have no problem paying its distribution…”Contributor Bob Ciura finds 3 High Yield REITs With Safe Dividends, in a TalkMarkets, “In the Spotlight” column. 
depositphotos “Stocks with high dividend yields often carry elevated risks. The following 3 REITs have high dividend yields but also have secure payouts backed by strong cash flow.Realty Income (O)Realty Income is a retail real estate-focused REIT that has become famous for its successful dividend growth history and monthly dividend payments. Today, the trust owns thousands of properties. Realty Income owns retail properties that are not part of a wider retail development (such as a mall), but instead are standalone properties…Realty Income recently reported its 2023 fourth-quarter results, revealing better-than-expected revenue but weaker-than [1] anticipated normalized Funds from Operations (FFO), with the midpoint of its 2023 earnings guidance slightly below Wall Street’s consensus. Following the quarter’s end, the real estate investment trust (REIT) finalized its acquisition of Spirit Realty.For 2024, Realty Income projects a normalized FFO per share ranging from $4.17 to $4.29, with a midpoint of $4.23, compared to the consensus estimate of $4.25 and the $4.00 reported for 2023.Realty Income has increased its dividend for 26 consecutive years, making it a Dividend Aristocrat. Shares have a current yield of 5.6%.
Essex Property Trust (ESS)Essex Property Trust Inc. invests in West Coast multifamily residential proprieties where it engages in development, redevelopment, management and acquisition of apartment communities and a few other select properties. Essex has ownership interests in several hundred apartment communities consisting of over 60,000 apartment homes.On May 1, 2024, Essex Property Trust, Inc. (ESS) reported strong first-quarter results…The company announced a notable increase in core Funds from Operations (FFO) per share by 4.9%, which exceeded the initial guidance expectations. This performance was bolstered by a growth in blended lease rates of 2.2%, with renewal leases rising by 3.9% and new leases by 10 basis points…Furthermore, the company made a significant $505 million investment in a joint venture portfolio which is expected to contribute nearly $2 million to FFO in 2024.Essex Property Trust is a high-quality apartment REIT that has raised its dividend for 30 consecutive years from the time it first became a publicly-traded trust.
CubeSmart (CUBE)CubeSmart is a self-managed REIT focused primarily on the ownership, operation, management, acquisition, and development of self-storage properties in the United States. The company owns 613 self-storage properties, totaling approximately 44.4 million rentable square feet in the District of Columbia and 24 other states. In addition, the company manages 860 stores for third parties.On April 25th, 2024, CubeSmart reported its Q1 results for the period ending March 31st, 2024. For the quarter, revenues grew by 1.9% to $261.4 million year-over-year. Higher revenues were primarily attributable to revenues generated from property acquisitions and a larger number of managed properties. Same-store revenues came in flat due to a relatively stable number of owned properties. On a per-share basis, FFO came in at $0.64 compared to $0.65 last year.CubeSmart showcases an excellent track record of growing revenues and FFO/share, with management skillfully acquiring lucrative properties and maximizing their potential profitability through operational efficiencies and low-cost financing. Consequently, the company’s FFO/share has grown by around 11.2% on average annually over the past decade.CUBE has increased its dividend for 14 consecutive years with a current yield of 4.8%… “See the full article for additional details.TalkMarkets contributor New Deal Democrat reports Real Retail Sales Back To Negative YoY.
depositphotos“Here is an update on one of my favorite indicators: retail sales. In April they were unchanged on a nominal basis. Adjusted for inflation they declined -0.3% for the month. They are also down -6.2% from their 2021 peak and -2.9% since January 2023: 
On a YoY basis, they have also returned to the negative side, down -0.3% (note two graphs below adds 0.3% to show at the zero line): 
…With the addition of this month’s data, the bigger picture is that real retail sales, which recently had trended neutral, now appear to be trending slightly downward, while real spending on goods has continued to trend higher.Unless and until there is a confirming downshift in real personal spending on goods, which when positive have almost always meant continued expansion, there does not appear to be any reason for alarm.”There are additional charts and details in the full article.Contributors of the Staff at The Fly, say Here’s What Wall Street Experts Are Saying About Walmart Ahead Of Earnings. 
Mike Mozart, Flickr “In February, Walmart (WMT) forecast fiscal 2025 adjusted earnings per share of $6.70-$7.12 on revenue of up 3%-4% vs. fiscal 2024. Walmart also forecast Q1 adjusted EPS $1.48-$1.56 on revenue up 4%-5%. The Fly notes that on January 30, Walmart announced a 3-for-1 stock split, part of its ongoing review of optimal trading and spread levels and its desire for its associates to feel that purchasing shares is easily within reach…
UBS thinks the quarter will “check the boxes” and show that Walmart’s investment case stands out, that the company will show that the retailer continues to gain share, domestically and abroad, and that the stock has room to run…In February, Walmart announced an agreement to acquire Vizio (VZIO) for $11.50 per share in cash, or a fully diluted equity value of approximately $2.3B…Walmart announced on April 30 that it will close all of its 51 health centers across five states and shut down the virtual care offering. “Through our experience managing Walmart Health centers and Walmart Health Virtual Care, we determined there is not a sustainable business model for us to continue,” Walmart said…Evercore ISI this week added Walmart to the firm’s “Tactical Outperform” list. The firm sees Q1 comp growth of 3.6% and EPS of 53c as “attainable with potential for upside,” said the analyst, who believes the company is executing at a high level and noted that the firm raised its Walmart comp and earnings outlook last week. The firm, which sees “near term upside to the mid-to-high $60’s and an upwards bias to consensus expectations,” has an Outperform rating and $66 price target on Walmart shares.” Caveat Emptor, on all of the above.Have a good one.Peace. 
depositphotosMore By This Author:Tuesday Talk: Market Stays Steady
Thoughts For Thursday: New Highs Expected While Market Slows
Tuesday Talk: Still Flying
