Chart of the Day: Apple (AAPL) Earnings After the Close

Apple (AAPL) has been in a nasty downtrend since it peaked in early 2015.  Sentiment towards the stock in the investment community is as negative as we can remember, at least in the post-iPod era.

aapl

In today’s Chart of the Day sent to paid subscribers, we provide a few thoughts on Apple (AAPL) heading into its earnings report after the close.  To view the report, please start a 14-day free trial below.

 

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Consumer Confidence Among Middle Income Consumers Soars

Today’s report on Consumer Confidence for the month of July exceeded forecasts and remained above its long-term average of 93.4.  While economists were forecasting the headline index to come in at a level of 96.0, the actual reading came in at 97.3, which was a slight decline from last month’s revised reading of 97.4.  After a steady trend higher from 2009 through late 2014, Consumer Confidence has plateaued over the last 18 months.

07313016 Consumer Confidence

While the headline reading was better than expected, the real story was in the internals.  Two we want to touch on are confidence by income level and consumer views regarding interest rates.  In the case of confidence based on income levels, we have made numerous mentions over the last several years regarding the divergent paths of confidence of ‘middle income’ consumers and ‘upper income’ consumers.  During this recovery, confidence among consumers with incomes above $50K outpaced confidence levels of consumers with incomes between $35K and $50K by record amounts.  In this month’s report, though, we saw confidence among ‘middle income’ consumers surge by 19% to its highest level since August 2007.  Meanwhile, confidence among consumers with incomes above $50k actually declined.  As a result of these moves, the gap in confidence between these two groups is at its narrowest level since March 2009!

07313016 Consumer Confidence by Income

Another interesting aspect of today’s Consumer Confidence report is the collective view towards interest rates.  In the July report, 13.6% of consumers expected interest rates to decline from current record low levels.  This is the highest reading in three and a half years.  At the same time, 51.7% of consumers expect interest rates to increase, but that reading was actually down from 59.4% last month and is the lowest level since May 2013.  It’s hard to imagine interest rates getting much lower than they are now, but then again, we probably would have said the same thing a year ago too.

07313016 Consumer Confidence Interest Rates

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S&P Case-Shiller Home Prices Seasonally Slow

As shown below, home prices around the country as measured by S&P Case-Shiller decelerated into the month of May.

072616 CS 1

Below we show our heatmap of historical YoY home price growth around the country using S&P Case-Shiller numbers.  The Pacific Northwest continues to show frankly rabid appreciation with Portland and Seattle both up double-digits YoY.  Dallas and Denver are also strong, while even a condo glut in Miami that has slowed activity couldn’t stop Floridian cities from putting in a good showing. The “Rust Belt” cities of Chicago and Cleveland are very weak, as is the nation’s capital and New York City.  We note that while relatively strong YoY, San Franciscan home prices were the worst in the country over the past 3 months, falling 4.45% at an annual rate.

072616 CS 2

 

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Bespoke Morning Lineup

Highlights

  • S&P 500 futures -2 bps
  • USD weaker as bonds rally (Overview)
  • Japan selloff, BoJ, and CNY (Asia)
  • PPI uptick continues; banks falter (Europe)
  • Housing and households in focus (US)

Remember CoCo bonds?  Back in January and February, the 10%+ collapse in these bonds stoked fears of an impending collapse in European banks.  Well six months later, not only have these bonds reversed all of their declines on a total return basis, but they are at new all-time highs (see chart from Bloomberg below).  Funny how when they drop, they are all over the headlines, but when they make new highs you don’t hear anything.

COCOs

Bespoke’s Morning Lineup is the top pre-market report on Wall Street.  We cover everything you need to know to get your trading day started, including international market moves and events, post-market and pre-market earnings news, upgrades and downgrades, dividends and splits, economic indicators and estimates, big stock movers, market internals and much more.  It’s all presented in the original and concise format that Bespoke is known for so you can digest lots of information quickly and efficiently.

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The Closer 7/25/16 – Texas Ticks Up As Oil Ticks Over

Looking for deeper insight on global markets and economics?  In tonight’s Closer sent to Bespoke clients, we summarize a surprising jump in the Dallas Fed’s Manufacturing Activity Index that has Texas joining the rest of the nation in a manufacturing rebound. We also update technicals on a variety of asset classes including crude, gasoline, the USD, the ten year note, and gold.

Sample

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ETF Trends: US Indices & Styles – 7/25/16

Below is our daily list of the twenty best and twenty worst performing ETFs over the last five trading days.  It was another tough day for commodities, as the stronger USD contributed to both the gold and oil ETFs’ drops. Turkey was up from Friday but still down on the week.  The biotech stocks led the top performers once again and Hong Kong and India were the top regional exposures, although most of the top twenty performers had fairly modest gains on the week.

Bespoke provides Bespoke Premium and Bespoke Institutional members with a daily ETF Trends report that highlights proprietary trend and timing scores for more than 200 widely followed ETFs across all asset classes.  If you’re an ETF investor, this daily report is perfect.  Sign up below to access today’s ETF Trends report.

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Summer Swoon at the Pump

Since crude oil’s recent highs in early May, the commodity has been under steady pressure with a series of lower highs and lower lows on a short term basis.  Today, the price of front-month WTI futures dropped below $43 and is now testing potential support at the low end of its range since its mid-April break out.  Crude oil and equity prices have been closely correlated since earlier this year, and while correlations don’t go on forever, the fact that crude oil is stumbling is a short-term worry.

Crude Oil 072516

Gas Prices YTD Table Since Memorial DayOne positive impact of the swoon in crude is that gas prices have been falling fast.  Since Memorial Day, the national average price of a gallon of gas has declined by 6.9%.  The table to the right shows the average change in prices from Memorial Day through 7/24 for each year since 2005, and this year’s decline ranks as the second steepest decline of any summer behind only 2007’s drop of 8.3%.  Normally, prices are relatively flat in the summer months, so this year’s decline is not the norm.

To show this another way, the chart below compares the year to date daily change in average prices at the pump in 2016 compared to a composite chart of all years since 2005.  Normally, prices tend to rally in the early months of the year, then peak and level off around Memorial Day, before a late-year decline post-Labor Day.  This year, though, rather than levelling off for the summer, prices have cratered.

Gas Prices Composite Chart 072516

 

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Bespoke’s Q2 2016 Earnings Season Calendar — 7/25/16

ecalIt’s difficult enough to stay on top of the earnings release dates for stocks in your portfolios, but figuring out what to do with a stock both before and right after it reports earnings is a whole different story.  If you’re looking for top-level earnings season analysis, Bespoke’s paid research product is the place to get it.

With earnings season now in full swing, now is the perfect time to try out Bespoke’s subscription product.  The first thing you’ll want to do once you sign up is download our Q2 Interactive Earnings Season Calendar, which provides the upcoming report dates for all US companies set to release numbers this season.  Our earnings calendar also includes a number of other data points to help guide investors through earnings season.

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Bespoke’s Asset Class Performance Matrix — 7/25/16

Below is an updated look at our asset class performance matrix using key ETFs traded on US exchanges.  For each ETF, we show its performance last week, month-to-date, and year-to-date.  The Nasdaq 100 is leading the list of US index ETFs in July with a gain of 5.68%.  Small-caps have outperformed large and mid-caps, while growth has outperformed value.  Most sectors are up anywhere from 3-5% on the month, but Consumer Staples, Energy and Utilities are only slightly in the green.

Outside of the US, Brazil continues to surge, gaining 2.59% last week for a total jump of 8.9% this month.  On the year now, Brazil is up 58.90%!  On the downside, Italy (EWI) is down the most YTD of any ETF in the entire matrix with a loss of 20.31%.  After a huge recovery off its lows earlier in the year, oil continues to dip here, falling 5.19% last week and nearly 10% month-to-date.  Gold and silver both pulled back a bit last week as well.  Finally, Treasury ETFs remain up on the year, but they’re now down slightly in July.

keyetf0723

 

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Bespoke Brunch Reads: 7/24/16

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week.  The links are mostly market related, but there are some other interesting subjects covered as well.  We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

Brexit

Straws in the wind (The Economist)

Using the highest frequency of high frequency indicators, it appears that while consumer spending has not been hurt by Brexit, businesses are either putting off hiring, cutting staff, or putting off investment. [Link; registration required]

Economic Review: July 2016 Annex A (UK ONS)

The UK’s Office of National Statistics has published a simple and straightforward summary of forthcoming data releases and which periods they cover to help properly contextualize the impact of Brexit on economic data. [Link; note, Annex A is at the bottom, some browsers will not load at that point on the page so please scroll to bottom to view]

Brexit Wreaks Havoc on U.K. Economy as Recession Risk Increases by Jill Ward (Bloomberg)

This week’s Markit Flash PMIs were a significant indication that Brexit has hurt confidence and the expectations (as well as current activity) of businesses across the UK. [Link; auto-playing video]

Brexit, the Target2 angle by Izabella Kaminska (FT Alphaville)

Kaminska explores the seignorage and payment systems implications of the Brexit decision; we won’t try to summarize but do recommend the piece. [Link]

Economics

Summer Camp For Econos by Claudia Sahm (Postagon)

An overview of Sahm’s prep for the NBER Summer Institute, which includes an overview of recent research and some fun thoughts on the connection between economics and life. [Link]

The Empirical Economics of Online Attention by Andre Boik, Shane Greenstein, and Jeffrey Prince (NBER Working Papers)

Time spent online is inversely correlated to income when controlling for other factors, making it an inferior good per this excellent micro-data analysis. [Link, 50 pg PDF]

Politics

Kaine’s Wikipedia Page Edits Spike, Following Past VP Pick Trend by Danielle Bernstein (Bloomberg)

Ahead of the announcement of Virginia Senator Tim Kaine as Hillary Clinton’s running mate, edits on his Wikipedia page rose dramatically, suggesting that it was being “prepped for prime time”. [Link]

Real Estate

Why Land and Homes Actually Tend to Be Disappointing Investments by Robert Shiller (NY Upshot)

While housing and land (collectively, real estate) have traditionally been seen as highly stable, reasonably profitable investments, one of the greatest modern asset pricing thinkers has other ideas. [Link; paywall]

Gas Stations Are Going Extinct In Manhattan by Kristen Lee (Jalopnik)

The ground beneath gas stations in New York City has outpaced their revenues, making it increasingly difficult if not impossible to fill up downtown. [Link]

Strange But True

Pablo Escobar’s Hippos Keep Having Sex and No One Is Sure How to Stop Them by Sarah Emerson (Vice Motherboard)

Drug kingpin and international organized crime don Pablo Escobar once imported a number of hippos into his compound in Colombia. Now, some of the massive animals have escaped and are officially the world’s largest (as well as possibly most dangerous) invasive species. [Link]

The $4 Million Battle Over Inflatable Pool Toys by Polly Mosendz (Bloomberg)

Sellers on Amazon have recently tried to hawk imitation versions of giant inflatable pool toys pioneered by BigMouth Inc. Is this story a bit goofy? Yes. Is it entertaining and interesting? We think so! [Link]

Latin America

My Venezuela Nightmare: A 30-Day Hunt for Food in a Starving Land by Fabiola Zerpa (Bloomberg)

A textual and photographic account of a week spent looking for food in inflation-stricken and socialism-wracked Venezuela. [Link]

Lessons for restoring the American dream from Latin America by Carol Graham (Brookings)

Western nations are facing populist anger over amongst other things, income inequality, but the perceived hotbed of inequality and political strife, Latin America, is in the opposite position. The middle class is growing and the social contract appears to be deepening; we draw special attention to Figure 1 in the article to follow. [Link]

Dollar Shave Club

Unilever Gets More Than a Name in Dollar Shave Club by Saabira Chaudhuri (WSJ)

This week the European consumer goods giant purchased a Silicon Valley “subscription model” shavng business for 10 figures. Here’s a bit of background on why that purchase might have happened. [Link; paywall]

Dollar Shave Club And The Disruption Of Everything by Ben Thompson (Stratechery)

We don’t necessarily believe the purported implications of this piece and the embedded reasoning but we think it’s fair to describe it as the “bull case” for why Dollar Shave Club was purchased. [Link]

Sports

U.S. Olympic fencer Ibtihaj Muhammad: ‘I’m just your basic Hijabi Zorro’ by Johnnette Howard (ESPN)

US Olympic fencing contender Ibtihaj Muhammad is a pioneer for American Muslim athletes and a fascinating personal story; a great preparatory read on the road to Rio! [Link; auto-playing video]

Long Reads

The Mystery of Urban Psychosis by Vaughan Bell (The Atlantic)

Paranoia and schizophrenia are both more common in dense urban areas, with all sorts of important questions for psychiatrists and implications for policymakers. [Link]

Blue Flames and Volcanic Hikes: the Harsh, Spectacular World of Sulfur Mining by Ranjeetha Pakiam (Bloomberg)

There aren’t many substances that are mined inside active volcanos under the watch of adventure tourists, but sulfur isn’t just any material. An amazing trip to East Java, Indonesia. [Link]

Oil in the Can by Eric Banks (Lapham’s Quarterly)

A fascinating walk through the history of horse race handicapping and the race to beat the house. [Link]

Investing

A Little-Noticed Kink in Smart-Beta ETFs Might Blindside Buyers by Dani Burger (Bloomberg)

Isolating single factors for performance amongst groups of stocks is very, very hard. That’s especially true for “smart beta” ETFs which purport to provide passive exposure to specific kinds of equity risk. [Link]

Financial Crime

HSBC Currency Trader Got Greedy on Christmas by Matt Levine (Bloomberg View)

As usual, Matt Levine is the best read on financial misconduct, in this case the allegations against the head of spot FX trading for HSBC that was recently charged with wire fraud in connection to an alleged abuse of a client related to a large sterling trade. [Link]

Banking

Italy’s bail-in headache by Silvia Merler (Bruegel)

An excellent overview of the current problems in the Italian banking sector which are much more about regulation and legal structure than they are about bad loans. [Link]

The Economics of the Young

Why Is Childcare Getting Even More Expensive? by Rebecca Greenfield (Bloomberg)

The cost of childcare isn’t just about wages, isn’t just about regulation, and isn’t just about a lack of economies of scale, but rather a combination of all these factors plus a little bit more. [Link]

Investing In Higher Educations: Benefits, Challenges, And The State Of Student Debt (Council of Economic Advisors)

An exhaustive overview of the economics of borrowing for education, including the current and innate challenges as well as the current Administration’s policy changes. While produced by an inherently political organization, this is an excellent resource for anyone interested in student loans. [Link, 77 pg PDF]

Stagnation Generation: the case for renewing the intergenerational contract by Laura Gardiner (Resolution Foundation)

This piece uses UK data but carries a very strong set of lessons for the US and other developed market. In our view, the conclusions are very worthwhile; society currently under-invests in the young and the economic impact is already being felt. [Link]

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