The Closer 2/10/16 – “Deficit Down, Yens Up”

Looking for deeper insight on global markets and economics?  In The Closer tonight we recap the US budget statement from today, as well as analyzing the complete breakdown of the USDJPY cross which as the chart below shows has been a major indicator for US equities recently.

Sample

The Closer also includes its standard charts, large volume and price movers in the US equity market, and Bespoke’s Market Timing Model.  The Closer is one of our most popular reports, and you can sign up for a trial below to see it free for the next two weeks!

Asset Class Performance Post Fed Rate Hike

With Fed Chair Janet Yellen delivering the Semi-Annual Monetary Policy Report to Congress today, we thought it was apropos to take a look at the performance of various asset classes since the Fed hiked rates 56 days ago back on December 16th.

Below is a table showing recent asset class performance using ETFs traded on U.S. exchanges.  U.S. equity related ETFs are shown on the left side of the table, while the right side includes country and other international equity ETFs, commodities ETFs, and fixed income ETFs.

As you can see, it has been UGLY for the equity asset class since since the Fed hiked.  The S&P 500 tracking SPY ETF is down nearly 11%, while the Nasdaq 100 (QQQ) is down 15.5%.  Smallcaps (IWM) are down even more at -16.3%.

In terms of sectors, Financials (XLF) — which investors were hoping would perform better with higher lending rates — are down the most at -16.6%.  Only Utilities (XLU) have done well post hike, as investors have loaded up on defensive plays that offer attractive dividend yields.

Outside of the U.S., Italy (EWI) is down the most at 23.3% post hike, while most other countries are down between 10% and 15%.

While equities have gotten slaughtered since the Fed hiked on December 16th, gold, silver, and Treasuries have soared.

Yes, the market has responded to Yellen and Co.’s recent decision to hike rates with quite a negative force.

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Bespoke Morning Lineup

Highlights

  • Risk rally across the board (Snapshot)
  • Strong FX, including CNH; looking ahead to tonight’s open (Asia)
  • Huge financial credit rally driving (Europe)
  • MBA strong, Yellen at 8:30 & 10:00 EST (US)

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.

See all of today’s Morning Lineup by starting a free trial to Bespoke’s paid research below.  No credit card is required.

The Closer 2/9/16 – “Labor Versus Capital: One Of These Is Not Like The Other”

Looking for deeper insight on global markets and economics?  In The Closer tonight we take a look through economic indicators that show a very strong labor market and very weak corporate sector.  We also highlight some big moves in sector relative performance, which we show in the chart below.

Sample

The Closer also includes its standard charts, large volume and price movers in the US equity market, and Bespoke’s Market Timing Model.  The Closer is one of our most popular reports, and you can sign up for a trial below to see it free for the next two weeks!

Chart of the Day – 2/9/16: Small Cap Gap Shrinks

In today’s Chart of the Day, we compare the relative returns of large and small cap stocks during the bull market that began in March 2009.

To continue reading our Chart of the Day, enter your info below and start a free Bespoke research trial.  During your trial, you’ll also receive access to our model stock portfolios, daily market alerts, and weekly Bespoke Report newsletter.

Strongest JOLTS Print Of The Expansion

Based on a very strong Employment Situation Report (including a large Nonfarm Payrolls gain) in December, we shouldn’t be surprised that JOLTS was profoundly positive during the same month, but we were taken aback by just how strong some internals were.  First, total separations were moderate; we’ll discuss the two offsetting factors below.  The headline reading for gross job openings came in above expectations, accelerating sharply to near expansion highs, but these two readings belied the true strength in the details.

The total job openings rate matched the all-time high recorded in July of 2015 (also the first print in this series, from January of 2001).  This is positive, though the private openings rate remains below both all-time and post-recession highs.  Again, openings (the headline figure) weren’t where the real strength of this report lay, but the readings were definitely constructive.

We’ve been waiting patiently for months to see quit rates accelerate as job openings have remained high and wage gains have accelerated.  It’s now happening, per December data charted below.  Private quits soared 0.2 ppt MoM, to 2.4% and set a new post-expansion high.  The Total quit rate also set a new high.  Both rates are now consistent with the range from the last expansion; by this measure, labor markets have returned to “normal” status after years of sluggish recovery from the Great Recession.

Even more encouraging, layoffs and other firings are back to all-time lows as a percentage of employment.  Despite concerns over oil patch layoffs and headline job cuts from some major corporations, actual data show that employers are desperate to cling to labor in aggregate, with extremely low firing rates despite concerns over the economic outlook.

Internals for low wage cohorts show even more constructive data with either new highs or dramatic improvements in the quite rate for workers with few prerequisites.  This suggests strong labor demand, low labor availability, and wage pressures that have been evident in numerous private sector surveys for some time, including the NFIB Small Business series.  We’ll have a full breakdown of that data (released this morning) for Institutional subscribers tonight in The Closer.  Finally, looking at layoff and discharge rates by region, we can see that the current strength is broad-based on a geographic basis as national labor markets tighten.

Chunks of Bull Market Gains Eroding

The info below is pulled from a recent report sent to Bespoke Premium and Bespoke Institutional members.  Start a 14-day free trial to see more reports like this.

Below is a look at the average performance of S&P 500 stocks (current members) in each sector over various time periods since the bull market began in March 2009.  What you’ll notice here is that stocks have really gotten crushed across the board since the end of 2014, and since the end of 2013, stocks are now flat.  The average stock in the entire S&P 500 is currently up just 0.68% since the end of 2013.

We know that it took a really long time for a large percentage of investors to “get back in” to the market coming out of the financial crisis.  From the lows in 2009 to the end of 2012, there were a lot of market pundits that wouldn’t even characterize the recovery as a new bull market.  Not until a rally of 30% for the S&P 500 in 2013 did the doubters get silenced, and that’s also when individual investors started to actually believe that the waters were finally clear.  Now, for investors that waited until the end of 2013 to get back into the market, the major indices are flat two+ years later.

Since the lows in March 2009, the average S&P 500 stock is up 329.79%, but since the end of 2009, the average stock is up just 105%.  That means that you had to be in the market during the very early stages of the bull to capture the bulk of the gains, which is actually a time when there were plenty of investors still unloading their portfolios after sharp losses over the prior two years.

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Below we highlight the 40 worst performing stocks in the S&P 500 so far in 2016.  Let’s just say that the declines are staggering, and it’s far from confined to Energy sector stocks.  Every stock listed is down more than 25% on the year, and 23 of 40 are down 40% from their 52-week highs.

Beaten down Energy stocks like Chesapeake (CHK), Williams (WMB), Marathon (MPC) are on the list, but stocks like Royal Caribbean (RCL), United Rentals (URI), Vertex Pharma (VRTX), Regeneron (REGN), Harman (HAR), Amazon (AMZN) and Netflix (NFLX) that have been huge winners in recent years are also included.

For market darlings like Amazon (AMZN) and Netflix (NFLX), we’ll be interested to see just how low they go.  There are plenty of non-Energy names listed that have already been cut in half.  Are you a buyer of AMZN or NFLX if they both fall 50%?  At this point they are closer to being cut in half than their recent highs.  We would certainly have to take a long, hard look if they got there.

stocks ytd

The Closer 2/8/16 – “Financials Freakout”

Looking for deeper insight on global markets and economics?  In The Closer tonight we look at equity performance and credit spreads, as well as other metrics, for major U.S. banks and brokers.  Below is one set of charts provided in tonight’s Closer, which shows credit default swap (CDS) prices for Goldman (GS), Morgan Stanley (MS), Citi (C), JP Morgan (JPM), Bank of America (BAC) and Wells Fargo (WFC).  As you can see, default risk as measured by 5-year CDS has exploded higher for these stocks over the last two weeks.

But one-year charts of CDS don’t quite paint the full picture of what’s going on right now.  For the full report, start a free 14-day Bespoke research trial below.

Sample

The Closer also includes its standard charts, large volume and price movers in the US equity market, and Bespoke’s Market Timing Model.  The Closer is one of our most popular reports, and you can sign up for a trial below to see it free for the next two weeks!

Chart of the Day – Exxon Mobil Payout Ratio to Top 100%

In today’s Chart of the Day, highlight how Exxon Mobil’s (XOM) dividend payout ratio is estimated to top 100% this year, and how that compares to the last thirty years.

To continue reading our Chart of the Day, enter your info below and start a free Bespoke research trial.  During your trial, you’ll also receive access to our model stock portfolios, daily market alerts, and weekly Bespoke Report newsletter.

Pain for Financials on Both Sides of the Atlantic

It’s been a rough year for Financials on both sides of the Atlantic, but for financials in Europe, it has been especially painful.  What makes the recent declines in European financials so bad is that not only are they doing worse than their US peers, but they never rallied as much in the first place on the way up.  The chart below shows the performance of the S&P 500 Financials and STOXX 600 Financials (in USD terms) over the last five years.  From early February 2011 through its peak last July, the S&P 500 Financials sector was up 52%.  During the same span, US investors invested in the STOXX 600 Financial sector were down nearly 3% in dollar terms.  Since that peak, US Financials have declined 20.4% while their European peers are down 26%.  Altogether over the last five years, the S&P 500 Financial sector is up 21% compared to a dollar adjusted decline of 28% for European Financials.  Ouch.

Financials 5 Yearas

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