Bespoke’s Sector Snapshot — 4/28/16

We’ve just released our weekly Sector Snapshot report (see a sample here) for Bespoke Premium and Bespoke Institutional members.  Please log-in here to view the report if you’re already a member.  If you’re not yet a subscriber and would like to see the report, please start a 14-day trial to Bespoke Premium now.

Below is our trading range screen for the ten S&P 500 sectors, which is always included in the weekly Sector Snapshot.  The screen allows you to quickly see which sectors have upside or downside momentum, and which sectors may be too extended to the upside or downside.  For each sector, the dot shows where it is currently trading within its range, while the tail end shows where it was trading one week ago.  The black vertical “N” line represents each sector’s 50-day moving average, and moves into the red or green zone are considered overbought or oversold.  The darker the shading, the more extreme the reading.

As shown, the S&P 500 has just moved below overbought territory, while five of ten sectors remain overbought.  These include Energy, Financials, Health Care, Industrials, and Materials.  No sectors are currently oversold, and five are in neutral territory.  Notably, the Technology sector has seen pretty significant weakness within its range over the last week.

To see our full Sector Snapshot with additional commentary plus six pages of charts that include analysis of valuations, breadth, technicals, and relative strength, start a 14-day free trial to our Bespoke Premium package now.  Here’s a breakdown of the products you’ll receive.

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Top Performing Russell 3000 Stocks Since 2/11

In an earlier post, we highlighted the fact that small-cap stocks have been leading the market higher in the rally off the 2/11 lows.  Looking at the stocks that have done the best since 2/11, it would also appear as though not only have stocks with low market caps done well, but so have ones with low prices too.  The table below lists the 31 stocks in the Russell 3000 that have risen more than 150% since the market’s closing low 11 weeks ago today.  As shown, the average closing share price of these stocks on 2/11 was a measly $2.85.  Additionally, only two stocks were trading above $10 per share while only another two had share prices with a five-handle.  What really stands out about the table, though, is the preponderance of stocks from the Energy sector.  Over half of the stocks listed are from the sector including each of the top five spots.

Top Russell 3000 Stocks

Q1 GDP Misses Slightly On Broad Deceleration Across Categories

The Advance estimate of Q1 GDP from the Bureau of Economic Analysis released this morning showed a notable deceleration in growth across categories. Estimates were calling for growth in the neighborhood of +0.6% QoQ, at an annual rate.  The actual unrounded number was +0.54%, so these estimates weren’t half bad! However, the result was still disappointing as weaker spending on cars helped push down the contribution of durable goods to GDP, investment in shaft/well structures (a proxy for oil & gas fixed investment) shaved over 60 bps from headline GDP, and the trade deficit widened. Below we summarize the release in our table which shows the contribution to total GDP by category for Q4 and Q1 as well as the change between last quarter and this quarter.

042816 GDP Review

The Smaller the Better in 2016

A common theme you’ve probably heard recently is that breadth has been strong during the rally off the market’s 2016 lows on 2/11.  Small and mid-cap stocks have contributed just as much as large-cap names, which is a healthy sign.  Even within the S&P 500 — which is an index of all large-cap stocks — smaller names in the index have led.  You can see this trend in the chart below, which breaks the S&P 500 into deciles (10 groups of 50 stocks each) based on a stock’s market cap on 2/11.  Decile 1 on the left contains the 50 largest stocks in the index — basically the mega-caps.  Decile 10 on the right contains the 50 smallest stocks in the index.  For each decile, we show how the average stock has performed since the 2/11 low.  As you can see, the 50 stocks in the biggest decile are up an average of just 11.7% during the rally.  The 50 smallest stocks in the S&P?  They’re up an average of 42.5%!  That’s some serious outperformance.

Other stock characteristics like dividend yield, valuations, analyst sentiment, and short interest have also impacted performance.  Start a 14-day no obligation free trial to our paid research to see more of our decile analysis. 

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Investors Still Having None of this Rally

It looks as though some of the big disappointing earnings reports are starting to weigh on investor sentiment.  According to the latest weekly sentiment survey from the American Association of Individual Investors (AAII), bullish sentiment dropped down to 27.37% this week from last week’s reading of 33.41%.  This now makes it 26 straight weeks where bullish sentiment has been below 40%, and 60 out of the last 61 weeks.  Investors still want nothing to do with the most recent equity market rally.

AAII Bullish 042816

With this week’s decline in bullish sentiment, more investors are now bearish than bullish.  In this week’s survey, bearish sentiment rose to 28.66% from 23.92% last week.  Bearish sentiment is still nowhere near levels it was earlier this year, but this is the first time since late February where bears have managed to outnumber the bulls.

AAII Bearish 042816

Jobless Claims Rise, But Four-Week Moving Average Drops to Multi-Decade Low

Jobless claims rose less than expected this week, coming in at a level of 257K versus consensus estimates of 259K.  It has now been 60 weeks since we last saw weekly claims come in above 300K.

042816 Initial Claims SA

Even though the weekly claims reading rose by 9K, the four-week moving average actually fell to another multi-decade low of 256K.  That’s the lowest level since December 1973!

042816 Initial Claims SA 4 WK

Finally, on a non-seasonally adjusted (NSA) basis, jobless claims increased by 2.8K.  That’s the lowest reading for the current week of the year since 2000 and more than 100K below the average for the current week of the year since 2000.

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042816 Initial Claims NSA

Bespoke Morning Lineup

Highlights

  • S&P 500 futures bounce off support (Snapshot)
  • No easing from the BoJ; global dynamics (Japan)
  • Weak stocks but credit okay (Europe)
  • Some possible upside risk to Q1 GDP this morning due to residual seasonality (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.  No credit card is required.

Chart of the Day – Advance Reads on Q1 GDP and the Calendar

The advance read on Q1 GDP will be released at 8:30 Eastern time, and with all the distortions to economic data that we have recently seen due to the early Easter, we wondered what impact a March Easter had on Q1 GDP readings.  In today’s Chart of the Day, we looked at how Q1 GDP has come in on an actual basis and relative to expectations based on whether Easter falls in March or April.

You can access today’s Chart of the Day by starting a 14-day no-obligation free trial to our paid research platform.

Chart of the Day – 4/27/16: Apple (AAPL) is Cheaper Than…

Apple (AAPL) is currently trading down more than 27% from its 52-week high of $134.54 made nearly a year ago.  Ever since AAPL has fallen on hard times, and even before that, the stock’s relatively low earnings multiple has been cited as a key reason to own the stock.  In today’s Chart of the Day, we have no interest in citing AAPL’s multiple as a bullish (or bearish) factor impacting the stock.  What we do want to do, though, is show where AAPL’s multiple currently stands relative to other stocks in the S&P 500.  We’ll let you make up your own mind as to whether you think its ranking is reason enough to own the stock or not.

You can access today’s Chart of the Day by starting a 14-day no-obligation free trial to our paid research platform.

 

Apple (AAPL) Year-Over-Year Return Dips to -26%

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After today’s post-earnings drop of 6%+, Apple (AAPL) is now down 26% over the last year.  Below is a chart showing Apple’s year-over-year percentage change since 2001.  As you can see, in the post-iPhone era, the stock has only had two other periods where it dipped into negative territory on a year-over-year basis.  One was during the Financial Crisis (market related) and the other was in late 2012/early 2013 (company specific).

If you believe in Apple long-term, these dips haven’t lasted very long, but it’s also worth noting that year-over-year gains following the dips have gotten smaller and smaller.  Given its market saturation in smartphones, the days of Apple as a “growth stock” are over.  The only way for Apple to kick-start things again is through acquisitions or the “new products” category.  They’ve done it before, and they can do it again, but for now, Apple is a “show me” stock.  As in “show me” the path for growth going forward.

While Apple (AAPL) is no longer a growth stock, that doesn’t mean it’s not worth owning of course.  Even though it’s the largest company in the world, its relative valuation is extremely attractive, and yesterday’s dividend hike gives it a yield that’s higher than the yield of the S&P 500 and the 10-Year Treasury Note.

AAPLYoY

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