Top Heavy Retail
Amazon.com (AMZN) is the stock that continues to amaze. On Wednesday, it traded up another 1% in early trading, marking its eighth straight day of gains. In just that eight trading day span, the company has seen its market cap increase by over $30 billion which is more than the entire market cap of Target (TGT)! The S&P 500 Retail Industry Group currently consists of 32 companies across a wide variety of the retail landscape, but interestingly enough, Wal-Mart (WMT) isn’t one of them as it is considered part of the Food & Staples Retail Industry Group. Not including the Food and Staples retailers (where AMZN is also growing an increasingly large foothold), AMZN continues to steadily increase its size within the Retail group.
With a market cap of over $400 billion, AMZN is by far the largest component in the S&P 500 Retailing industry Group, accounting for more than a third of the group’s market cap. The chart below shows the market cap of each company in the S&P 500 Retailing Industry Group. With that, we have also included a line that shows the cumulative market cap of companies in the group from left to right. So, at a market cap of $434 billion, AMZN accounts for 36% of the group’s market cap. The next largest company in the group is Home Depot (HD), with a market cap of $177 billion. Together, AMZN and HD account for more than half of the group’s market cap. Then, if you add in Priceline (PCLN) and Lowe’s (LOW), you’re up to just under two-thirds of the entire group’s market cap! Talk about top heavy! Even in the broader S&P 1500, which includes more than 90 stocks, AMZN still accounts for one-third of the group. As AMZN and the largest stocks in the Retail group have grown, the remaining stocks are becoming increasingly irrelevant.
ETF Trends: Fixed Income, Currencies, and Commodities – 4/5/17
South Africa and GAF (which has a large position in South Africa) have been the worst performers over the past week with Retail stocks also a leading decliner. A smattering of Asia, EM, and FX ETFs round out our list of the biggest decliners. On the winning end, oil is down sharply off today’s highs thanks to bearish EIA inventory numbers but is still up notably over the past week. MLPs, a few EM names, and MLPs are also up a decent amount.
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Fixed Income Weekly – 4/5/17
Searching for ways to better understand the fixed income space or looking for actionable ideals in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit every Wednesday. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1 year return profiles for a cross section of the fixed income world.
In this week’s note, we analyze the aggregate difference between the price of fixed income closed-end funds and their underlying holdings.
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ISM Services Declines to Lowest Level Since October
After a very strong ‘hard’ data report earlier in the day from ADP, today’s ‘soft’ data point came in weaker than expected in the form of the ISM Services report. While economists were forecasting the headline reading to come in at a level of 57.0 versus last month’s reading of 57.6, the actual reading came in at 55.2, which was the lowest reading since October. On a combined basis, the ISM report for March declined to 55.4 from 57.6, marking the first m/m decline since October.
In terms of the Services PMI internals, March was a weaker month relative to February. Of the report’s ten sub-components, six declined and four increased. The biggest increases this month were in Export and Import Orders, while the largest decline came from Business Activity, Prices, and Employment. On a y/y basis, breadth was much stronger with eight components increasing and just two (Inventories and Business Activity) declining.
Some of the more interesting charts from this month’s reports came from the Business Activity, Employment, and Export Orders components. First, after looking as though it had broken its downtrend following last month’s strong showing, Business Activity fell back below that trendline this month. At a level of 58.9, though, it is still indicative of solid growth.
With the March employment report coming on Friday, the Employment component of the ISM Services report is always worth watching. This month, that component saw its largest drop since October and at 51.6 is showing only modest growth. It’s hard to reconcile this relatively weak level with the strong ADP report earlier in the day, but there can always be noise from month to month.
With respect to Export Orders, the weaker dollar is really benefiting multi-nationals. As shown in the chart below, this component now sits at its highest level since May 2007 after putting in its largest two-month increase since that same month.
