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“The best fiction is far more true than any journalism.” – William Faulkner
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Just when it seems like the market can only go up, it does nothing but go down. Futures on the S&P 500 and Nasdaq are in firmly negative territory this morning, putting both indices on pace for their third straight day of losses. The S&P 500 is indicated to open down by about 0.4% while the Nasdaq is on pace to open down closer to 0.6%. The weakness in US stocks follows a weak morning in Europe, where the STOXX 600 is down over 0.75%, and other major country-level indices are down by 0.15% to 1.0%.
Despite the weaker tone in equities, investors aren’t rotating into treasuries as yields are modestly higher as well. Crude oil is also lower, although gold and other precious metals are all up at least 0.5%. One are where investors certainly aren’t rotating is into crypto. Bitcoin is down nearly 2% while Ethereum is down over 3.7% as it struggles to hang onto the $4,000 level. There may have been a decent amount of froth in the sector heading into the month, but it has definitely worked itself off over the last several days.
We also have a ton of economic data to contend with this morning, with Wholesale Inventories, GDP, Personal Consumption, Durable Goods, and Jobless Claims at 8:30, followed by Existing Home Sales at 10 and the KC Fed Manufacturing report at 11. Besides those reports, there are also a ton of Fed speakers on the calendar. Should be fun! Of the reports hitting the tape at 8:30, most of them came in better than expected, with a much weaker-than-expected initial jobless claims reading of 218K being the big standout. The market response has been even higher yields and lower futures.
While the last couple of days have started to show some cracks in the market, sentiment was little changed based on the weekly survey from the American Association of Individual Investors (AAII). Bullish sentiment remained unchanged at 41.7% while bearish sentiment dropped to 39.2% and neutral sentiment increased to 19.1%. As shown in the chart below, even as stocks have recovered from their April lows, sentiment hasn’t experienced anywhere nearly as big a lift.
In fact, while the bull-bear spread in sentiment broke a streak of seven weeks in a row of negative readings, nearly three-quarters of all weeks this year have had negative spreads, and if the year were to end now, it would rank as the third-most weeks of negative bull-bear spreads in the survey’s history. The only years with a higher percentage were 2022, when the spread was only positive once (March 2022), and 2008, when 73% of weekly readings were negative. Outside of those two years, the only others when the bull-bear spread was negative more than two-thirds of the time were 1990 (69%) and 2020 (68%).
