The Closer – Growth Wacked, Naz Reversals, Term Structure, Productivity & Costs – 5/5/22
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, tonight, we show a decile analysis of which Russell 3,000 stocks were the worst performers today (page 2). Staying on the topic of today’s declines, we show how rare it has been for the Nasdaq to rally 3%+ one day and erase it all the next (page 3). On the topic of earnings, we go over tonight’s reports (page 1) in addition to an update on triple plays including a breakdown by sector (page 4). We then take a look at how many commodities are in backwardation (page 5) before switching over to a rundown of unit labor costs and productivity (pages 6 and 7).
See today’s full post-market Closer and everything else Bespoke publishes by starting a 14-day trial to Bespoke Institutional today!
Bulls Bloom
The latest reading on sentiment from the American Association of Individual Investors showed bulls stepped back in as the S&P 500 generally rallied in the past week. After a historic low of only 16.4% last week, the percentage of respondents reporting as bullish rose back up to 26.9%. That is the first time over a quarter of respondents reported as bullish since the end of March. The double-digit weekly increase was also the largest since last October.
The increase in optimism was met with a 6.5 percentage point drop in the share of respondents reporting bearish sentiment. Even after that decline, over half of the respondents responded as bearish. That is the first time with back-to-back weeks of over 50% readings since May 2020. The current level of 52.9% is also still in the top 3% of all readings going back to the start of the survey in 1987.
That means in spite of a small improvement, sentiment continues to heavily favor bears. The bull-bear spread returned to a more normal but still very low reading of -26.
Fewer respondents were also reporting that they expect equity market prices to hold steady as neutral sentiment fell to 20.3%. That was the lowest reading since November 2020 when it was only one percentage point lower than now. Click here to learn more about Bespoke’s premium stock market research service.
Bespoke’s Weekly Sector Snapshot — 5/5/22
This content is for members onlyFed Day Follow Up
In last night’s Closer, we recapped the market reaction to the FOMC’s 50 bps rate hike noting that equities really took off once Fed Chair Powell ruled out the possibility of 75 bps hikes on the horizon. By the close, the S&P 500 rallied 2.55% from right before the decision (1:59 PM). As shown below, that marked the third-best S&P 500 reaction to a Fed day since 1994 when the FOMC began to announce its decision on the same day as the meeting.
Given today’s massive declines, the S&P has already erased its 2%+ post-FOMC gain. Below we show the S&P’s intraday performance the day after each Fed day when the index rallied over 2% post-meeting (1:59 to the close). For each day, the date shown represents the day of the FOMC meeting. On average, the S&P 500 has tended to gap down the following day and continue to trade lower throughout the first post-FOMC session as we are seeing today.
Today’s performance is certainly on the weaker end of these occurrences, though. In fact, like the other two largest post-FOMC rallies that saw over 3% gains in the afternoon of Fed days, December 2008 and August 2011, today saw a significant gap lower with continued losses through mid-morning. The continued selling today is setting up to more closely resemble the August 2011 occurrence. Following the December 2008 instance, on the other hand, the S&P 500 found a low in the late morning and even briefly went positive the day after the big post-FOMC gain.
While today is shaping up to look like another time the market rallied hard in response to the FOMC, taking a step back to look at all Fed day afternoon performance (1:59 to the close) versus next-day performance (full day), there is not much of a strong trend. As shown below, the S&P 500’s performance from 1:59 to the close on a Fed day is a statistically poor explainer of next-day performance. That being said, today does stand out as one of the worst Fed day follow-ups on record. Click here to learn more about Bespoke’s premium stock market research service.
