Mar 3, 2022
The S&P 500 has been fighting to regain some of its lost ground in the past week working its way out of oversold territory at yesterday’s close in the process. As a result, investor sentiment has taken a more optimistic tone this week as the AAII sentiment survey showed the percentage of respondents reporting as bullish climbed back above 30% for the first time since the first week of the year. In total over the past two weeks, bullish sentiment has now risen 11.2 percentage points. While improved, that still leaves bullish sentiment several percentage points below its historical average of roughly 38%.
The gains to bullish sentiment borrowed heavily from an extremely elevated reading in bearish sentiment. Last week over half of the respondents reported as bearish after a 10.5 percentage point increase week over week. This week that has dropped all the way down to 41.4%. That 12.3 percentage point decline was the largest drop since October 2019 when it fell 12.91 percentage points to a much lower 31%. This also marks the first time bearish sentiment rose double-digits then fell double digits in back-to-back weeks since February 2016.
In spite of the big drop to bearish sentiment, they continue to heavily outnumber bulls with an 11 point spread between bullish and bearish sentiment. That is improved from last week’s reading of -30.3 but remains at the low end of the recent range.
While the AAII survey results showed an improvement in sentiment, other sentiment surveys showed the opposite. The Investors Intelligence survey saw the lowest reading on bullish sentiment since February 2016 and the NAAIM Exposure index showed investment managers are basically market-neutral as the index saw the lowest reading since the COVID crash. Combining all of these readings into our Sentiment Composite, the gains to AAII sentiment in the past couple of weeks has brought the composite off the lows, but current levels are still some of the most bearish of the past decade. The only lower readings were in the spring of 2020 and early 2016. Click here to view Bespoke’s premium membership options.
Mar 3, 2022
Jobless claims were expected to fall to 225K this week, but the decline was even larger as first-time claims fell to 215K. That marked an 18K decline from last week’s slight upwardly revised number of 233K and is the lowest level of claims since the final week of 2021.
On a non-seasonally adjusted basis, it was a very impressive week. Claims dropped to 194.7K, and after revisions, it is the first sub 200K print since March 2020. That also makes for the lowest level of the current week of the year on record. The 21.3K improvement from last week is also seasonally unusual. The current period of the year has historically marked a temporary low in the average reading on claims (second chart below). Additionally, the current week of the year has infrequently seen claims fall as they did this week. Throughout history, the ninth week of the year has been one of the most consistent periods in the first half of the year to experience week over week increases in claims. In fact, historically the current week of the year has seen claims rise WoW over 70% of the time and prior to this year, the last time the current week of the year saw a lower reading on claims was 2011.
Continuing claims were less impressive this week. While last week’s reading was revised down by 2K to 1474K, this week’s number was slightly higher at 1476K. That compares to estimates of further declines down to 1420K. Even though the most recent reading disappointed, the current level of claims is still well below the range of readings from the past several decades. Click here to view Bespoke’s premium membership options.
Mar 2, 2022
Log-in here if you’re a member with access to the Closer.
Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin tonight’s Closer with some comments on Fed Chair Powell’s appearance in front of the House of Representatives. We also review the Fed’s latest update of the Beige Book. We then review the Bank of Canada’s rate hike and Canadian crude demand. We follow up with the latest EIA data and a look at the disconnect between mortgage rates and Treasuries.
See today’s post-market Closer and everything else Bespoke publishes by starting a 14-day trial to Bespoke Institutional today!
Mar 2, 2022
While Financials are the best performing sector so far in today’s session, leading into today it was the worst-performing sector over the past week thanks in large part to a 3.7% decline on Tuesday; the sector’s worst single day since June 2020. Looking more specifically at bank stocks, using the SPDR S&P Regional Banking ETF (KRE) as a proxy, yesterday saw an even more dramatic decline of 5.47% marking the largest decline since November 2020. That drop also ranks in the bottom 1% of all daily changes on record since the ETF began trading in 2006. The over 3.5% rebound today, meanwhile, ranks in the top 5% of all days on record as yesterday’s decline was not quite enough to drop the industry below its 200-DMA; a support level that has now held multiple times in the past year.
As previously mentioned, it is rare for KRE to fall over 5% in a single day. Excluding yesterday, there were 68 other times this happened but only a dozen of those occurred with at least 3 months between the prior instance. In the table below, we show the performance of KRE after each of those periods.
While it is far from the case today, typically, the next day has often seen KRE fall further after a 5% drop. Instead, today it is seeing the second-best next-day performance of these instances. As for where things go from here though, returns have been weaker than the norm one week and one month following these past occurrences. KRE has then tended to outperform all other periods three, six, and twelve months out. Click here to view Bespoke’s premium membership options.
