Dec 10, 2024
Shares of Alphabet ($GOOGL) are trading up over 4% this morning, and outside of an earnings report, it would be the largest upside gap for the stock since March. This morning’s gap higher is also poised to take out short-term resistance from the post-election highs, putting the stock at its highest level since mid-July. So what’s the news driving the stock higher this morning?
There are only two notable stories out regarding the stock. The first is an analyst report from Piper Sandler naming GOOGL the top mega-cap stock to own in 2025. The analyst cited a product-driven resurgence and survey data showing that the company leads among its peers in AI. A bullish analyst report can always boost a stock, but a 4%+ rally in a company with a market cap of over $2 trillion? That seems a little excessive.
The only other catalyst being cited is a breakthrough the company announced in quantum computing where its Willow chip was able to solve a problem in five minutes that “would take one of today’s fastest supercomputers 10 septillion (that is, 1025) years — a number that vastly exceeds the age of the Universe.” The math problem the chip solved has no commercial applications as of yet, but it still marked a major breakthrough in quantum computing and seems to be a promising start. Besides the fact that GOOGL stock is trading higher this morning, other stocks involved in the quantum computing space are trading lower, indicating that this news is the more likely driver of the rally in GOOGL shares versus the Piper report.
What makes the rally in GOOGL shares this morning somewhat puzzling has to do with the timing of the news release. Below is a post from the company on X, discussing the breakthrough with its Willow chip with a link to the company’s blog post about it. Looking at the bottom left, you can see that it was posted Monday morning at 11:46 AM Eastern time. In other words, when the news of this chip was released, the market still had more than four hours of trading in which to react to it yesterday. During that time, the stock actually traded down marginally from the time of the release through yesterday’s close. Nothing clears the mind like a good night’s sleep, and after sleeping on the news last night, the market likes what it read!
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Dec 10, 2024
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“Having faith is believing in something you just know ain’t true.”– Mark Twain
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Equity futures are mixed this morning with the Dow trading slightly lower while the S&P 500 and Nasdaq futures along with Treasury yields, crude oil, gold, and bitcoin are all modestly higher. In terms of economic news, NFIB’s index of small business optimism saw a monster surge and rose to a 3+ year high in the wake of November’s election. Unit Labor costs for Q3 came in much lower than expected (0.8% vs 1.9% forecast) and Q3 Productivity was inline with forecasts at 2.2%.
Yesterday was a rough day for US stocks relative to the post-election period. With a decline of 0.61%, the only day worse since the election was on 11/15 when the S&P 500 fell 1.32%. In a post yesterday, we noted that the biggest losers of the day were the stocks that had the biggest YTD gains, and that can be seen in the performance of the Momentum ETF (MTUM) which fell 2.13% for its worst one-day decline since the election. Even after the relatively large drop yesterday, the MTUM ETF still managed to hang onto to its uptrend from the summer lows and also remains comfortably above its 50-DMA.
At the sector level yesterday, performance was essentially the opposite of sectors’ direction in the month after the election. As shown in the table and chart below, four of the five best-performing sectors from the election through Friday – Communication Services, Financials, Technology, and Industrials – were also four of the five worst-performing sectors yesterday. Similarly, the only three sectors down in the post-election period through last Friday – Health Care, Materials, and Real Estate – were the only three sectors to trade higher yesterday. The only major exception to yesterday’s reversal theme was Consumer Discretionary (XLY). While it was the best-performing sector ETF after the election through Friday, it only saw a modest decline yesterday.
Turning to individual stocks, the table and chart show the 20 best-performing stocks in the S&P 500 from 11/5 through 12/6 along with their performance yesterday. In the post-election period, these 20 stocks were up an average of 30.3%, and all but one was up at least 20%. Yesterday, though, was not nearly as positive. As shown, 13 of the 20 stocks were down on the day, and the average performance of all 20 stocks for the day was a decline of 1.8% or three times the decline of the S&P 500.
Dec 6, 2024
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“It is not heroes that make history, but history that makes heroes.” – Joseph Stalin
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Futures saw little movement as US investors awaited the big November jobs report, in which payrolls were expected to bounce back from October’s hurricane-related weak print. The report was just released, and investors got just about what they expected. Headline jobs was slightly higher than expected (227K vs 220K), and October’s print was revised modestly lower. The Unemployment Rate ticked up slightly to 4.2% from 4.1% which was a tick higher than expected, and average hourly earnings were up 4.2% y/y versus expectations for 4.1%. All in all, the report had little in the way of surprises.
Asian stocks closed out a positive week with a negative bias. Japan, India, South Korea, and Australia were all lower, but China bucked the trend with gains of over 1%. The gains there come in anticipation of next week’s Central Economic Work Conference where investors expect authorities to introduce additional measures to support growth in that ailing economy.
European equities are finishing off a positive week with additional gains this morning. The STOXX 600 is up fractionally (<0.25%) taking its gain for the week to over 2%. GDP for the region increased 0.4% which was in line with forecasts, but Industrial Production in Germany unexpectedly declined. French equities are the big winners in the region with a gain of over 1% as Macron insists that he will finish his Presidency through 2027.
As mentioned above, investors expected a rebound in the November jobs report after last month’s weaker-than-expected print. While the hurricanes in the south impacted job growth for October, last month’s report was the fourth miss relative to expectations in the last seven reports and the biggest miss (-88K) since January 2022. The market hoped for a better November report… but not too much, and that’s exactly what it got. In response, market pricing for a December cut now stands at just about 90%.
Now that everyone has discovered digital gold, is the physical version on its way to becoming a paperweight? After peaking just above $2,800 per ounce at the end of October, gold prices declined as much as 9% to their lows in mid-November, but after a bounce still remain down over 5% hovering right around $2,650 per ounce.
A look at the chart shows a delicate picture. Gold broke its uptrend from the summer just after the election and then surrendered the 50-DMA just days later. From that mid-November low, it rallied back above its 50-DMA but stalled out right below its former uptrend line. These failures at a former key trendline can often signal a shift in trend, and another attempted rally after Thanksgiving has failed at the 50-DMA which is now starting to roll over. The next few days will be critical; it will either break above its short-term downtrend from the October high or below what looks like a very short-term uptrend line from the mid-November low.
As is usually the case, the move in the gold mining stocks has followed a similar path, but with wider swings. The VanEck Gold Miners ETF (GDX) was in an upward trending channel for about six months dating back to late May but broke below the low end of that range as well as its 50-DMA just two days after the election. GDX managed to find some support at its 200-DMA – a level it hasn’t traded below since March, but already appears to be running out of momentum and starting to roll over. Judging by the President-elect’s various real estate holdings, no one seems to love gold more than him, but his victory in November hasn’t been good for anything related to gold.
Getting back to the original question over whether Bitcoin has become a substitute for physical gold, there are certainly some aspects where it could serve as a substitute. Less than a month ago, though, gold was at record highs, so it will take more than a month of weakness and a decline of less than 10% for us to get the hammer out and start putting the nails in gold’s coffin.
Dec 5, 2024
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“If you don’t believe me or don’t get it, I don’t have time to try to convince you, sorry.” ― Satoshi
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As we type this, futures on the S&P 500 and Nasdaq are down 0.01% while Dow futures are unchanged. This comes after all three indices hit record highs yesterday. On the economic calendar, initial jobless claims came in modestly higher than expected while continuing claims fell back below 1.90 million to 1.871 million
In Asia, the Nikkei was modestly higher as expectations for a December rate hike were dialed back following comments from a BoJ official saying that he expects inflation to fall back below the 2% target in 2025 as he sees wage growth slowing down. In South Korea, President Yoon is expected to be the subject of an impeachment vote over the weekend, and Q3 GDP came in weaker than expected rising by just 0.1% compared to expectations for growth of 0.5%.
In Europe this morning, equities are trading modestly higher as the market increasingly expects the ECB to cut rates at its policy meeting next week as October Retail Sales for the region fell more than expected (-0.5% vs -0.4%).
It’s hard to believe that the election was only a month ago today, and it’s equally hard to believe the move in Bitcoin during that time. After closing just above $69,000 on Election Day, overnight the world’s largest cryptocurrency topped $100,000 for the first time, and this morning those gains have continued as it trades right around $103K. In a month, Bitcoin has rallied nearly 50%. In terms of market cap, that works out to more than $400 billion! While all three major US equity indices hit all-time highs yesterday, Bitcoin saw those gains and one-upped the equity market overnight.
We’ve shown versions of the chart below numerous times over the last few weeks, but the cup-and-handle breakout formation in Bitcoin is textbook.
While Bitcoin has been hitting record highs for the last couple of weeks now, last night’s move was notable for another reason besides crossing $100K for the first time. In yesterday’s DealBook conference, Fed Chair Powell referred to Bitcoin as “just like gold only it’s digital”. The chart below shows the historical ratio of Bitcoin to an ounce of gold. The last peak in this ratio occurred in November 2021, but with yesterday’s move above $100K, the ratio between digital and physical gold also broke out to a new record high. Just like Powell, investors increasingly appear to view Bitcoin as a digital version of gold, that’s a lot easier to store and move around.
Dec 4, 2024
It’s been nearly a month now since the Presidential election, and from the close on 11/5 through yesterday (11/3), 354 (71%) stocks in the S&P 500 have experienced gains and the average performance of all 500 stocks in the index has been a gain of 3.89%. Of the ones that have rallied since the election, 13 have posted gains of at least 20%, and we have listed each one below with one-year price charts below that. Of the 13 biggest winners, most of them were already big winners leading up to the election, and all but four are currently up over 40% YTD. Looking at the charts, it’s also worth noting that the only four that experienced reversals in their trends around the election were EPAM Systems (EPAM), Super Micro Computer (SMCI), Tesla (TSLA), and Warner Brothers Discovery (WBD). In most cases, the reason for these reversals had little to do with the election and were more company-specific events. EPAM and WBD both reported earnings two days after the election, and SMCI had news related to hiring a new auditor. Tesla (TSLA) is the only stock that really saw a notable shift in its trend due to the election, and given CEO Elon Musk’s role as the right-hand man to President-Elect Trump, that move is understandable.
Turning to the losers, only 12 stocks in the S&P 500 were down 10% or more between 11/5 and the close yesterday (12/3). Unlike the list of biggest winners, though, some of these names, especially in the Health Care sector, were in steady uptrends ahead of the election but have seen those rallies reverse. Shares of Leidos (LDOS) were also at 52-week highs just after the election but have plunged since, as Vivek Ramaswamy has discussed the large amounts of bloat in funding for federal contractors. In several cases, though, the declines have been company-specific.
Finally, within the “Trillion-Dollar Club”, most have seen gains but to varying degrees. Leading the way higher, TSLA has rallied nearly 40% (Elon’s bet really paid off!), and next on the list is Apple (AAPL) with a gain of 8.6%. There’s been a lot of talk about Mark Zuckerberg not being welcomed at Mar-a-Lago, but it hasn’t impacted the stock of Meta Platforms (META) as it has rallied 7.2%. Behind META, the other members of the “Trillion-Dollar Club” that have outperformed the S&P 500 are Amazon.com (AMZN), Berkshire Hathaway (BRK/B), and Microsoft (MSFT), which have rallied 7.0%, 5.7%, and 4.8%, respectively. That leaves Alphabet (GOOGL) and Nvidia (NVDA) as the only two members of that club that have underperformed the S&P 500 since the election.
As with anything, it’s tempting to look at these recent performance numbers and extrapolate the out or under-performance throughout the entire Trump Administration, but remember that it hasn’t even been a month yet, so expect a lot of changes along the way.
