Bespoke’s Morning Lineup – 9/10/24 – Slight Positive Tone
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“No one asked me to be an actor, so no one owed me. There was no entitlement.” – James Earl Jones
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
To view yesterday’s interview from CNBC Overtime, click on the image below.
Equity futures are moving back and forth on either side of unchanged this morning, with little direction in either direction. The only economic report of the day was small business sentiment from the NFIB, which came in just over two points below expectations (91.2 vs. 93.6).
You may recall that last month’s report came in a bit more than two points above expectations, so this morning’s report essentially erased that move. While the report was weaker than expected, it shouldn’t have been a surprise. As we noted last month, the NFIB’s report tends to skew Republicans, and the prior survey came just after former President Trump had a big lead in the polls following the GOP convention. The latest survey was conducted as Harris shifted into the lead, hence the weaker sentiment. Now that the polls have shifted back to neutral or in favor of Republicans, it wouldn’t surprise us to see a bounce again next month.
Ahead of Wednesday’s CPI report, we realize that the market may have moved on from inflation, but gas prices play a big role in overall inflation levels and especially consumers’ perception of it. On a YTD basis, the national average price of a gallon of gas has increased 4.9%, which wanks as the fourth smallest YTD increase since 2005, and ten percentage points less than the median change during that span.
On a year/year basis, prices have declined 7.6% relative to where they were last year and have mostly been negative for the last year or more.
Lastly, the national average currently stands at $3.26 per gallon. That’s 36 cents more than the historical average since 2005, but when you take inflation into account, prices are lower now than their historical average.
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Oracle (ORCL) Joins the Pack
When you think of the major cloud infrastructure providers, Amazon.com (AMZN), Alphabet (GOOGL), and Microsoft (MSFT) are the first names that typically come to mind. Given that their market caps are all well into the trillions, it makes sense, but one name saying “don’t forget about me” is Oracle (ORCL). If you compare the performance of the four stocks since the launch of ChatGPT, ORCL’s 74.6% gain lands right in the middle of the pack, ahead of GOOGL and MSFT but trailing AMZN’s gain of 82%.
This year, though, ORCL has been the clear leader. With a gain of over 35%, it has doubled AMZN’s 15.2% move and more than quadrupled the gains of GOOGL and MSFT. What’s most impressive about ORCL’s performance is that it’s still right near its highs of the year even as the other three stocks are in drawdowns of 12%-20%.
Making ORCL’s performance even more impressive is that the company has reported weaker-than-expected sales in each of its last four earnings reports. Last September and December, those weaker-than-expected revenues were not met kindly by the market as the stock experienced one-day declines of 12.4% and 13.5% which were the two largest one-day earnings declines since at least 2001! Following its March and June reports, though, the company still reported weaker-than-expected sales, but each of those reports were followed by one-day gains of 13.3% and 11.8% – ranking as the third and fourth strongest one-day gains in reaction to earnings since at least 2001. While no investor ever wants to see a company report weaker-than-expected sales, they were able to look past that shortfall as the company reported a new cloud partnership with Google, 50%+ growth in its cloud infrastructure services unit, and a higher-than-expected backlog.
Even as shares of ORCL have kept pace with the three major cloud providers since the launch of ChatGPT and outperformed handily so far this year, from a valuation perspective, shares trade more in line with the market. At 22.6x estimated earnings for the current year, ORCL’s multiple is slightly more than three turns higher than GOOGL, and well below the multiples of AMZN and MSFT. With a market cap of nearly $400 billion, ORCL is far from an under-the-radar company, but it still doesn’t get the same attention as many of its peers. Its performance this year illustrates that the best returns in the market don’t always come from the places everyone else is already looking.
Bespoke’s Morning Lineup – 9/9/24 – Can the Bounce Last?
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The line between failure and success is so fine. . . that we are often on the line and do not know it.” -Elbert Hubbard
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After an all-around bad week for stocks, markets are looking to rebound this morning with the Nasdaq leading the way higher. There’s not much in the way of a catalyst for this morning’s bounce and little in the way of economic data. The New York Fed’s survey of Consumer Expectations has been an important report in recent months, but now that the Fed has shifted its focus from inflation to employment, it doesn’t have the heft it used to have.
September didn’t start well. Since 1953, when the five-day trading week in its current form began, this year ranks as the worst first week for the S&P 500 on record. As shown in the chart below, there have only been four other years where the S&P 500 dropped 2.5% or more to kick off the month. Before this year, the record for worst start to kick off the ninth month of the year was 2001 with the other years being 1987, 2008, and 2015. To use a basketball analogy, these years are to bulls what the Detroit Pistons were to the rest of the NBA in the late 1980s and early 1990s.
In the next chart, we show the S&P 500’s performance from the close on 9/7 (or the most recent close before that) through the end of September. For all years since 1953, the median performance was a decline of 0.56% with gains just 44% of the time. In the four other years when the S&P 500 was down 2.5%+ in the first week, the rest of the month tended to be even weaker with the S&P 500 down three times and up just once.
We all know that September is typically weak, so the numbers above shouldn’t be a surprise, but what about the rest of the year? The next chart shows the S&P 500’s performance from the close on 9/7 (or the most recent close before that) through year-end. For all years since 1953, the median rest-of-year performance was a gain of 4.16% with gains 76% of the time. In the four prior years shown the rest of the year was evenly split between gains and losses, but the magnitude of the gains was much less than the losses. In the two years where the S&P 500 rebounded through year-end, the S&P 500 was up 5.74% (2001) and 6.39% (2015), but in the years when it continued lower, the losses were four times larger in magnitude with declines of 21.98% (1987) and 27.29% (2008). Gulp.
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Bespoke’s Morning Lineup – 9/6/24 – Stormy Market
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“The sea is dangerous and its storms terrible, but these obstacles have never been sufficient reason to remain ashore.” – Ferdinand Magellan
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
To catch a segment of yesterday’s interview on CNBC, click on the image below.
The trend of weakness in September looks likely to continue this morning as equity futures are lower and the 10-year yield falls to 3.7%, the lowest level since June 2023. Nasdaq futures are leading the decline this morning following earnings from Broadcom (AVGO) which is down over 7% after a lackluster report after the close yesterday.
The only economic report on the calendar today was Non-Farm Payrolls at 8:30, and traders were anticipating it for signs of whether or not the weakness in the economy is a precursor to something worse or just a soft spot. Unfortunately for the optimists, the headline reading came in weaker than expected as Non-Farm Payrolls rose by 142K versus forecasts for an increase of 165K. Last month’s report was also revised lower. Besides that, average hourly earnings rose more than expected, but the unemployment report (4.2%), average weekly hours (34.3), and the labor force participation rate (62.7%) were all right in line with forecasts. Not a terrible report, but not a strong one either.
Markets have seen a stormy September as the S&P 500 has declined 2.7% month to date. That ranks as the worst 3-day start to September since 2011 (-4.40%), but for all months, August’s 6.08% decline was more than twice as deep. For all months since 2000, just 26 out of 297 months (8.8%) have seen declines of 2.5%+ in the first three trading days of the month, so the fact that we’ve seen back-to-back months of 2.5%+ to kick off a month is not common, and the last time it happened was in September and October 2008.
The Nasdaq finds itself in a similar situation to the S&P 500. With that index down 3.3% in the first three trading days of the month, it also ranks as the worst first three days of September since 2011, but again for all months, August’s 7.95% decline was more than twice as week. Unlike the S&P 500, 2.5%+ declines in the first three trading days of a month are much more common. Since 2000, 15.4% (46) of all months have seen declines of this magnitude, and to find a period where there were 2.5%+ declines in back-to-back months, you only have to go as far back as early 2022.
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