Morning Lineup – 90 Up, 184 To Go

This just hasn’t been a month for months or Prime Ministers with the name May.  This May, stock markets around the world are on pace for their worst month of the year, and this morning UK Prime Minister Theresa May has finally given in and announced her resignation effective June 7th.  Thankfully, June is right around the corner.  While it’s been a pretty bad May, US equities are doing their best this morning to finish off the week on a positive note as Dow futures are indicating a positive open of +90 points (down from earlier highs) which would mean that it only needs another 184 points to get back to even for the week.  While it’s a full day of trading, with the holiday weekend coming up, you can bet that a lot of trading desks will start to clear out early today.

Make sure to check out today’s Morning Lineup for a recap of all the important overnight and morning events from around the world. Included in today’s report is our take on Theresa May’s resignation, as well as an analysis of the short-term trading action in European equities.

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You don’t need us to tell you that investors have been rotating into defensive sectors lately, but we have a great illustration of it for you.  The chart below shows the relative strength of the S&P 500 Technology sector and compares it to the relative strength of defensive sectors like Utilities, Consumer Staples, and Health Care.  In the chart, rising lines indicate periods where the sector outperformed the S&P 500 and vice versa.

For much of 2019, Technology was leading the market higher, while all three defensive sectors lagged.  In late April, though, it was like a switch went off as trade war fears intensified.  Investors quickly started rotating out of Technology and into the defensives, which have surged relative to the market.

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Morning Lineup – More Bad Trade Headlines

The back and forth action of the market lately in response to trade headlines related to China is really getting tiresome.  Today, the narrative is negative as futures have been trending lower all night and into this morning.  While we’ve seen a small bounce since 6:00 AM NY time (when things started to head south yesterday) we’re still deep in hole relative to yesterday’s close.  Jobless Claims were just released and came in slightly lower than expected (211K vs 215K).

Be sure to check out today’s report for a recap of all the US and major European earnings reports overnight, the latest releases of flash PMIs for May, and some European data that was actually positive.  How about that!

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We mentioned that the constant whipping around of the markets has become tiresome.  To illustrate just how much US equities have been getting tossed around lately based on overnight headlines, the chart below shows the 20-trading day average of the opening gap for the S&P 500 ETF (SPY).  Including today’s weakness, over the last 20 trading days, SPY has averaged an opening gap to the downside of 0.36%. As shown in the chart, this hasn’t happened too often in the period since the financial crisis.  In fact, the last time it occurred was in August 2015 (China issues again) and before that 2011 (US debt downgrade)!

While the S&P 500’s opening print has tended to be extremely weak over the last four weeks, investors have spent most of the trading day buying the weakness.  As shown in the chart below, the S&P 500’s average change from the open to close has been a gain of 0.22%.  That hasn’t been enough to erase the opening losses, but it has managed to keep the market’s declines in check.

Start a two-week free trial to Bespoke Premium to see today’s full Morning Lineup report. You’ll receive it in your inbox each morning an hour before the open to get your trading day started.

Morning Lineup – May be Not

Ever since 6 AM this morning, US equity futures have been drifting lower, turning earlier gains into moderate losses.  A number of catalysts are behind the weakness.  For starters, US-China trade talks show no signs of improvement.   Over in the UK, Thersa May’s latest plan for a Brexit deal is falling apart, and her job looks increasingly at risk.  Here at home, there are also a number of negative data points.  Qualcomm (QCOM) is sharply lower after a US judge ruled that the company’s business practices violate antitrust violations.  Also, Lowe’s, VF Corp (VFC), and Nordstrom’s are all seeing big declines after reporting disappointing earnings.

We’ve just published today’s Morning Lineup featuring all the news and market indicators you need to know ahead of the trading day.

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With the drama surrounding Brexit close to entering its fourth year now, it’s worth taking a look at the performance of UK equities since the initial vote back in June 2003. The chart below shows the performance of the FTSE-100 in dollar adjusted terms since the close on 6/23/16 – the day of the Brexit vote.  Over that nearly three-year period, UK investors who have been long the FTSE are down just under 1% in price terms.  While a decline of 1% is considerably better than the 16% decline we saw initially after the vote, essentially UK equities have been dead money for three years.

Start a two-week free trial to Bespoke Premium to see today’s full Morning Lineup report. You’ll receive it in your inbox each morning an hour before the open to get your trading day started.

Morning Lineup – Leaning Positive

In what is preliminarily looking like another turnaround Tuesday, S&P 500 and DJIA futures are indicating a positive open this morning and looking to erase all of Monday’s declines.  While there has been no easing in trade tensions with China, the rally in US futures is coming on the back of a positive day in Europe.  Bulls are hoping the gains can hold throughout the day, but all it takes is one tweet…

We’ve just published today’s Morning Lineup featuring all the news and market indicators you need to know ahead of the trading day.

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Although S&P 500 and DJIA futures are on pace to erase most of Monday’s declines, the same can’t be said for the Nasdaq which isn’t even on pace to erase half of Monday’s declines.  The last couple of weeks have been especially tough on the tech sector, and therefore the Nasdaq, versus the broader market.

As shown in the intraday relative strength chart from the last three weeks, the underperformance for the Nasdaq began in earnest after the first full week of May and really accelerated with the major gap down at the open last Monday (5/13).  While the Nasdaq spent much of the rest of the week trying to dig itself out of the hole, shortly before the close last Friday and into Monday, the bottom fell out again.

Start a two-week free trial to Bespoke Premium to see today’s full Morning Lineup report. You’ll receive it in your inbox each morning an hour before the open to get your trading day started.

Morning Lineup – Weekend to Weakstart

We hope you enjoyed your weekend because it’s looking like a weak start to the trading week.  Futures were actually in positive territory overnight but have been sinking ever since Europe opened for trading.  The culprit once again is trade concerns with China, and the technology sector is bearing the brunt of the weakness following Friday’s blacklisting of Huawei by the US.

We’ve just published today’s Morning Lineup featuring all the news and market indicators you need to know ahead of the trading day.

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With tech facing much of the selling this morning, semiconductors have been especially weak.  Making matters worse for the sector this morning is that Morgan Stanley is recommending that investors reduce exposure to the sector.  This is sure to make what has already been a weak technical picture for the sector worse as the sector was already down nearly 13% from its late April high heading into today.  If that 200-DMA around 1,300 breaks this week, it wouldn’t be a good sign for the technology sector.  Watch how the sector reacts to opening weakness this morning for any signs of investor interest.

Start a two-week free trial to Bespoke Premium to see today’s full Morning Lineup report. You’ll receive it in your inbox each morning an hour before the open to get your trading day started.

Morning Lineup – Oh Deere

Futures are indicating a lower close for equities to end the week, and a big reason for that decline is the latest earnings report from Deere (DE).  In addition to missing EPS forecasts by 11 cents (3.52 vs 3.63), DE also lowered guidance.  The company summed up the factors affecting its impact with the statement that, “Ongoing concerns about export market access, near-term demand for commodities such as soybeans, and a delayed planting season in much of North America are causing farmers to become much more cautious about making major purchases.”  Trade and weather.

In other earnings news, Nvidia (NVDA) is trading modestly lower after initially seeing a very positive reaction to earnings in after-hours trading on Thursday, while Applied Materials (AMAT) is trading higher after a strong report.  Finally, Pinterest (PINS) is down over 17% in the pre-market after reporting a wider than expected loss and lowering guidance in its first earnings report as a public company.  Rule #1 for IPOs, for at least your first earnings report as a public company, it’s a good idea to manage street expectations well enough so that you don’t come in weaker.

We’ve just published today’s Morning Lineup featuring all the news and market indicators you need to know ahead of the trading day.

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The term ‘stock-picker’s market’ has become a bit of a cliche in stock market conversation, but looking at where sectors are currently trading relative to their trading ranges shows that the term is especially applicable right now.  While the S&P 500 is essentially right at its 50-day moving average, sectors are pretty much evenly split between trading above and below that level.  At the extremes, Consumer Staples is the only overbought sector while Energy is the lone sector in oversold territory.

Start a two-week free trial to Bespoke Premium to see today’s full Morning Lineup report. You’ll receive it in your inbox each morning an hour before the open to get your trading day started.