Jan 9, 2024
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“When we put it all together, we’ve got to be perhaps the greatest club ever.” – Bill Sharman
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Markets are experiencing a bit of a turnaround Tuesday (in the wrong direction) this morning as a good chunk of yesterday’s gain is getting retraced this morning. Small Business Optimism from the NFIB topped forecasts reaching its joint-highest reading since September 2022, and the Trade Balance came in slightly narrower than expected. Perhaps the biggest headlines in the next 24 hours, though, will come in the crypto space where the SEC is expected to give a definitive answer regarding approval for a Bitcoin ETF.
Last week’s decline to kick off the year ended what had been simultaneous nine-week winning streaks for the S&P 500 and the Nasdaq and the longest such streak in decades. Given the weakness to kick off the year, a lot of investors went into the weekend thinking that maybe the rally had finally run its course, and the bears were going to be back in charge for 2024. Yesterday, though, the bulls made a stand as the S&P 500 rallied 1.4% to put it down just 0.13% on the year. Who knows what the rest of the year may bring, but one week doesn’t necessarily make a trend (even if it was the all-important first week of the year). Think back to the 1972 Lakers.
52 years ago today, the Lakers, led by Jerry West, Gail Goodrich, and Wilt Chamberlain ended a record 33-game win streak when Kareem Abdul-Jabbar dropped 39 to help lead the Milwaukee Bucks to a 120-104 win. While the end of the streak was undoubtedly a disappointment at the time, the Lakers still ended the season with a 69-13 record. They then sailed through the playoffs with just three losses in three rounds, ultimately winning the Championship over the Knicks. Even the best runs have their rough patches.
As mentioned above, after five full trading days, the S&P 500 is down just fractionally YTD with a decline of 0.13%, and the average performance of stocks in the index is a decline of 0.23%. Overall, 230 stocks in the index are up YTD, so it’s been a draw all around. While there hasn’t been much movement at the index level, on an individual stock level, there have been some extremes at each end of the spectrum with a handful of ‘stars’ already up over 5% YTD and an even larger number down over 5%.
Starting with the biggest winners, 18 stocks in the S&P 500 have already rallied 5% on the year, and the top five performers are all from the Health Care sector with Moderna (MRNA) leading the way posting a gain of 16.1% YTD. Rounding out the top five, Eli Lilly (LLY) is continuing its run from last year with an additional gain of 7.4%. Outside of the Health Care sector, some of the more notable names on the list include Verizon (VZ), which doesn’t often find itself on a top performer list, and NVIDIA (NVDA), which always seems to be near the top of a top performer list no matter what time frame you look at.
While 18 stocks are already up at least 5% YTD, 27 stocks are already down 5% on the year. The most notable of the losers is Boeing (BA) as it’s down over 12% following its 8% decline on Monday. Tech was a top-performing sector last year, but it has run into a bit of profit-taking in the first week of 2024 as one-third (9) of the stocks listed are all from that sector and more specifically, the semiconductor group.
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Jan 8, 2024
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“All truths are easy to understand once they are discovered; the point is to discover them.” – Galileo
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
We may be eight days into the year already, but from a market perspective, today seems like the first day back. While there isn’t any economic news on the calendar, there’s been a ton of announcements from individual companies concerning guidance and Q4 performance. This week also marks the unofficial start of Q4 earnings season, and we’ll have the JP Morgan Healthcare Conference and the 2024 Consumer Electronics Show. It’s also a full trading week!
The biggest individual stock story of the morning is Boeing (BA) which is trading down around 7.5% after a door panel on an Alaskan Air (ALK) flight blew off mid-flight. In response to the event, the FAA has ordered the grounding of all 737 MAX 9 jets in the US.
Boeing can’t seem to catch a break this decade, but towards the end of last year, the 40%+ rally in the stock suggested that maybe the worst of the company’s problems were behind it. This morning, though, the stock is poised to gap down to just above its 50-day moving average (DMA) in what would be the worst downside gap for the stock since 6/11/2020.
As painful as the decline is for BA shareholders this morning, historically the stock has tended to bounce back following downside gaps of at least 5%. The chart below compares the stock’s median performance following 5%+ downside gaps in the stock to its average performance for all periods since 1980. Outside of the one month, the stock’s median performance and frequency of positive returns were better than the average for all periods and in many cases, significantly so. That obviously doesn’t guarantee anything going forward, but even in the post-COVID period, the stock’s performance, especially over the following three, six, and twelve months, has tended to be positive.
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Jan 5, 2024
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“It took two decades and two hundred million words to convince people the bridge was feasible.” – Joseph Strauss, Chief Engineer of Golden Gate Bridge
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
If the action in Europe and pre-market futures is any indication, we’re on pace to o-fer the week. That would extend the losing streak for the S&P 500 to five days and the Nasdaq and Russell 2000 to six. Before we get ahead of ourselves, though, there’s still a full day of trading left ahead, and how we end the day will in large part be impacted by the 8:30 release of Non-Farm Payrolls and the 10 AM release of ISM Services.
After closing within 0.30% of its record high last Thursday, the S&P 500 has embarked on what is now a four-day losing streak. We got so close, and yet now those record highs seem so far away (even if we are still within 2% of that record). The fac that the S&P 500 traded at a 52-week high and then proceeded to fall for five straight days doesn’t instill a lot of confidence, and a look at recent history will show you why. Looking at the S&P 500 since the start of 2020, this most recent period is the third time that the S&P 500 closed at a 52-week high that was then followed by at least four straight days of declines. The other two occurrences were on July 31st, right before the S&P 500 began its late summer swoon, and then on 1/3/22, which marked the peak of the post-COVID bull market. Happy Friday!
While the last two occurrences certainly weren’t positive, if we widen our perspective, the declines that followed those two most recent occurrences were more of an exception than the rule. Extending the chart out to 2020 shows that while there was another occurrence right at the pre-COVID peak in February 2020, from late 2020 through 2021, there were multiple occurrences that, in hindsight, are barely noticeable.
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Jan 4, 2024
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“Nature is pleased with simplicity. And nature is no dummy” – Isaac Newton
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Isaac Newton was born on this day in 1643, and markets appear to be celebrating his birthday with their rediscovery of gravity after last year’s rally in the final two months of the year. Analysts have also been getting in on the act as there have been as many downgrades of Apple (AAPL) in the first three trading days of the year (3) than there were in the entire fourth quarter of 2023.
Equity futures have been trading with a modestly positive bias this morning which marks a shift from the last two days where declines in Europe have pushed futures in the US lower. This morning’s economic slate includes the ADP Employment report which came in higher than expected at 164K versus forecasts for an increase of 115K. Jobless claims were also just released and on both an initial and continuing basis, the numbers were better than expected.
With a decline of 0.80% yesterday, the S&P 500 posted back-to-back declines of 0.50% or more to start the year for just the fifth time on record. Wasn’t the start of the year supposed to be strong? As we’ve noted in various seasonality analyses, while the S&P 500’s long-term performance in January has been strong, in more recent history that has not been the case. In any event, regarding the back-to-back declines, you have to go back to 2005 to find the last occurrence and the only three others were in 1980, 1991, and 2000.
In the table below we show the performance of the S&P 500 for the rest of January and the rest of the year in each of those four years. For the rest of January, the S&P 500 bounced back big in 1980 and 1991 and saw just modest declines for the rest of the month in 2000 and 2005. For the remainder of the year, performance varied widely as well. In both 1980 and 1991, the S&P 500 posted gains of more than 29% for the rest of the year while in 2000 it fell nearly 6% while in 2005, it rallied 5%.
A sample size of four is admittedly small, and the fact that there was no clear trend of performance going forward doesn’t shed much light on what to expect for the remainder of the year. Not only that, but whereas each of the declines this year were less than 1%, in each of the four other periods, the magnitude of the decline was much larger.
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Jan 3, 2024
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“There are two days in my calendar: This day and that Day.” – Martin Luther
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It’s not for another month, but it’s starting to feel a bit like Groundhog Day as futures are once again pointing to a lower open on the day. If you’re looking for a scapegoat, the other side of the Atlantic may be a good place to start. The charts below show overnight market action combining intraday trading in Asian and European markets along with US futures. The chart on the left shows overnight trading from Monday night into Tuesday while the chart on the right shows trading overnight into this morning. In each case, the pattern has been the same. Up until Europe opened, there wasn’t much going on, and while stocks on the continent briefly rallied to start the day, sellers quickly came in and overwhelmed any positive sentiment.
This morning in the US, several catalysts could either break the trend or accelerate it. At 10 AM, we’ll get the December ISM Manufacturing report which is expected to come in below 50 for the fourteenth straight month and is the longest streak in over 20 years. Along with that report, the release of JOLTS for November is expected to increase modestly after last month’s much weaker-than-expected report. Besides those two reports, we’ll get the FOMC minutes at 2 PM.
Yesterday may not have been an especially positive start to a year, but it probably wasn’t as bad as the headline declines in the S&P 500 and Nasdaq would suggest. While the Nasdaq’s 1.63% decline was the fourth worst start to a year for the index on record, and the S&P 500’s 0.57% decline was steep in its own right, overall breadth on the S&P 500 was slightly positive (+19), and the equal-weighted S&P 500 was barely down on the day (-0.03%).
At the sector level, things weren’t so bad either. You probably wouldn’t believe it, but four sectors rallied over 1% and two other sectors were up on the day. Outside of Technology (-2.62%) and Industrials (-1.01%), no other sector ETF declined more than 1% on the day.
Yesterday’s best-performing sector was Health Care as the sector ETF rallied 1.76%. While the sector was a big laggard in 2023, it appears to be making up for lost time in the new year as the stock convincingly broke out above the upper end of its 2023 trading range.
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Jan 2, 2024
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“Intelligence is an accident of evolution, and not necessarily an advantage.” – Isaac Asimov
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
2024 is not picking up where 2023 left off as futures are sharply lower with the Nasdaq indicated to open the year down over 1% and the S&P 500 down 0.8%. Things weren’t as bad overnight, but the sellers appeared to step in just after Europe opened for trading. While an earthquake in Japan over the weekend and geo-political concerns in the Middle East haven’t helped concerning this morning’s market picture, they wouldn’t account for such a large decline at the open. The more likely culprit is simply a round of profit-taking after a monster rally to close out 2023.
The economic calendar in the US is light today with the S&P Markit Manufacturing PMI at 9:45 and Construction Spending at 10 AM. PMI readings for the rest of the world that have already been released were generally slightly better than expected even as the manufacturing sectors for Europe’s largest economies remain in contractionary territory.
One area of the market not feeling the pressure this morning is Bitcoin. After a rally of over 150% in 2023, the world’s largest cryptocurrency isn’t skipping a beat in 2024 as it’s already up over 7% YTD and above $45K. Bitcoin traded in a bit of a sideways range from early December through the end of the year, but a rally in the first two days of the new year has helped it to clear resistance and reach new 52-week highs.
From a longer-term perspective, bitcoin is still well off its record highs from late 2021, but it has also essentially erased all its losses from 2022. There’s still plenty of overhead resistance above, but with $45K cleared, $50K, a level it has only crossed above or below 16 times, will be the next area to watch.
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