Oct 10, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“In nine times out of ten, the slanderous tongue belongs to a disappointed person.” – George Bancroft
Start a two-week trial to Bespoke Premium now to get full access to the Morning Lineup.
Global markets are picking up the rally where the US left off yesterday. Some of that positive tone is following through to US markets this morning, but equity futures are only modestly higher. Small business sentiment was modestly weaker than expected, and as discussed in this morning’s report, has confirmed the message from a number of other indicators that the labor market is moderating. Bond yields are lower relative to Friday’s close, but they have erased just about half of their initial declines.
In last week’s Bespoke Report, we highlighted the fact that through last Thursday, while most equity indices and other assets were all in steady downtrends over the last few weeks, the dollar was moving in the other direction and steadily rallying. Two trading days later (or one and a half if you consider the fact that Monday was a holiday for some), we’ve started to see a reversal of that trend as assets have been rallying and the dollar’s rally has taken a breather. The dollar’s weakness yesterday was even more notable given the geo-political tensions in the Middle East given the dollar’s typical safe-haven status. It’s only been two days, but as the saying goes, once is random, twice is a coincidence, but three times is a trend.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Oct 9, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“When you know people, you have to behave towards them like human beings.” – Oskar Schindler
Start a two-week trial to Bespoke Premium now to get full access to the Morning Lineup.
Whenever we get a major episode of geo-political unrest, especially when it pertains to the Middle East, there are some things you can count on in the market- equity futures trade lower while oil, gold, and treasuries rally. This morning has been no different. Equity futures are trading over half a percent lower, gold is up 1%, and after a horrendous week for crude oil, WTI is trading up over 3.5%. Turning to the bond market, with banks closed for Columbus Day, there is no official trading in the treasury market, but you can get an idea of where the market stands by looking at other areas of the market. Treasury-linked ETFs are one example. In pre-market trading today, the iShares 20 Plus Year Treasury ETF (TLT) is trading higher, but the gains are hardly convincing.
As shown in the image below from Google Finance, as we type this, TLT is trading up 10 cents this morning or 0.12%. That would only be enough to erase a fraction of Friday’s losses or basically the declines that took place in the last eight or nine minutes of trading. That’s how bad the current environment is for the US Treasury market right now. Not even a major outbreak of geo-political violence can spark a rally these days.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Oct 6, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“I don’t have anything else to prove” – Michael Jordan
Start a two-week trial to Bespoke Premium now to get full access to the Morning Lineup.
Futures are modestly higher this morning as markets are just digesting the September non-farm payrolls report. Michael Jordan claimed he had nothing left to prove when he announced his retirement on this day in 1993, but he ultimately realized he did and was back on the court in March 1995. The stock market may have felt it had nothing left to prove when it was at its highs last July, but just over two months later it now has plenty to prove, and bulls are starting to get impatient.
The September payrolls report just hit the tape, and the headline reading came in much better than expected as total payrolls increased 336K versus forecasts for an increase of 170K. While the headline number was much better than expected, the Unemployment Rate was unchanged at 3.8%, which was higher than the 3.7% forecast. Likewise, average hourly earnings were also slightly weaker than expected. The initial reaction in futures has been a sharp sell-off in stocks and bonds as the headline number topped forecasts, but underneath the surface, the report wasn’t as hot as it looked. Job creation is rising, but the cost of incremental workers hasn’t been accelerating.
In terms of market reactions to recent Non-Farm Payrolls reports the fact that the market is swinging widely shouldn’t come as a surprise. On the last 12 report days, the S&P 500’s average daily move on Non-Farm Payroll report days has been 1.1% (up or down. That’s up sharply from a year ago and near the high end of its post-financial crisis range.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Oct 5, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“The daily blips of the market are, in fact, noise — noise that is very difficult for most investors to tune out.” – Seth Klarman
Start a two-week trial to Bespoke Premium now to get full access to the Morning Lineup.
After a ‘rare’ rally yesterday, equity futures are lower again this morning even as crude oil and treasury yields are lower on the day. Treasury yields were lower, but jobless claims were just released and came in lower than expected on both an initial and continuing basis. The strength in initial jobless claims has been especially impressive as the four-week moving average has dropped to its lowest levels since February. With bonds looking for any excuse to sell off, the better-than-expected jobless claims report has sent yields higher.
The title of yesterday’s Morning Lineup post was “And Then There Were None”, and we discussed the fact that after the Energy sector’s decline to kick off the week, the ETF that tracks it (XLE) joined the ten other S&P 500 sector ETFs in trading below its 50-day moving average. That was the first time since October 3rd of last year that every sector was below their respective 50-DMAs, and while the Energy sector was only marginally below its 50-DMA, it quickly made up for lost time yesterday by falling more than 3% and into oversold territory. As shown in the chart below, after hovering just below its 50-DMA yesterday morning, by the close it was treading water just above its 200-DMA, and the uptrend line that had been in place since late June has been shattered. Moving forward, both the 50-DMA and the former uptrend line have the potential to act as resistance.
Along with the weakness in the Energy sector, crude oil has been on its heels as well. A week ago, WTI briefly traded above $95 per barrel after rallying more than 42% from its June lows. Anyone who knew anything was saying that crude was back on its way to a triple-digit price. In just a week, though, prices have slumped over 10%, and in yesterday’s swoon, prices broke below the uptrend line from June, the 50-day moving average, and the high from August – that’s a lot of broken support all at once! If crude continues to follow the recent path of the Energy sector, it could be a painful few days.
Regarding the recent moves in crude oil, it’s funny to think that less than two weeks ago the run-up in prices was attributed to a stronger economy. Now that prices have started to fall, the narrative has quickly shifted to an economy that’s slowing. Does the direction of the global economy really turn that fast? If you’re using day-to-day moves in a volatile commodity like crude oil as your gauge for the health of the global economy, you’re going to go deaf.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Oct 4, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“Being an intellectual creates a lot of questions and no answers.” – Janis Joplin
Start a two-week trial to Bespoke Premium now to get full access to the Morning Lineup.
Unlike most other days recently, futures have been rallying as we approach the opening bell. While the bounce started before the ADP employment report, it picked up steam after that release came in weaker than expected. Now, we just need to get through Factory Orders, Durable Goods, and most importantly, ISM Services at 10 AM.
After two months of steadily lower trending markets, the number of sector ETFs trading above their 50-day moving average (DMA) is finally down to zero as the Energy sector ETF (XLE) surrendered that level this week. While XLE is less than 0.1% below its 50-DMA, every other sector ETF is trading at least 2% below its 50-DMA (Communication Services), and Utilities and Real Estate are both more than 9% below their respective 50-DMAs.
So, when was the last time this happened? The chart below shows the running total number of sector ETFs above their 50-DMAs, and while it got close to zero in the spring, the last time it was zero was exactly a year ago yesterday (10/3/22), and before that, in the summer of 2022. In the entire post-COVID era, this current period is just the sixth time that a sell-off has resulted in every sector trading below its 50-DMA.
Looking at the longer-term 200-DMA, the only sectors currently trading above that level are Energy (4.2%), Consumer Discretionary (2.1%), Communication Services (8.6%), and Technology (5.7%). Like the 50-DMA, the last time every sector ETF was below their respective 200-DMA was briefly last fall and before that in the summer. In the post-COVID period, though, the only other period where every sector was below its 200-DMA was during the initial market crash when the virus first shut down the US economy. With two sectors still trading more than 5% above their 200-DMAs, it would take a considerable amount of more selling to get that reading back to zero. Something no one’s portfolio wants to see.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Oct 3, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“Half of tradition is a lie.” ― Stephen Crane
Start a two-week trial to Bespoke Premium now to get full access to the Morning Lineup.
Yields are higher again this morning, which means stocks are trading lower. It’s gotten to the point where we picture Bill Murray smashing the alarm clock which is playing “I Got You Babe”. The 10-year yield is nearing 4.75% while the 30-year yield has broken above 4.85% as it joins the list of points on the yield curve that are at their highest levels since 2007. The only data on the economic calendar this morning is the August JOLTS report which is expected to show a modest increase in job openings from 8.83 million to 8.90 million.
As rates rise, Utility stocks have been decimated, and yesterday the S&P 500 Utility sector closed 3.2 standard deviations below its 50-day moving average which is the most oversold reading for the sector since February 2021, and it isn’t often that you see the sector get this oversold.
In the short-term, the sector’s 11% decline is the steepest five-day decline since last June, but the difference between these two periods is that back in June 2022, the S&P 500 was down over 10% during that same five-day span while it’s only down 1% in the current five-day span.
The chart below shows the five-day performance spread between the S&P 500 Utility sector and the S&P 500. After adjusting for the S&P 500’s performance, the Utility sector is underperforming the S&P 500 by the widest margin over a five-day period since October 2002!
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
