Jan 17, 2025
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“You may delay, but time will not.” – Benjamin Franklin
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Late last week and early this week we noted how extended the yield on the 10-year Treasury had gotten, and since then we’ve gotten a few cooler-than-expected inflation prints that finally caused the 10-year yield to not only stop going up, but also start pulling back. The pullback in yields has coincided with a rally in equities, but the bulls still have work to do. Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) have made a series of lower highs and lower lows since early December, and we’ve yet to see a break of that trend on the most recent bounce. As shown below, SPY has yet to get back above its 50-DMA and is sitting right below the top of its short-term downtrend channel. QQQ traded above its 50-DMA yesterday morning but pulled back intraday right when it touched the top of its own downtrend channel.
For both SPY and QQQ, one day of solid gains that hold into the close would break the recent downtrend, so we’ll see if the bulls have it in them today.
Jan 16, 2025
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“Mothers are often fondest of the child which has caused them the greatest pain.” ― Victor Hugo, The Hunchback of Notre-Dame
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
With the major inflation reports behind us, today’s pre-market session is much more muted than yesterday. S&P 500 futures are basically flat, while the Nasdaq is indicated to open modestly higher. The biggest of the inflation reports for the week may be behind us, but there’s still plenty of data on the calendar today with the Philly Fed, Retail Sales, Import Prices, and jobless claims all at 8:30 while homebuilder sentiment will hit the tape at 10 AM.
Retail Sales came in modestly weaker than expected, and jobless claims came in modestly higher than forecasts. Unfortunately Import Prices unexpectedly increase rising by 0.1%. But the big surprise was in the regional Philly Fed Manufacturing report which came in at +44.3 versus expectations for a reading of -5.0. That was the biggest beat relative to expectations in that report since at least 1998. The market reaction to all the data has been minimal as S&P 500 futures remain little changed.
Bulls couldn’t have asked for a better way to kick off the first ‘real’ day of earnings seasons as the major financials kicked things off with a bang. Of the six major financials reporting, all six rallied on the day, and all but JP Morgan Chase was up over 5%!
With an average daily gain of 5.74% yesterday, the six financials that reported yesterday had their best average earnings day reaction performance of any quarter since at least the financial crisis. These companies don’t always report on the same day, so it’s not entirely an apples-to-apples comparison. Still, it illustrates how strong the reactions to these earnings reports were yesterday (even if a softer-than-expected CPI report helped to goose the returns).
Jan 15, 2025
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“Mothers are often fondest of the child which has caused them the greatest pain.” ― Victor Hugo, The Hunchback of Notre-Dame
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 CNBC segment, click on the image below.
The last few days have seen a trickle of earnings reports, but this morning, the Q4 earnings season started in earnest with reports from six major banks/brokerages. After a very strong 2024, the banks have kicked off 2025 on a mixed note. Of the six companies reporting this morning, three are up YTD (C, JPM, and WFC), and three are lower (BK, BLK, and GS) for an average YTD change of 0.27% heading into today. Given the mixed returns, they are also all over the place regarding their trading ranges, although most finished yesterday below their 50-day moving averages. The outliers were JPMorgan Chase (JPM) and Citigroup (C).
All six of the banks scheduled to report this morning have now hit the tape, and at the headline level, the results were positive relative to expectations. Wells Fargo (WFC) is the only one of the six not to exceed sales results, and all six exceeded their profit forecasts. Given the better-than-expected results, all of them are trading higher in the pre-market with gains ranging from over 3% for WFC to JPM, which is up just fractionally.
The positive results have set the market up for a positive start to the trading day, but we still had to get through the December CPI report. Economists expected the headline reading to increase 0.4% m/m, with the core reading expected to rise 0.3%. At the headline level, the report was right in line with expectations while the core reading came in a tenth lower at 0.2% in what was the first weaker-than-expected core reading since the June report on 7/11/24. In response to the report, equity futures have built on their pre-market gains while the 10-year yield dropped down to 4.70%.
Jan 14, 2025
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“I took a negative and I turned it into a positive.” – Garo Yepremian
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
52 years ago today, the Miami Dolphins were on the verge of a perfect season and icing a win in Super Bowl VII. They were up 14-0 over the Washington Redskins, and it was fourth and four on the Washington 25-yard line with just about two minutes left in the game. Dolphin kicker Garo Yepremian came out to kick a 42-yard field goal which would have taken the score to a fitting 17-0 capping off Miami’s season with a 17-0 record.
It should have been a pretty easy field goal, but Washington’s defensive end Bill Brundige blocked the kick. Yepremian recovered it, but rather than fall on it, he made the boneheaded decision to pick it up and make a play. When he tried to pass it, the ball slipped out and into the hands of Washington’s cornerback Mike Bass who ran it back for a touchdown. Instead of 17-0, the score was 14-7, sending a scare down the Miami bench. With just two minutes left, Miami still had the lead and with a 14-7 was still likely to win. After the fact, they were even able to laugh about it. At the moment, though, it was anything but a joke and illustrated that even a “perfect season” can have its ugly moments.
The markets are experiencing a Yepremian scare right now. Since early December, nothing has seemingly gone right for equities where breadth has weakened, the dollar and yields have surged, and now even oil is on the rise. Like everything else, this too shall pass. At some point, we’ll be able to look back without a lot of concern regarding the last six weeks. The only question is when. Weeks? Months? Even longer?
For the very short-term, yesterday’s intraday rebound followed through to Asian markets overnight as Chinese stocks rallied over 2% after government officials pledged that measures would be taken to stabilize the market. Other countries in the region were also higher, although Japan was an outlier as the Nikkei fell over 1.5% (it was closed on Monday). In Europe, the STOXX 600 bounced 0.5%, and every country in the region except for the UK is trading higher.
Ahead of the US open, equity futures are higher this morning but off their highs as yields have reversed higher with the 10-year pushing close to 4.8%. Small business optimism continued its post-election surge rising to 105.1 which was the highest reading since late 2018 and was three full points ahead of consensus expectations. The report du jour, though, is the December PPI. That report will dictate the market’s direction today, but even that will only be an appetizer for tomorrow’s CPI.
The December PPI just hit the tape and at both the headline and core readings, the reported data came in well below forecasts, and the immediate reaction in markets has been for yields to fall and pre-market equity futures to build on their gains.
Semiconductors are a key area we’ll be watching for signs of where the market is going. While the broader market has only recently started to succumb to weakness, semiconductors started to roll over way back in July and fell 25% from early July to early August. After recovering half of those losses late in the summer, the Philadelphia Semiconductor Index (SOX) has been essentially trading in a sideways range for the last four months. As shown in the chart below, that range has resulted in a convergence between the 50 and 200-day moving averages.
What makes the recent convergence even more unique is that yesterday broke a streak of 14 trading days where the percentage spread between the level of these two moving averages was less than 0.50%. The chart below shows prior periods when the spread between the SOX’s 50 and 200-day moving average was less than 0.5%, and the just-ended streak was the second longest on record. The only streak lasting longer ended at 20 days in July 2005, and two other streaks lasted 13 trading days (one in March 2005 and another in January 2016).
Jan 13, 2025
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“There is no compression algorithm for experience.” – Andy Jassy
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Global equities stumbled into the weekend on Friday, and they’re bumbling out of the gate to kick off the week. While Japan was closed, other Asian markets started off the week on a down note with the Hang Seng falling 1%, while India South Korea, and Australia all also saw at least 1% declines. Europe was open during much of Friday’s US sell-off, so it didn’t have as much to ‘catch up’ from this morning, but the STOXX 600 is still down close to 1% which is right in line with where US futures are trading this morning. The culprit behind the global weakness has primarily been interest rates as yields have been increasing worldwide. Add to that the relentless run in the dollar, and now oil prices moving up towards $80 per barrel, and it isn’t a good recipe for higher stock prices.
Large-cap tech was notably weak on Friday as it was the first day since September 11th, that the Nasdaq 100 ETF (QQQ) opened and traded the entire session below its 50-day moving average. It’s been less than a month, but QQQ has established a relatively well-defined trend of lower highs and lower lows.
Jan 10, 2025
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“It’s equal can not be seen on this earth.” – Anthony Lucas
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
These words describe the image of oil soaring into the sky from beneath the clay Texas surface at the first major oil discovery in US history. It occurred 124 years ago today when Anthony Lucas and his partners struck black gold, starting the US oil industry. Lucas and company tried and failed for years to find oil underneath the Texas, but January 10th, 1901, was the day their dreams were finally realized.
Like the dog that catches the car, right after finally finding success, the question quickly became “Now what?” Once oil started flowing and launched the pipe they were drilling with 100s of feet in the air, they realized they had nowhere to put it or no way to stop it from flowing. First, they tried a 2.5-foot-high wall around the perimeter of the well, but it overflowed within 24 hours. They built a second wall at a wider circumference, but that quickly became overwhelmed too. A third wall covered 50 acres, but it wasn’t long before that was overflowing too. Talk about a good problem to have! Eventually, they got things under control and so began the modern-day US oil industry.
The chart below shows how US crude oil production started to take off after 1901. According to the Department of Energy, in 1900, the US produced 63 million barrels of crude oil annually. Within 10 years, production tripled. Another 10 years later, it more than doubled again and kept rising from there until peaking in 1970. Production was nearly cut in half from 1970 through 2008 as analysts started to fear the world was running out of oil and prices shot well into the triple-digits. Then, proving the adage, that the cure for higher prices is higher prices, the shale boom arrived, and production since then has rebounded to a historic degree. So much for running out of oil.
Even as the US oil industry exploded in the early 1900s, exports were practically non-existent until more than 100 years after Lucas’ first discovery. Beginning in the 2010s, though, exports surged like nothing ever seen before and now total a record 4+ million barrels per day.
When it comes to recent crude oil performance, prices were weak for most of the second half of 2024 after prices peaked in the high 80s during the spring. Over the next six months, WTI sank into the mid-60s where it started to stabilize. Since early December, though, prices have started to rebound with a rally this morning taking it above $75 per barrel and back above its 50-day moving average for the first time since October. While one level of resistance has been cleared, another remains at the downtrend line in the high $70s. If those levels get taken out, markets will find it increasingly difficult to prevent concerns over inflation from getting louder.
For the next couple of hours, though, December’s non-farm payrolls will be the market’s main area of focus, and the much higher-than-headline forecast has yields surging and equity futures plunging. At 4.78%, the 10-year yield is now at its highest level since November 2023.
