Oct 14, 2022
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.
“Just before you break through the sound barrier, the cockpit shakes the most.” – Chuck Yeager
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
Let the games begin. Today marks the unofficial start to earnings season as the major banks come out of the gate with what have generally been positive results. Of the seven banks reporting, five exceeded EPS forecasts, one (Morgan Stanley) missed and one was inline (US Bancorp). Besides the Financials, UnitedHealth (UNH) also reported and topped forecasts on both the top and bottom lines. It’s still early, but so far, no major disasters. JPMorgan Chase (JPM) is even poised to trade higher in reaction to earnings which, if it holds, would be something it hasn’t done in over two years!
Outside of earnings, it’s a busy day for economic data this morning with Retail Sales (mixed relative to expectations), Import Prices (lower than expected), Business Inventories, and Michigan Sentiment all on the docket between now and 10 AM. If that wasn’t enough, we’ll also hear from three different Fed officials (George, Cook, and Waller). So much for a quiet Friday.
In international news, the German economic ministry said that a recession likely started in Q3 and will last for three quarters. The political situation in the UK continues to be a mess as PM Truss will reportedly reverse her tax plans and allow the corporate tax rate to increase while at the same time sacking her finance minister. That news has pushed the yield on the 10-year gilt down 23 bps and below 4%.
US Futures are still in positive territory, but they are well off their highs, and if the last several weeks have told us anything, it’s that where the market starts the day and where it finishes usually varies widely.
75 years ago today, Chuck Yeager accomplished the ‘impossible’ becoming the first pilot to ever break the sound barrier. Up until that time, the thought among ‘experts’ was that once an aircraft approached the speed of sound it would break apart resulting in the death of the pilot. Not really the way anyone wants to go out. Yeager proved the experts wrong, but in the moments leading up to that point, he remarked that the cockpit of the aircraft starts to shake violently.
Based on Yeager’s description, the market looks like it’s trying to break its own sound barrier. After trading up over 1% in pre-market trading yesterday, the stronger-than-expected CPI erased all the gains and more. Shortly after the open, the S&P 500 had dropped nearly 4% from its pre-market highs before staging an epic rally of over 5%. Even in this ‘all or nothing’ type of market environment, reversals of that magnitude are rare.
As shown below, prior to yesterday there were only nine other days since 1983 when the S&P 500 fell more than 2% intraday but finished the day up over 2%. The most recent occurrence was over eleven years ago on 10/4/11 and before that, there were five separate occurrences in 2008 alone! The three remaining reversals were in 2002, 1997, and 1987.
We’re not sure when or where the ultimate bottom in stocks will end up, but violent moves like yesterday tend to occur closer to lows than highs. It’s easy to remember the good parts of a bull market where stocks rally, but people usually forget that long-term rallies emerge out of chaos where investors become increasingly convinced that the only viable path if any exists at all, is lower. The early days of bull markets feel like anything but a sure thing.
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
Oct 13, 2022
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.
“Inflation is the crabgrass in your savings.” – Robert Orben
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
Futures were higher most of the night but really picked up steam in the last hour following reports out of the UK that the Truss government was looking to reverse some of its recent tax proposals. In reaction, gilt prices are rallying, the pound is surging, and equity futures around the world have rallied. Now, if only the CPI report would cooperate. The pace of earnings is starting to pick up and this morning we got better-than-expected reports from Blackrock (BLK) and Taiwan Semi (TSM), while Delta (DAL) and Domino’s (DPZ) missed on the bottom line.
Weaker-than-expected CPI reports have become endangered over the last several months as economists just haven’t been able to keep up with the rapid increase in prices. Heading into today’s report for September, there have only been three reports in the last two years where headline CPI came in lower than expected and just one in the last year. In both cases, the 12- and 24-month totals have been at or near record lows. The average 12 and 24-month totals of weaker-than-expected reports have been 8 and 4, respectively, indicating that two-thirds of the time consensus forecasts are either at or below the actual reading. Simply put, economists have historically underestimated inflation, but the recent degree of underestimating price increases has been unprecedented to the point where betting on a higher-than-expected report has been nearly as bankable as it used to be taking the over in the NBA all-star game.
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
Oct 12, 2022
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.
“It is well that war is so terrible, or we should grow too fond of it.” – Robert E. Lee
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
The big news item of the day will be the September PPI which is being released as we type this, and the results were not all that good. Headline PPI came in at 0.4% versus forecasts for an increase of 0.2%. Core PPI was in line with forecasts at 0.3%. On a y/y basis, the headline reading came in at 8.5% versus forecasts for an increase of 8.4%. Y/Y Core PPI was actually slightly weaker than expected at 7.2% versus forecasts for 7.3%. Futures were higher heading into the print along with US Treasury yields as the 10-year trades back up near 4%, but equities have now given up nearly all of their gains in the immediate aftermath of the report.
Pepsi (PEP) reported better-than-expected earnings and sales and also raised guidance this morning, and the stock is trading 2.5% higher in response. Today is really just the warmup for tomorrow, though, when we’ll get the release of CPI and banks will kick off the Q3 earnings season. In the meantime, keep an eye on the UK as officials there can’t seem to make up their minds on how long they intend to support the gilt market.
With the S&P 500 down five days in a row, the number of down days this year continues to pile up. Through Tuesday’s close, the S&P 500 has traded down on 56.9% of all trading days. That may not sound all that extreme, but since the five-trading day week began in late 1952, this year is currently on pace to have the second-highest percentage of down days in a given calendar year. The only one with a higher percentage of down days was 1974 (58.3%) when the S&P 500 was down 29.7% for the calendar year. Barring a major reversal in Fed policy, which is only taking on an increasingly hawkish stance even as economic activity shows signs of weakness, 2022 could end up in the record books.
Not only has the S&P 500 experienced a large number of down days, but the frequency of big down days has also been at historical extremes. 2022 just took out 1974 for third place in terms of the percentage of down 1% days, trailing only 2008 (29.6%) and 2002 (28.6%). Just as the S&P 500 was down nearly 30% in 1974, 2008 and 2002 were horrible years as well with declines of 38.5% and 23.4%, respectively. If it Ever Went Up, They Wouldn’t Call it Losing
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
Oct 11, 2022
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.
“Sometimes the wheel turns slowly, but it turns.” – Lorne Michaels
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
Equity futures were sharply lower this morning but have rebounded sharply in the last hour. There’s no specific catalyst to the move, but the BoE’s expansion of its bond-buying program has certainly helped. The monthly look at small business sentiment from the NFIB came in slightly higher than expected (92.1 vs 91.6) and increased slightly relative to August’s reading. There are no other economic data on the calendar today, but Cleveland Fed president Loretta Mester will be speaking at noon, and remember that in late September she made some rather hawkish comments suggesting that hell or high water wouldn’t deter the Fed from hiking rates to combat inflation.
Between value and growth stocks yesterday, we saw a modest divergence where the S&P 500 Growth ETF (IVW) traded at a new low while the Value ETF (IVE) did not. At face value, that divergence would sound like a negative for growth stocks. Looking at the price charts of each ETF, though, shows that while the growth ETF made a new low yesterday breaking through its September and summer lows, the value ETF had already broken below its summer lows in late September. So yes, value has outperformed over the last few days, but the technical picture for both is lousy.
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
Oct 10, 2022
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.
“For the execution of the journey to the Indies I did not make use of intelligence, mathematics or maps.” – Christopher Columbus
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
The bond market is closed today, so at least Treasury yields can’t go up. We wish we could say the same thing about yields across the Atlantic, though, where British gilt yields are all higher and getting back up near their closing highs from less than two weeks ago.
Equity markets are open for trading today, and after opening sharply lower last night, futures have rebounded to move close to the unchanged level. That’s the type of environment we’re in these days when just a modestly negative open to start the day is considered a win. With banks and the treasury market closed for trading, there is no economic data on the calendar today, so expect volumes to be on the light side.
How bad is sentiment out there? In looking through the various Bloomberg headlines this morning, the following three were all out one after the other:
- “Deutsche Bank Strategists See 12% Drop in US EPS Next Year”
- “MS Strategists See Bear Market Continuing Until Earnings Reset”
- “Goldman’s Kostin Sees Strong Dollar as Headwind for US Earnings”
Like the birds overhead, sentiment heading into earnings season has been moving south. Bulls can only hope that sentiment has moved south enough already.
Over the last several years, Columbus Day has seen some extreme market moves. The two best Columbus day performances for the S&P 500 were in 2008 (+11.58%) and 2011 (3.41%), and the one thing both of those years have in common is that they were lousy years for stocks heading into Columbus Day To the downside, the worst Columbus Day performance was in 2014 when the S&P 500 declined 1.65%, and no other year besides 2014 over the last 25 has seen a decline of more than 1%.
While the two best Columbus Days for the S&P 500 came in years when stocks were already down big YTD, there isn’t really much of an inverse correlation between YTD performance and Columbus Day returns. In the seven years over the last 25 when the S&P 500 was down YTD heading into the holiday, the median Columbus Day performance was a gain of 0.13% with positive returns four out of seven times (57%). In the 18 remaining years when stocks were up YTD heading into the holiday, the S&P 500’s median performance on Columbus Day was a gain of 0.05% with gains 10 out of 18 times (56%).
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
Oct 7, 2022
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.
“You never know what those Cumberland players have up their sleeve” – John Heisman
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
The above comment was made by coach Heisman during halftime of a game on this day in 1916 when Georgia Tech was beating Cumberland University by a score of 126-0. Bulls are this year’s Cumberland University as financial assets of all types are in the red YTD, and the classic 60/40 portfolio is having its worst year on record. This week, they’ve seen a faint glimmer of hope even as the Fed keeps turning up the heat, but it remains to be seen if they can chip away at the bears’ lead. After taking a 126-point lead at the half, Georgia Tech went on to win 222-0 in what was the most lopsided college football game of all time. The bulls can only hope the next three months don’t play out like the second half of Georgia Tech vs Cumberland and make 2022 one of the most-lopsided years in terms of downside stock market performance.
Today’s employment report isn’t going to help the bull’s cause. While Non-Farm Payrolls only surpassed expectations by 8K (263K vs 255K), the Unemployment Rate came in at 3.5% versus forecasts for an increase to 3.7%. Futures, which were higher heading into the report, have reversed those gains and are now indicated modestly lower.
When the economy was cratering during the early days of COVID, once the Federal Reserve and Congress stepped in with massive stimulus, markets looked right through the weakness and rallied. Two years later, we’ve done a 180. Heading into today’s Non-Farm Payrolls (NFP) report for September, seven of the eight reports for 2022 have come in better than expected. Over the course of these eight reports, the initially reported reading was an average of 133K greater than consensus forecasts. That may not sound like a lot, but prior to COVID, there were only six other NFP reports out of 262 where the actual reported reading exceeded consensus forecasts by more than that amount.
Even as the US employment situation has outperformed expectations this year by an unprecedented margin, stocks haven’t liked it one bit. The table below lists the date of each NFP report this year and summarizes how the initial reading came in relative to expectations along with how the S&P 500 performed on the day (using SPY as a proxy). Of the seven NFP reports that came in better than expected, the S&P 500 gapped lower by an average of 0.48% and finished the day down by an average of 0.55% six out of seven times. The economy may be doing OK, but once again, the market is looking right through it to one of the most aggressive tightening cycles by the Federal Reserve investors have ever seen.
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
