Aug 4, 2022
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“Far and away the best prize that life offers is the chance to work hard at work worth doing.” – Theodore Roosevelt
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Futures were higher earlier but have given up much of their gains as we head into the open. Initial Jobless Claims were just released and came in at 260K which is just 1K shy of a post-COVID high. Continuing Jobless Claims saw a larger increase hitting the highest levels since April. In the UK, the BoE raised rates by 50 bps which was the largest hike since 1995. What’s ironic about the move is that at the same time the central bank raised rates by the most in more than 25 years, it also warned of a long recession.
Today’s Morning Lineup discusses earnings and market news out of Europe and the Americas, rate hikes in Brazil and the UK, a look at LNG markets on news of a sooner-than-expected restart at the Freeport terminal, and much more.
Yesterday was the 58th time in 2022 that the Nasdaq experienced a one-day rally or decline of 2% or more, and it is only August 4th! To put that in perspective, we’re just under 150 trading days into the year, so at the current pace, we’re seeing an average of about two 2%+ daily moves per week! How does that stack up relative to history? Going back to 1971, even if there aren’t any more 2% moves for the rest of the year, 2022 would rank as the 6th highest number of 2% days in a calendar year in the Nasdaq’s history. That’s just four less than the total for 1999, 25 behind the total for 2008, but well more than 40 below the triple-digit totals seen in 2000, 2001, and 2002. The record for the greatest number of 2% days in a calendar year came in 2000 when the 2% threshold was crossed 134 times or more than once every other day.
2022 already ranks as the sixth highest number of 2% days in a calendar year in the Nasdaq’s history, but when we compare the number of 2% days this year through the end of July to the first seven months of all other years, it ranks as the third most. As shown in the chart below, the only two years that had more 2% daily moves YTD through 7/31 than 2022 (57) were 2000 (84) and 2001 (74). Other years that were close were 2002 (54) and 2009 (51).
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Aug 3, 2022
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“Economics is extremely useful as a form of employment for economists.” – John Kenneth Galbraith
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Normally on the first Wednesday of the month, we’d be discussing the release of the ADP Private Payrolls, but that report is still on the DL as economists work on revising its methodology to make it a more accurate gauge of payroll trends in the economy. The only reports on the calendar today are Durable Goods, Factory Orders, and the ISM Services report which will all be released at 10 AM Eastern. It’s been another busy day for earnings, and the results continue to surprise to the upside with EPS and revenue beat rates that are higher than most analysts and strategists would have expected heading into earnings season.
Equity futures are higher this morning, oil is higher as OPEC+ only agreed to a small increase in daily output, and Treasury yields are continuing their steep run higher which began yesterday morning at right around this time. After trading well below 2.6% yesterday, the yield on the 10-year is now pushing 2.8%.
Today’s Morning Lineup discusses earnings and market news out of Europe and the Americas, Pelosi’s visit to Taiwan, a detailed look at PMI and economic data from around the world, and much more.
As oil prices have pulled back in the last couple of months, stocks in the Energy sector have also experienced a hiccup as growth-oriented names have enjoyed some time in the sun. Technology is one sector that has experienced a rebound, and that bounce has shown up in the chart of Energy’s relative strength versus the Technology sector. From the summer of 2020 through late last year, there was a push and pull with lots of noise between the two sectors, but neither one had anything to show for it as they essentially performed in line with each other during that entire period. Beginning in late 2021, though, when the Fed apparently got religion with respect to surging inflation, tech stocks plunged while energy names surged. That run essentially continued uninterrupted right up to mid-June. In the span of under two months, though, Energy has given up 40% of its outperformance versus Technology. Easy come easy go.
Given its outperformance in the years coming out of the Financial Crisis, there’s almost a Pavlovian instinct for investors to look towards the technology sector for outperformance. Over the last two years, though, the sector has essentially generated zero alpha. Comparing the sector’s relative strength to the S&P 500, Technology is barely positive versus August 2020.
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Aug 2, 2022
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“The more you sweat in peace, the less you bleed in war.” – Norman Schwarzkopf
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With Speaker Pelosi reportedly en route to Taiwan as we type this, markets are on edge this morning as China has threatened military action if the planned trip takes place. Only Chinese authorities know exactly what the response will be, but we would expect more bluster than bite. After a relatively slow day of earnings news yesterday, today will be a busy day, and there have already been a number of important reports this morning from the likes of Caterpillar (CAT), Uber (UBER), and Marriot (MAR) among others. After the close, among others, we’ll hear from AMD, Gilead (GILD), Occidental (OXY), PayPal (PYPL), and Starbucks (SBUX).
Today’s Morning Lineup discusses earnings news out of Europe and the Americas, the rate hike in Australia, a detailed look at other economic data from around the world, and much more.
32 years ago today, Iraq invaded Kuwait, spurring a monumental surge in oil prices. In the first five trading days of August alone, WTI surged more than 35% and nearly doubled in price through the fall as tensions in the region boiled over. There are still more than enough geopolitical issues around the globe today to worry about, but unlike in August 1990, crude oil prices have been moving in the opposite direction.
After briefly trading above $130 per barrel earlier this year, crude oil has declined nearly 30% from its peak to under $95 per barrel, and just yesterday, closed below its 200-DMA for the first time in over six months.
As shown in the chart below, yesterday’s close below the 200-DMA ended what was the 12th longest streak of consecutive closes above the 200-DMA for WTI since the early 1980s. The streak that just ended was the longest since the 269 trading day streak that ended last November. That streak was the third longest on record trailing only the 276 trading day streak that ended in April 2000 and the 330 trading day streak that ended in August 2008.
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Aug 1, 2022
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“Ladies and gentlemen, rock and roll.” – John Lack
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41 years ago today, teens, pre-teens, and other people resembling the cast of “Stranger Things” watched “Video Killed the Radio Star” as MTV revolutionized the entertainment industry by making music both a listening and viewing experience. Eleven years later, in 1992, MTV mixed things up again with the launch of “The Real World” in what ultimately became the start of the reality TV revolution. The life cycle of MTV has been interesting to watch. What started as a network intended solely for ‘watching’ music, has become a network that now shows little or no music at all. MTV’s experience also shows the importance of adapting and changing with the times. Peter Drucker may not have had MTV in mind, but the phrase most famously applied to him still applies. Innovate or die.
Futures started off the month of August with losses last night but have erased much of the weakness so far this morning. Treasury yields are only marginally higher, crude oil is lower, while gold is higher. The big economic indicator of the day is the ISM Manufacturing report at 10:00 AM Eastern. Economists expect the headline reading to come in at 52.2 versus June’s reading of 53.0. Any reading under 53.0 would be the weakest reading in two years (June 2020).
Today’s Morning Lineup discusses earnings news out of Europe and the Americas, global PMI data for July, a detailed look at other economic data from around the world, and much more.
There may not be an official start date, but August represents what many consider the dog days of summer when, for a lot of people, the market is the last thing on their minds. Historically, there have been a number of calamitous events that began or transpired in August, but overall stock market returns during this time of year have been middling. The snapshot below from our Seasonality tool shows that over the last ten years, the S&P 500’s median performance from the close on 8/1 over the next week, month, and three months has ranked between the 50th and 60th percentile. For the next week, the S&P 500’s median gain has been 0.40%. The next month has had a median gain of 1.15% while the next three months have seen a median gain of 2.75%. Nothing especially notable, but the way this year has gone, a gain is a gain!
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Jul 29, 2022
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“The time to hesitate is through. No time to wallow in the mire.” – The Doors
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Stocks are looking to close out a strong week on a positive note this morning as S&P 500 and Nasdaq futures are indicated higher. Earnings have been the driver of the strength, and this morning we’re seeing positive reactions to reports from the likes of Apple and Amazon on the tech/growth side to Chevron and Exxon on the energy side.
We’re pretty much done with earnings for the week, but a number of economic reports are on the calendar. Employment Cost Index, Personal Income, and Personal Spending were all just released, and every one of them exceeded forecasts by 0.1 percentage points. PCE Deflator numbers were also just released and were exceptionally high relative to history but generally in line with or slightly higher than expectations. The initial reaction from the markets has been weakness in equity prices and higher yields in the Treasury market. Outside of these reports, the only others on the calendar are Chicago PMI and Michigan Confidence which will both be released after the opening bell.
Today’s Morning Lineup discusses earnings news out of Europe and the Americas, a detailed look at economic data from around the world, and much more.
With all that’s gone on this week and how lousy a year it has been for the equity market, it’s surprising that the S&P 500 heads into the final trading day of the week with a gain of nearly 3%. The performance of the four mega-cap stocks (Alphabet, Amazon.com, Apple, and Microsoft) this week has been equally as impressive. The table below lists every earnings season since 2015 that all four stocks reported earnings in the same week. Before this week, in each of the eight prior earnings seasons where all four stocks reported in the same week, there was never an earnings season when they all reacted positively the day after their reports, and the S&P 500 was only higher in that week two times.
That trend changed this week. GOOG and MSFT already reported and both rallied more than 5%. AAPL and AMZN, meanwhile, reported after the close Thursday, and both stocks traded higher after hours. Along with the gains in all four stocks, the S&P 500 is already up 2.8% on the week through Thursday’s close and indicated higher in the pre-market. As nervous as bulls were heading into the week with all the major events (earnings, FOMC meeting, Q2 GDP report) on the calendar, as often ends up being in the case with these types of situations, the bark turned out to be a lot worse than the bite.
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Jul 28, 2022
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“In a world that changing really quickly, the only strategy that is guaranteed to fail is not taking risks.” – Mark Zuckerberg
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After Fed Chair Powell downplayed the significance of the initial read on quarterly GDP reports and then today’s negative print for Q2 GDP, conspiracy theorists will say yesterday’s comments were made so the Fed could downplay today’s negative print. Whatever. We now have seen two straight quarters of negative GDP, and while that may not meet the ‘official’ definition of a recession, it still doesn’t change the fact that the US economy shrank in the first half. Add to that, initial jobless claims remain right near their post-COVID highs. This morning’s print of 256K was above last week’s print of 250K, but last week’s reading was subsequently revised up to 261K meaning that claims actually fell this week.
Futures have actually rallied a bit since the 8:30 print of GDP and Jobless Claims, but they are still indicating a modestly lower market at the open. The Q2 GDP report was an important report, but who wasn’t expecting a weak print? More important than that report will be earnings reports from Amazon.com (AMZN) and Apple (AAPL) after the bell today.
Today’s Morning Lineup discusses earnings news out of Europe and the Americas, the potential budget deal between Manchin and Senate Democrats, economic data from around the world, and much more.
Even in the current volatile environment, a 4% rally in the Nasdaq is a big move. In the index’s entire history dating back to 1971, there have only been 86 prior occurrences, and yesterday’s rally was the largest one-day gain since early April 2020 just after the COVID crash lows. The chart below shows every 4% rally in the Nasdaq over its history since 1971, and outside of the period from 2000 to 2002, and to a lesser degree the Financial Crisis, moves of this magnitude were sporadic. The most notable aspect of the chart below, however, has to be the fact that in the 50+ year history of the Nasdaq, nearly half of all the index’s rallies of 4%+ occurred in the three-year window from 2000 to 2002.
Given the near majority of all 4%+ rallies in the Nasdaq occurred during the most severe bear market in its history, maybe big moves like yesterday aren’t such a good thing in terms of the Nasdaq’s future direction. In the chart below, we show the index’s forward returns following prior 4%+ rallies as well as 4%+ rallies, like yesterday, that were the first occurrences in at least three months. As shown in the chart, median returns following all 4%+ rallies (light blue bars) are mixed relative to overall average returns since 1971, but when the 4%+ rally is the first in at least three months, forward returns have actually tended to be above the historical average for all periods since 1971. It’s hard to say the coast is now clear following yesterday’s big rally, but historically speaking, big one-day rallies for the Nasdaq after a long absence have historically been followed by above-average returns.
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