Jun 3, 2022
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“Work takes on new meaning when you feel you are pointed in the right direction. Otherwise, it’s just a job, and life is too short for that.” – Tim Cook
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In the middle of the night, it was looking like it was going to be a positive start to the last trading day of the week, but then news of the Musk ‘super bad’ memo filtered out where the CEO said he wants the company to cut 10% of its workforce citing concerns over the economy. Ever since then futures have been moving steadily lower and are currently indicating a 0.65% decline at the open. Obviously, that could change considerably with the release of the May employment report. Overseas in Europe and Asia, we haven’t seen nearly the degree of negative sentiment in those equity markets as Asia was higher, and Europe is pretty much flat. Treasury yields are little changed across the curve, and crude oil is down modestly.
The May Non-Farm Payrolls report was just released and the headline number was modestly stronger than expected 390K vs 325K. The Unemployment Rate was unchanged at 3.6% versus expectations for a decline to 3.5%. The average workweek was in line with forecasts (34.6) and average hourly earnings rose slightly less than expected (0.3% vs 0.4%).
In today’s Morning Lineup, we discuss Musk’s memo (pg 4), activity in Asian and European markets (pg 4), and selected economic data from Asia and Europe (pg 5).
Don’t call it a comeback, but if (pretty big if at this point following the TSLA news) the S&P 500 can manage to drop less than 0.45% today, it will mark the second straight week of positive returns for that index. The chart below shows the rolling six-month total number of positive weeks for the S&P 500. Just two weeks ago, after a streak of seven weekly declines, the rolling number of positive weeks dropped below ten for the first time since 2011. What’s also notable to highlight is that in early May, the S&P 500 ended a ten-year run where the six-month average never dropped as low as ten, and that was the longest streak without a reading that low in the entire post-WWII period. The prior record was ten years from early 1991 through early 2001.
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Jun 2, 2022
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“We should take comfort that while we may have more still to endure, better days will return.” – Queen Elizabeth II
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The quote above from Queen Elizabeth was from a speech in the early days of COVID, and with life getting back to ‘normal’ in most western economies, she was definitely right. The Queen’s comments from two years ago can also be attributable to the current market environment. 2022 hasn’t been enjoyable, and it’s more likely than not that investors will still have further volatility and losses to endure, but better days will come, even if – like COVID – those better days take longer than expected to return.
It’s been a busy morning of economic data today with ADP Employment missing expectations and showing the smallest level of job growth since April 2020. Unit Labor Costs were also revised more than a full percentage point higher, while the revision of Non-Farm Productivity showed a slightly less negative number. Jobless Claims were also just released, and on both an initial and continuing basis, the reported readings were lower than expected.
Heading into this morning’s data, futures were already higher, but they’ve given up some of those gains as interest rates ticked higher following the releases.
In today’s Morning Lineup, we discuss recent trends in the oil market (pg 4), activity in Asian and European markets (pg 4), and selected economic data from Asia and Europe, and the US (pg 5).
When it comes to semiconductors, we typically focus on the group’s relative strength versus the S&P 500 as a leading indicator for the broader market. This morning, however, we wanted to highlight the actual price chart of the Philadelphia Semiconductor Index (SOX). The group has been a steady outperformer in recent weeks, and unlike the major averages which are nowhere near their 50-day moving averages (DMA), the SOX has actually traded above that level in each of the last three trading days. The only problem is that it also closed below that level all three times. In market downtrends, declining moving averages often act as resistance, so the failed rallies of the last three days leave the bulls somewhat discouraged.
We were curious to see how common it is for the SOX to repeatedly run into resistance at its 50-DMA, so the chart below shows streaks where the index traded above its 50-DMA intraday but finished the day below that level. The current streak of three trading days is the longest streak since August 2018, and to find a longer streak you have to go all the way back to August 2007. While the current period has often been compared to the early 2000s, bulls can take some solace in the fact that there was never a similar streak in the years from 2000 through 2003.
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Jun 1, 2022
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“Often we look so long at the closed door that we do not see the one which has been opened for us.” – Helen Keller
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It’s a new month and markets are looking to start off on a good note with equity futures modestly higher across the board. Positive sentiment this morning has been driven by earnings from Salesforce (CRM) and Victoria’s Secret (VSCO). In economic data, German Retail Sales came in weaker than expected for the month of April, and PMI data for the month of May in both Asia and Europe generally showed a slowing but still growing trend.
Looking ahead here in the US, Construction Spending (April), ISM Manufacturing (May), and JOLTS (April) will all be released at 10 AM.
In today’s Morning Lineup, we discuss recent trends in the natural gas market (pg 4), activity in Asian and European markets (pg 4), May PMI trends from around the world (pg 5), and then selected economic data from Asia and Europe (pg 6).
We’ve noted the wide divergence in performance between individual sectors this year, but within the commodity space, the discrepancies are even wider. As shown in the snapshot of our Trend Analyzer below, the spread in YTD performance among commodity-related ETFs through the end of May is over 130 percentage points! At the top of the list, the US Natural Gas Fund (UNG) has rallied more than 123% even after falling more than 7% over the last five trading days. Behind UNG, the next best performing ETFs are also energy-related but they’re up less than half as much as UNG. At the other end of the spectrum, precious metals have been the worst performers YTD as Silver (SLV) is down nearly 8%, while gold-related ETFs are barely hanging on to gains. That may not sound like much, but compared to equities, which are down by double-digit percentages this year, flat is 2022’s version of up.
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May 31, 2022
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“We can draw lessons from the past, but we cannot live in it.” – Lyndon Johnson
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After major US equity indices broke what were the longest weekly losing streaks in decades, it’s back to reality again this week as futures are lower across the board. Yesterday’s announcement that Europe would ban imports of most Russian oil has crude trading up over 3% this morning leading to further concerns of potential inflationary pressures. China reported PMI figures for May overnight, and while both the Manufacturing and Services sectors remain in contraction, the magnitude of the weakness wasn’t as bad as expected.
It’s a busy day of economic data this morning as we’ll get Case Shiller Home Price Data at 9 AM along with the Chicago PMI at 9:45 and then Consumer Confidence at 10 AM (all times eastern).
In today’s Morning Lineup, we recap key events in the Russia-Ukraine war (pg 4), activity in Asian and European markets (pg 4), and key economic data from Europe (pg 5).
As mentioned above, the EU embargo of Russian oil raises concerns of further inflationary pressures, which at the moment aren’t showing any signs of getting under control. Just this morning, headline inflation in the region rose more than expected rising to a record high of 8.1% y/y. That’s up from a y/y reading of negative 0.3% just 17 months ago. It’s only a 20-year history, but the fact that headline inflation in Europe has gone from close to record lows and then easily to record highs is pretty extreme.
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May 27, 2022
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“You take an educated gamble. If you don’t occasionally make a mistake, you’re not doing your job.” – James Sinegal
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Is this the week markets finally manage to scratch out a rally? Barring an absolute collapse into the three day weekend, US stocks are poised to finish off the week significantly higher, but before we get to the closing bell, there’s a bunch of economic data to get through, including Wholesale Inventories, Personal Income and Spending, the PCE Core Deflator, and Michigan Confidence.
Treasuries are modestly higher, equities are flat, crude oil is slightly lower, and bitcoin is down heading into the final session before a three-day weekend.
In today’s Morning Lineup, we recap major market moves out of Asia and Europe as well as the comparison in the performance between US and European stocks so far this year.
Memorial Day weekend marks the unofficial start to the summer driving season, and prices heading into the period have surged both this month and on a YTD basis. The national average price of a gallon of gas, according to AAA, sits at $4.60 per gallon, which is up just under 10% this month (third-largest increase since 2005) and 40% YTD (second largest YTD increase since 2005). The 40% YTD increase is more than twice the historical average and follows what was a 35% YTD increase last year. There’s pain at the pump.
Gas prices have no doubt surged, but if there’s any potential silver lining, it is that from a seasonal perspective, we’re at the point in the year where prices tend to peak. Whether prices follow that seasonal pattern this year, though, remains to be seen.
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May 26, 2022
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“Someday neither AI nor us will be able to tell whether we are in a virtual or physical world.” – Jensen Huang
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We’ll be honest, based on the way markets have been trading the last couple of months, we would have expected that if the 7th largest stock (NVIDIA) in the Nasdaq 100 was trading 5% lower in reaction to earnings, that futures for the index would also be lower. Right now, futures are actually trading about 0.4% higher. Is this real?
In addition to the positive tone in futures, there’s also some major M&A news with Broadcom (AVGO) reaching a deal to acquire VMware (VMW) in a cash and stock deal valued at $61 billion in what would be one of the largest tech mergers of all time. On the one hand, a bull would point to this transaction as a sign that companies are finding value in the market after the plunge over the last five months. On the other hand, as recently as February, VMW’s stock was right around the $142.50 price the company agreed to sell itself at today, so does that indicate that management expects limited upside for the industry going forward?
It’s a big morning for economic data with revised GDP for Q1 (revised lower), Personal Consumption (higher than expected), PCE (lower than expected), and Jobless Claims (initial lower than expected, continuing higher) all just released at 8:30. Later on this morning, Pending Home Sales and the KC Fed manufacturing report will be released at 10 AM.
In today’s Morning Lineup, we recap morning earnings reports (pg 4), overnight central bank actions (pg 4), the latest economic data out of Asia and Europe (pg 5), and a lot more.
The Energy sector hit another new 52-week high yesterday further cementing its lead as the top-performing sector in the S&P 500. Given the rally over the last year, it’s pretty hard to believe that the Energy sector is still more than 10% below its record high back in 2014.
Given the rally in Energy, the sector’s relative strength has made a significant turnaround this year. After eight years of near-constant underperformance, the recent outperformance has taken its relative strength to levels not seen in three years.
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